4 Norwegian climate policy

• The Government will continue to pursue an ambitious national climate policy.

• The Government will take steps to reduce Norway’s domestic emissions in the period up to 2030.

• The Government’s long-term objective is for Norway to become a low-emission society by 2050.

4.1 Emission trends

In 2013, Norway’s greenhouse gas emissions totalled 53.9 million CO₂ equivalents (CO₂-eq). This corresponds to 0.1 % of global emissions when removals in forest and other land categories are excluded. With the exception of 2009, when emissions were lower as a result of the downturn in economic activity, this was the lowest level since 1995. Since 2010, there has been a drop in emissions each year. Nevertheless, emissions in 2013 were 3.7 % above the 1990 level. In 2013, industrial processes accounted for 22.5 % of Norway’s emissions. Emissions from industrial processes have been substantially reduced since 1990, partly as a result of the introduction of emission abatement technology. The oil and gas industry accounted for 26 % of Norway’s total emissions in 2013. There has been a rise in emissions from the industry, partly because more fields are now producing.

The transport sector accounted for 32 % of Norway’s emissions in 2013, or 26 % if fishing activities and non-road mobile machinery are excluded. Emissions from the transport sector rose by 27 % from 1990 to 2007 but have remained stable since then despite rising traffic volumes. This is explained by lower emissions from new vehicles and increasing use of biofuels. The drop in emissions from new vehicles is only partly due to technological advances; other factors involved are restructuring of vehicle taxes to improve their environmental profile, and considerable tax and user benefits for electric vehicles.

Future emission trends will depend on a number of factors including technological developments, population trends, economic developments and the policy instruments used. The emission projections are based on the assumption that there will be general technological advances in all sectors.

Table 4.1 shows projections of Norwegian emissions up to 2030.

4.2 Current policy instruments

The Government’s policy is based on the updated cross-party agreement on climate policy (published in a recommendation to the Storting, Innst. 390 S (2011–2012)), and the strengthening of this agreement announced in its policy platform. Norway’s domestic greenhouse gas emissions are to be reduced in the period up to 2030, and the Government’s long-term objective is for Norway to become a low-emission society by 2050. During this transition, it is important to make use of new opportunities for industrial development and to build green competitiveness.

The main instruments of Norwegian climate policy are taxes and participation in the EU emissions trading system (ETS), which are cross-sectoral economic instruments. More than 80 % of Norway's emissions are either in the ETS sector or subject to the carbon tax. A carbon tax was proposed by the Syse Government as early as 1990 and was introduced the following year. Policy instruments used in addition to taxation and emissions trading are direct regulation, standards, agreements and grants for emission reduction measures. Norway is among the countries with the highest levels of greenhouse gas emission efficiency, in other words where emissions per unit of GDP are lowest.

Norway’s climate policy results in considerable reductions in domestic greenhouse gas emissions. Norway’s most recent communication to the UN Climate Change Convention includes estimates of the substantial effect of Norway’s actions on the level of emissions. The report estimates was estimated that in 2010, greenhouse gas emissions were about 13–15 million tonnes CO₂-eq lower than they would have been without any of these actions, and that in 2020, emissions will be 17–20 million tonnes CO₂-eq lower than they would have been without these actions.

The Government will continue to pursue an ambitious national climate policy that will reduce domestic emissions by 2030 and contribute to achieving the long-term objective that Norway is to be a low-emission society by 2050. Steps to strengthen climate policy instruments are being taken, including the establishment of a green tax commission, the Government’s carbon capture and storage (CCS) strategy, which was set out in the Ministry of Petroleum and Energy's budget proposal for 2015 (Prop. 1 S (2014–2015)), a comprehensive review of vehicle taxes and updating of the National Transport Plan.

A good many policy instruments and measures intended to reduce greenhouse gas emissions from the transport sector are already in place, some of them introduced in the 2015 budget. The effects of a number of them may increase over time, because they provide incentives to develop new technologies and to choose low-emission technologies. The system for calculating purchase tax on vehicles was altered in 2007 to encourage people to choose vehicles with low greenhouse gas emissions. This has been successful: average CO₂ emissions from new passenger cars have been reduced by almost 40 % from 2006 to 2014.

