Energy transition

Denmark Becomes First Major Oil-Producing Nation To Set Deadline To End Extraction

The country has announced that it plans to phase out all oil extraction by 2050.

Image of A.P. Moller-Maersk oil rig
An oil rig of the Danish company A.P. Moller-Maersk operates in the North Sea in 2013.
Claus Bonnerup/Polfoto/AP.

Denmark on 4 December became the first major oil-producing nation to announce an end to state-approved exploration in the North Sea, with the aim of phasing out all extraction by 2050.

The decision was applauded by some environmental activists, with Greenpeace celebrating it as a “watershed moment,” although other groups had hoped for a faster timeline.

Denmark’s new rules mean companies will be barred from receiving new licenses to search for and extract oil and gas resources. Previously issued licenses will remain valid until 2050.

Denmark is the top oil producer in the European Union, but it has come under mounting pressure as the EU aims to become carbon-neutral within the next 30 years.

“It’s a historic decision for Denmark,” Dan Jørgensen, the Danish climate and energy minister, told The Washington Post in an interview.

“It’s a tough decision, it’s an expensive decision, but it’s the right decision,” he said. The move “will cost taxpayer money” but is crucial to stay “trustworthy,” as the country seeks to implement the EU climate goal for 2050 by curbing CO2 emissions and offsetting emissions that is absolutely necessary, he added.

Denmark’s decision will translate to an estimated loss of $2.1 billion for a country with a gross domestic product of more than $348 billion last year.

“Denmark is once again showing its willingness to take bold steps to signal its dedication to deep decarbonization, and it sends an important signal,” said Sarah Ladislaw, director of the energy security and climate change program at the Center for Strategic and International Studies. “This move will not have an important impact on oil and gas markets, but it will be instructive to see how Denmark continues to reshape its economy as it moves away from the production of oil and gas.”

For Denmark, the announcement marks the final chapter in a 5-decade-long era in which oil and gas revenue helped consecutive governments turn the country into one of the world’s richest and most generous welfare states. The country has earned more than $88 billion in total revenue from the North Sea since 1972.

Denmark’s oil and gas output is far exceeded by the production of Norway and Britain, both outside the EU. In Norway, as in Denmark, oil and gas revenue similarly formed the foundation of the country’s deep-pocketed welfare system. But both nations have seen their production decrease significantly over the last 20 years, making it easier to be at the forefront of the transition to renewable energy.

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