• Andreas Papachristodoulou

Denmark’s Big No to Big Oil: Putting a stop to future Fossil Fuel Exploration

Last December, in a landmark moment for environmentalists, Denmark cancelled its plans to grant fossil fuel exploration licenses in its EEZ in the North Sea, and declared that no such licenses would be granted again. The move forms part of the country's plan to stop the extraction of fossil fuels by 2050, as it aims to become a carbon-neutral state. As the country's climate minister stated, Denmark’s act is "now putting a final end to the fossil era".

Denmark's Decision

Denmark’s decision is not the first of its kind. France had already adopted such a measure in 2017 when it made moves to put territorial exploration and exploitation of fossil fuels in decline by 2040. New Zealand followed suit the following year by terminating any future oil and gas exploration permits and allowing its already-granted licenses to terminate in due course without any plans to renew them.

Nevertheless, Denmark’s recent decision is a milestone in environmental actions, as it marks the first time that a sizeable oil-producing country decided to adopt such a policy. It also means that it abandoned any plans for the future exploration of fossil fuels in one of the most resource-rich areas in Europe. The country's decision becomes even more significant when one considers that Denmark is currently the largest oil producer in the EU.

According to estimates of the Danish energy ministry, the decision will cost Denmark about 13 billion Danish Krone (£1.6bn). The move, however, is believed to act as an example for other oil-producing countries to follow similar commitments, such as Norway and the UK. The Danish government insisted that it will invest in renewable energy to offset the loss of revenue and jobs following the decision, as it seeks to make the most of the EU’s green recovery plans and subsidies.

The impact of this decision on the environment will be massive, preserving the natural habitat of hundreds of species. Oil exploration in new areas brings about the destruction of the seabed in the explored areas as well as disrupting migration patterns of both fish and birds, causing significant problems for the long-term sustainability of the environment. By halting new oil exploration efforts, Denmark has shown that its loyalties lie with environmental preservation rather than short term economic gains.

Denmark’s act set a long-term expiry date for its oil and gas production industry, claiming a major energy overhaul after which oil and gas will play no role in the Danish energy sector. More importantly, it increases the pressure on other countries to adopt similar decisions. Countries such as the UK, Sweden and Germany have claimed plans to lead the efforts to tackle climate change and often proclaim that their objective is to become green economies. Denmark’s decision to cut its plans for future oil and gas exploration places the onus on them to live up to their promises and may just force them to change their current energy approach.

Looking forward

The decision is significant as it evidences that even oil-producing countries are pressured to eventually act and stop their plans for the future exploration of fossil fuels. The environmental commitments by most developed nations, especially the EU’s commitments to reach carbon neutrality by 2050, can only be achieved if further exploration of fossil fuels is not permitted.

Thus, companies in the energy sector will have to adapt if they are to survive in the near future. Denmark’s decision could be the first of many, especially if developed countries' governments are serious about upholding their environmental commitments. The prevention of future fossil fuel extraction in their waters and territory is mandated if the EU is to achieve carbon neutrality by 2050.

Recent developments suggest that Big Oil companies should be advised to adapt to the new reality that greater environmental action and awareness will reduce their scope of operation. The refusal to grant any new licenses and permits for gas and oil exploration by various countries seems to be a realistic possibility following this development. In such a case, the future of fossil fuel companies that do not adapt to the changing environment could be put into question. A switch into renewable energy sources might be the only way for such companies to remain relevant during the forthcoming Green Recovery period.

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