The Government is giving priority to railway operation and maintenance. The 2015 budget will reduce the maintenance backlog in the railway system, which should improve punctuality and reliability and encourage the transfer of goods from road to rail. Services are also being improved by increasing capacity along several stretches of railway and increasing the number of intercity rush-hour departures. This will encourage more people to use the railways.

Aviation is partly included in the ETS sector, and domestic aviation in Norway is also subject to the carbon tax. In the 2015 budget, the carbon tax for domestic aviation in the ETS sector has been increased by almost 85 % in real terms.

The renewable transport fuel obligation for road transport is instrumental in reducing emissions, provided that the biofuels meet satisfactory sustainability criteria. In connection with the 2015 budget, the Storting has decided to increase the obligation from 3.5 % to 5.5 % biofuel from 1 July 2015. At the same time, the Storting asked the Government to put forward a proposal in the 2015 Revised National Budget to exempt biodiesel from the road use duty on fuels and introduce road use duty at half the normal rate for low-level bioethanol blends. The Storting asked the Government to take particular account of the consequences for EEA law and the fiscal, environmental and financial consequences of the changes. The 2015 budget introduced a larger deduction from the purchase tax for rechargeable hybrid vehicles than previously. In connection with the 2015 budget agreement, the Government decided that all future procurement processes for ferries are to include a requirement to use zero-emission technology if this is possible given the maturity of the technology.

The Government presented its national biogas strategy in autumn 2014. This includes the establishment of a pilot plant and research on biogas. NOK 10 million has been allocated to the strategy in the budget. Since the strategy was presented, it has been decided to introduce road use duty on natural gas and LPG, which will improve the profitability of biogas relative to natural gas.

Under the cross-party agreement on climate policy, there is agreement that the use of fossil fuel oils to provide base-load capacity is to be phased out in all central government buildings by the end of 2018. The Government wishes to strengthen the cross-party agreement, and intends to phase out the use of oil-fired boilers to provide base-load capacity in all properties owned by Statsbygg by the end of 2016. NOK 15 million has been allocated to this work in the 2015 budget.

The state-owned enterprise Enova is responsible for administering important instruments for the transition to a low-emission society in several key emission sectors. The Government has strengthened the cross-party agreement on climate policy by increasing allocations to the Green Fund for Climate, Renewable Energy and Energy Efficiency Measures and thus increasing support for energy and climate technology. The fund’s capital is being increased by NOK 9.25 million each year in 2014, 2015 and 2016. Enova’s grant scheme for energy efficiency measures in private households has been reorganised and expanded.

Action to increase carbon stocks in and reduce emissions from forest and other land categories as part of a more active forest and land use policy will also play a part in achieving a new Norwegian emission reduction commitment. Increasing the use of bioresources to replace fossil fuels and emission-intensive materials will also make an important contribution to the transition to a low-emission society. In the 2015 budget, NOK 15 million has been allocated to a pilot project for afforestation of new areas.

Some types of mitigation action have positive effects beyond the reduction of greenhouse gas emissions. Measures such as including reducing the use of fuel oils to heat buildings, steps to increase the proportion of electric vehicles increasing the walking and cycling as a proportion transport also reduce air pollution by cutting emissions of pollutants including sulphur dioxide, particulate matter and nitrogen oxides. This reduces acidification and has a positive impact on health.

4.3 Trends in forest in Norway

Based on figures for 2012, which at the time of publication are the most updated emission inventory figures, total net removals from the land sector as a whole were 26.7 million tonnes CO₂-eq, largely due to the net increment in forest. Emissions from other sectors in 2012 totalled 52.7 million tonnes CO₂-eq. In other words, net removals from the land sector currently correspond to about 50 % of emissions from other sectors. The main factors affecting the volume of removals are age structure, the level of harvesting and natural losses (for example through fire, insects and storms). Age structure influences the level of removals because trees that are approaching harvesting age absorb more carbon than younger saplings; this effect is not a result of forest policy. The annual increment has shown a rising trend in Norway, while the annual harvest has been relatively stable at a lower level than the increment. The high level of net removals in forest is a result of the low harvest level combined with active afforestation since the Second World War. The net increment is expected to decline up to 2100, but will remain positive, thus increasing the carbon stock in forest (see Figure 4.1). The projected decline in net increment is explained by a combination of an increase in harvesting as more forest reaches the right age, a changing age structure, and a low level of investment in forest production in recent years. In the longer term, it will be possible to slow the downward trend by introducing new forest management practices and through targeted mitigation measures in the land sector.

