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Climate-friendly businesses need Europe

Danish companies cannot afford to go it alone in solving current climate issues. International collaboration is called for, as shown by the results of an MSc thesis from Aarhus University, Business and Social Sciences.

International agreements are required to solve the climate problems. The Danish Commission on Climate Change Policy’s proposal to introduce an energy tax risks making it both harder and more expensive for energy-intensive Danish companies to compete globally.

- If it was possible to draw up broad energy agreements in the EU, Denmark would enjoy a strong position because we have the technology and innovative skills to survive. However, if the proposals are only introduced by Denmark, then we are such a small player compared to other countries that the energy tax will act as a penalty for Danish businesses, says Stefan Kirkedal, who holds an MSc in International Economic Consulting.

Together with Cæcilie Thielke Mølgaard, he has written a thesis: “Environmental regulations and competitiveness – An analysis of the effects of the Danish Commission on Climate Change Policy’s recommendations on the competitiveness of Danish industry”.

The two graduates have the full support of their supervisor, Philipp Schröder, an acknowledged economics professor from Aarhus University, Business and Social Sciences:

- Denmark can achieve much more by influencing European legislation instead of allowing itself to be restricted by a national plan, says Philipp Schröder, who also says that the Commission’s proposal should, as a minimum, be implemented throughout the EU.

Companies will be penalised 
In their thesis, Stefan Kirkedal and Cæcilie Thielke Mølgaard explore, among other things, how the energy tax on fossil fuels will affect Danish industry in the short and long term.

- Danish companies cannot afford the burden of higher costs if they are not also imposed on foreign companies. It would mean that the energy tax will act as a penalty for companies in the short term, says Stefan Kirkedal, while adding that the higher costs may also lead to companies not having the necessary resources to innovate and find new solutions.

However, in the longer term, the energy tax may help to strengthen Danish businesses, as they will be forced to streamline operations and find new and greener production methods. But nobody knows how long such a process will take.

- There may be serious implications for Denmark if we are looking at a ten-year period of being unable to compete with foreign companies. Many companies will be forced to close, and workplaces will be outsourced, says Cæcilie Thielke Mølgaard. However, she adds that those companies which make it will enjoy a huge competitive advantage over foreign companies without green ambitions.

Framework agreements required
The results of the thesis also show that some sectors will be harder hit by the energy tax than others. Industrial companies in particular will bear the brunt.

According to Stefan Kirkedal and Cæcilie Thielke Mølgaard, the Danish state and industry should together agree on a solution which suits both parties if international support for stricter climate regulation is not forthcoming.

- It is far from ideal that Danish companies are expected to shoulder the costs on their own. The state should introduce subsidy schemes or framework agreements which make it possible for companies to change their energy consumption without undermining their competitiveness because of the significant costs involved, says Cæcilie Thielke Mølgaard.

- The crucial question, of course, is who will be left footing the bill. It is in everyone’s interest that agreements are reached which serve all the parties involved, says Stefan Kirkedal.

An important task
Stefan Kirkedal and Cæcilie Thielke Mølgaard defended their thesis in September, and both were awarded top marks. Their supervisor, economics professor Philipp Schröder, was very impressed with the result.

- They have identified a subject which is very relevant for the broader social debate, and they have shed light on the topic from several different angles. This has produced a solid piece of research. Anyone wanting to know more about the subject should definitely read the thesis, says Philipp Schröder.

Read the thesis here

For further information

Philipp Schröder, Professor in Economics
Aarhus University, Business and Social Sciences
Department of Economics and Business
Telephone: +45 8948 6392
Mobile: +45 2311 9527

Stefan Kirkedal, MSc in International Economic Consulting
Telephone: +45 2868 5389

Cæcilie Thielke Mølgaard, MSc in International Economic Consulting
Telephone: +45 2279 3822