Climate and energy policy and national competitiveness in Denmark: The paradox of ambitious policy in a small, open and exposed economy

Klaudia Gram

Student thesis: Master thesis

Abstract

Despite being a small, open economy that is highly exposed to international competitive pressures, Denmark has nevertheless chosen to pursue relatively ambitious unilateral climate and energy policies. This seemingly paradoxical behaviour of Denmark is the point of departure of the present study. Accordingly, the study inquires into why Denmark has taken on relatively more ambitious climate and energy policies than what can reasonably be expected in light of Denmark’s vulnerability to globalisation and international competition as a small, open economy. On the basis of a theoretical framework composed of aspects of the literature on small European states, the literature on national competitiveness, and the literature on economic benefits from regulatory constraint on economic actors, significant conditions for policy development in the way competitiveness is perceived in Denmark is analysed. The empirical basis of the study consists of semi-structured qualitative interviews with key actors in Danish climate and energy policy, which are put into play against a social constructivist perspective. The study finds that key actors in Danish climate and energy policy, due to the perceived exposure of the Danish economy, tend to consider national competitiveness as a broader and more long-term oriented concept, that it requires active engagement by policy to ensure. Due to this broader and capacity-building perspective on national competitiveness, the study finds that key actors in Danish climate and energy policy tend to perceive ambitious climate and energy policy as beneficial to national competitiveness. While they perceive ambitious policy to contribute to competitiveness by furthering industrial innovation within niche segments of future international supply, and by contributing to the promotion of international demand for Danish green solutions through the exertion of international political influence, it is the perceived ability of ambitious policy to mitigate the exposure of the Danish economy to international competitive pressures, that provides adequate basis for a small open economy to undertake unilateral ambitious climate and energy policy efforts. Accordingly, the interviewed policy actors tend to perceive ambitious climate and energy policy as a means to mitigate international exposure of the vulnerable Danish economy through a decreased dependence on vital import, as well as a means to enhance long-term competitiveness by internalising the cost of negative externalities, and thereby preserving supplies of necessary conditions for competitiveness for the longer term. The Danish case demonstrates that it is possible to perceive ambitious climate and energy policy as beneficial to national competitiveness in absolute terms, which opens up possible interesting perspectives to achieve much needed increase in global climate and energy ambition.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2013
Number of pages72