The Government will give more weight to climate policy goals in the management of Norwegian forests. To secure a transition to a low-emission society, both in Norway and in other countries, CO₂ removals in forest and other land categories that are not a result of new action must be additional to and not replace emission reductions in other sectors. New action should be considered, including measures designed to maintain or increase the carbon stock in forest, and measures to allow the replacement of more emission-intensive materials with wood and fossil energy with renewable bioenergy. The Government also intends to take steps to increase the timber harvest.

Source Norwegian Forest and Landscape Institute

4.4 Priority areas

The priority areas of the Government’s climate policy will be as follows:

• reduction of emissions from the transport sector;

• development of low-emission industrial technology and clean production technology;

• carbon capture and storage;

• strengthening Norway’s role as a supplier of renewable energy;

• environmentally sound shipping.

4.4.1 Introduction

The updated cross-party agreement on climate policy from 2012 states that Norway’s climate policy must be designed to give the greatest possible emission reductions relative to the resources used and to give substantial cuts in emissions both in Norway and abroad. The parties agree that general policy instruments are a central element of domestic climate policy. Cross-sectoral economic instruments form the basis for decentralised, cost-effective and well-informed measures to ensure that the polluter pays. The parties agree that further regulation should as a general rule be avoided in areas that are already regulated by means of general policy instruments. However, the possibility of using other policy instruments in addition to emissions trading and taxes should be retained in these sectors too. For example, the development of new technology in Norway can help to speed up the shift to more climate friendly technology. The agreement states that the implementation of measures that will be cost effective with a projected rise in the price on emissions of greenhouse gases over the lifetime of the investment, and that will not necessarily be implemented in response to current policy instruments, should be considered in particular. This applies especially to measures that promote technological developments and measures to encourage the population as a whole to speed up the changeover to a low-emission consumption pattern.

Many long-term investments in infrastructure are not made primarily for the purpose of reducing greenhouse gas emissions. Nevertheless, in many ways infrastructure determines the framework for emission trends and what mitigation action can be taken. The IPCC emphasises the importance of avoiding lock-in to carbon-intensive technology or infrastructures in connection with new investments. Deep cuts in emissions will require major changes in investment patterns in the world.

The development of low-emission technology will be of crucial importance for the world’s chances of achieving the two-degree target. Although Norway is putting considerable resources into the development of new climate-friendly technology, we are also dependent on technological advances in other countries to achieve substantial cuts in emissions. The costs of a technology drop once some actors have led the way in its use, as a result of wider deployment and learning effects. Economies of scale also come into play. The real challenge in phasing in new technologies is to cross a critical threshold – from a situation where a lack of experience and limited deployment keep prices high, to one where market forces start to drive the deployment of the technology. For climate-friendly technology to be developed and deployed, it must give returns. This is why it is essential to put a price on emissions. At present, only about 10 % of global emissions have a price.

The Government will strengthen the research effort and environmental technology initiatives. The aim is to provide a basis for new industrial development and a forward-looking business sector. The priority areas of Norwegian climate policy are discussed below. In these areas, Norway can play a part in developing solutions that can be used to reduce emissions both in Norway and in other countries. The Government will submit proposals for new measures, including assessments of their cost and effectiveness, to the Storting at a later date, including in the annual budgets.

4.4.2 Reduction of emissions from the transport sector

Greenhouse gas emissions from the transport sector can be reduced by shifting to modes of transport with lower emissions, by taking steps to reduce transport needs, and by reducing emissions from specific means of transport. The Government will take steps to encourage more people to meet their everyday transport needs by using public transport, walking and cycling. This means that residential areas and areas where people work need to be developed to ensure efficient land-use and siting of functions, flexible and effective transport solutions, and environmentally sound energy use.

Norway’s rolling National Transport Plan includes assessments of how policy instruments can be used to achieve different transport policy goals and play a part in resolving major social issues such as climate change. The guidelines for the transport authorities and Avinor in the analytical and strategic phase of the plan for the next period state that the analyses are, wherever relevant, to describe what will be needed to achieve the target of Norway’s transition to a low-emission society by 2050.

The report from this phase of the work is to be submitted in February 2015, and will form part of the basis for developing guidelines for the planning phase for the National Transport Plan. It will be natural for these guidelines to include a request for supplementary analyses of action in the transport sector to reduce greenhouse gas emissions, so that the basis for drawing up the plan is as good as possible.

Achieving large cuts in greenhouse gas emissions from the transport sector will require major technological advances internationally. There is no car manufacturing in Norway, but it is still possible to make a contribution to technological developments, for example by supporting research and development. Norway generally makes effective use of policy instruments, thus providing incentives for a switch from fossil to renewable energy. A number of policy instruments for reducing greenhouse gas emissions from the transport sector are already in place, and more are being introduced as a result of budget decisions for 2015 and the Government’s action plan for public transport. The Ministry of Transport and Communications will continue implementation of the action plan, for example by promoting the provision of park-and-ride facilities at railway and express bus stations.

Vehicle taxes are helping to make Norway’s vehicle stock more environmentally and climate friendly, since tax levels are low for zero-emission vehicles, plug-in hybrids and other greener vehicle types than for similar vehicles that use fossil fuel. The Government has announced that it will present a complete review of vehicle taxes in the 2015 Revised National Budget, with a view to making changes that will encourage the use of new technology, make the vehicle stock safer and encourage greener choices.

It is important to continue to encourage people to choose low-emission vehicles. Technological developments are rapid, and Norway must use policy instruments that give people financial incentives for making climate-friendly choices. It is essential to provide a predictable framework for consumers and the business sector. The Storting has pointed out that shifting goods transport from road to sea and rail will have important effects. These effects must be considered in conjunction with the new National Transport Plan and other policy instruments.

Biofuels can make a contribution to reductions in greenhouse gas emissions provided that they meet satisfactory sustainability criteria.

In 2015, the Government will start negotiating urban environment agreements for the nine largest urban areas in Norway. As more people move to the towns, there is a growing need to develop environmentally sound transport infrastructure, but urbanisation also makes it possible to provide more cost-effective public transport. There is now a government investment grant scheme for important public transport projects. In addition, facilities for pedestrians and cyclists need to be considerably improved, and it must also be possible to make use of restrictive measures.

Patterns of development of service functions, homes, workplaces and infrastructure have a strong influence on the options available for meeting transport needs, and thus on local emission levels. Climate change considerations must be given considerable weight in land-use and transport planning, so that development patterns and transport systems promote the development of compact towns and urban areas, reduce transport needs and promote green forms of transport. When sites for large enterprises, institutions and so on are being chosen, transport options must be considered and given weight. In urban areas and around public transport nodes, there should be a particular emphasis on densification and transformation. It is important to ensure that this is reflected in all the decisions of varying importance that are made about infrastructure, in order to ensure consistency.

4.4.3 Development of low-emission industrial technology

Emissions from Norwegian land-based industry have been reduced by the introduction of a range of measures. To reduce emissions further, it will be necessary to develop and deploy new climate-friendly technology. Clean production technology, technological developments to reduce emissions from cement and fertiliser manufacturing, and technology to reduce process emissions from ferro-alloy and aluminium production will make it possible to bring about emission reductions in Norway and increase production worldwide without a rise in global emissions. Continued research and development and the establishment of pilot plants will be important as a basis for success. Considerable funding is already being made available, for example through Enova's Green Fund for Climate, Renewable Energy and Energy Efficiency Measures.

4.4.4 Carbon capture and storage

The importance of carbon capture and storage (CCS) is well documented in reports from the IPCC and the International Energy Agency. According to the IPCC’s Fifth Assessment Report, the costs of achieving the two-degree target would rise by 138 % without the use of CCS. The IPCC considers that it will be essential to use CCS to deal with emissions from various industrial sources, such as the manufacture of cement and mineral fertiliser, the chemical industry and electricity production.

The Government's CCS strategy includes a wide range of activities, including research and development, demonstration of technologies for capture, transport and storage of CO₂ and international cooperation. In order for CCS to play an effective role in climate change mitigation, it will be necessary to achieve technological developments, reduce costs and increase the price of greenhouse gas emissions. Projects to demonstrate large-scale capture, transport and storage of CO₂ should be carried out. The first demonstration facilities need to function as suitable reference projects from which as much as possible can be learned and that can promote deployment of the technology. The Government's ambition is the construction of at least one full-scale CCS facility by 2020. Options for full-scale CCS demonstration plants in Norway are being reviewed, and this work will continue. The Government will also consider possibilities for full-scale CCS demonstration projects abroad. The Government is already supporting some projects outside Norway, for example in South Africa and China. The Government's CCS strategy is further discussed in the 2015 budget proposal from the Ministry of Petroleum and Energy.

The policy instruments needed to get CCS projects off the ground must ensure that companies with the best project ideas are given sufficient incentive to carry them out, without any negative impact on their market position. Research and development work on immature CCS technologies that are of interest to Norwegian companies should be continued and further developed to the pilot stage.

The IPCC’s Fifth Assessment Report points out that unless emission cuts of more than 40–70 % are achieved before 2050, CCS based on bioenergy together with other approaches to achieving net negative emissions will be of crucial importance in achieving the two-degree target. The IPCC has also emphasised that there are risks associated with becoming dependent on achieving negative emissions later on, rather than making larger emission cuts at an earlier date. Norway has a limited number of large industrial point sources of emissions, and substantial biomass resources. Norwegian research groups are already collaborating with Norwegian companies on the development of solutions that involve using biofuel in CCS to achieve net negative emissions from industrial plants.

4.4.5 Strengthening Norway’s role as a supplier of renewable energy

A large proportion of greenhouse gas emissions both globally and in Norway is associated with energy production and use. Both energy efficiency measures and the availability of more renewable energy are therefore essential to the transition to a low-emission society. Norway has natural advantages here; it can produce renewable electricity profitably, and in addition, a large proportion of this is flexible production of hydropower. To achieve emission reductions, there must be sufficient renewable energy available to replace fossil energy use. The Nordic electricity market is linked by cables to the rest of Europe, and renewable energy could therefore be used to replace fossil fuels in other parts of Europe, and can make it possible to further develop intermittent renewable energy sources in other countries. The Government has granted licences for the construction of two new electricity interconnectors, one to Germany and one to the UK. These will make it possible to replace more fossil energy in the rest of Europe with renewable energy from Norway, and will promote green growth in Norway. Further expansion of renewable energy production must also be weighed against the scale of disturbance to the natural environment. It is therefore vital to promote efficient energy use. This can also reduce fossil electricity consumption by permitting more export of renewable electricity to other parts of Europe. Electricity production is included in the EU ETS.

Norway can also play a part in developing new and improved renewable energy technology and advanced biofuels. Avinor has entered into cooperation with the forestry industry on the development of aviation biofuels. Norwegian industry and Norwegian research groups have expertise that can be harnessed to drive technology development.

4.4.6 Environmentally sound shipping

The Government will pursue a proactive and integrated policy for more climate friendly and environmentally sound maritime transport. The maritime sector is one of Norway’s largest industries. Norway plays an active part in negotiating internationally binding climate and environmental rules within the International Maritime Organization (IMO). The Norwegian Maritime Authority plays a key role in this work. Its expertise, innovative potential and environmental technology give the Norwegian maritime industry a competitive edge.

Ships that are under construction now will continue to sail up to about 2050. In other words, the green ships of the future are being built today. Norwegian support schemes and requirements have promoted the development of new technology and encouraged the construction of greener ships for commercial purposes. Norway is already a world leader in gas-powered ships and battery-powered ferries, and Norwegian environmental technology may in future become an important export for the Norwegian maritime industry.