3 Norway’s climate strategy for 2030 and the transition to a low-emission society

3.1 A strategy to ensure that Norway achieves its targets

The Government intends to achieve its 2030 target mainly through domestic emission reductions, and with the use of EU flexibility mechanisms as necessary. The Government's strategy for 2030 is intended to facilitate substantial domestic emission reductions.

Both Norway and the EU are giving high priority to climate policy. The Government has chosen to enter into a dialogue with the EU on joint fulfilment of the 2030 emission reduction commitment in order to contribute to the wider international cooperation on global climate solutions. Joint fulfilment with the EU could open up more opportunities for Norwegian companies to provide innovative solutions for the green shift in the economy that has already begun both in the EU and in Norway. Norway is already cooperating with the EU to reduce emissions from sectors covered by the EU Emissions Trading System. Given an agreement on joint fulfilment of the 2030 target, Norway would also cooperate with the EU on reducing non-ETS emissions covered by the proposed Effort Sharing Regulation. These emissions are mainly from transport, agriculture, buildings and waste management, but also include non-ETS emissions from manufacturing and the petroleum sector. Under an agreement on joint fulfilment of climate targets with the EU, Norway would be assigned its own target for reduction of non-ETS emissions. The Commission's proposal estimates that Norway would be attributed a target of a 40 % reduction of emissions that come within the scope of the Effort Sharing Regulation. Norway would thus be a full participant in collective European efforts to reduce emissions. After the US decision to withdraw from the Paris Agreement, it is first and foremost the EU that will have to lead the way in the international climate negotiations. This makes Norway’s decision to cooperate closely with the EU even more important.

Given joint fulfilment with the EU, Norway’s commitment for emissions covered by the Effort Sharing Regulation would be expressed as a budget for the whole period 2021-2030. This budget would specify not only a ceiling for total emissions over the period as a whole, but also the maximum permitted emissions for each year. However, we know that it is difficult to calibrate greenhouse gas emissions closely from year to year. Economic activity fluctuates and the population may change. The speed of developments in climate-friendly technology is uncertain, and the costs of deploying such technology are therefore also uncertain. The Government’s strategy has been designed to deal with the interplay between an emission budget including specified annual targets and greenhouse gas emissions that are influenced by the actions of several hundred thousand companies and millions of people.

The emission budget Norway would be allocated under an agreement with the EU has not been finally settled, and will depend on the EU legislation as finally adopted. On the basis of the figures available at present, the gap between projected emissions in Norway and Norway’s emission budget is estimated at 30 million tonnes CO₂-eq for the period 2021–2030. This estimate is uncertain. The gap can be closed by domestic emission reductions and cooperation with EU countries on emission reductions.

Source Statistics Norway, Norwegian Environment Agency, Ministry of Finance and Ministry of Climate and Environment.

In the Effort Sharing Regulation, the European Commission has proposed several forms of flexibility to assist countries to meet their targets. Some countries will have the flexibility to access a limited number of allowances from the EU ETS. Based on the proposed regulation, Norway is likely to be able to use between 5.5 and 11 million EU ETS emission allowances to cover part of the gap in the emission budget (this is further discussed in Chapter 4.3.4 and 4.5.1). The Government will make full use of this flexibility. Further emission reductions totalling 20–25 million tonnes would be required during the period to cover the remaining gap. The estimated need for emission reductions is uncertain.

If the Commission’s legislative proposals are adopted, joint fulfilment by Norway and the EU would mean that Norway too would be assigned the target of ensuring that recorded emissions from the LULUCF sector (land use, land-use change and forestry) do not exceed the recorded removals of CO₂. If the Commission’s proposal is adopted, Norway is likely to have to record net emissions from the sector. This means that Norway’s emission commitment may increase above the level that follows from the Effort Sharing Regulation, despite the large net uptake of CO₂ by forest in Norway; see Chapter 4.4 for further details. Various alternatives to the Commission’s proposal are now being discussed. Norway will work together with other European countries that have large areas of forest to promote an alternative model for the EU. The final design of the accounting rules is still very uncertain. The contribution of the LULUCF sector is therefore considered to be zero for the purposes of the present calculations. The calculated gap of 20–25 million tonnes in the emission budget has therefore been used as a basis for assessing the need for further cuts in emissions, see Table 3.1. If the emissions gap turns out to be higher than this as a result of the rules for the LULUCF sector, it will probably be possible to cover the difference by using bilateral flexibility mechanisms.

The Government intends to achieve its 2030 target mainly through domestic emission reductions, and with the use of EU flexibility mechanisms as necessary. The Government's strategy for 2030 is intended to facilitate substantial domestic emission reductions. Chapter 3.2 describes national action that Norway can take to satisfy the need for emission reductions. Before the commitment period starts in 2021, the details of the legislation will be known and the consequences for Norway will be clearer. However, well into the commitment period 2021–2030 there will be considerable uncertainty related to emission trajectories, the effects of climate policy, technological developments and the costs of emission reductions. This is why the strategy needs to be both ambitious and flexible. The Government is allowing for uncertainty by strategic planning to ensure the necessary flexibility to achieve the emission budget. Norway expects sufficient flexibility to be available through bilateral agreements with EU countries. If it is necessary and proves to be cost-effective, the Government also plans for Norway to be able to make use of flexibility in the form of direct purchases of emission allowances from other countries. Use of the EU flexibility mechanisms will contribute to emission reductions elsewhere in Europe within the common overall emission ceiling, and thus contribute to real global reductions in the same way as emission reductions in Norway.

To ensure that the targets are achieved by 2030, the Government’s strategy incorporates sufficient flexibility to allow for adjustments as new knowledge becomes available and conditions change, for example as a result of technological advances. Thus, in the present white paper, the Government is presenting a realistic and dynamic strategy for tackling the climate policy challenges we are facing in the period up to 2030, and one that will contribute to a green shift and green competitiveness in Norway.

3.2 Continuing and strengthening Norway’s national efforts

The Government has already implemented a range of mitigation measures and strengthened national climate policy together with the parties with which it is cooperating in the Storting (Norwegian parliament). In addition, decisions made by the Storting and ambitions and goals that have been formulated will play a part in bringing about emission reductions in the years ahead. This applies in particular to the targets for zero-emission vehicles as a share of the vehicle park set out in the Norwegian National Transport Plan 2018–2029; the decision to increase the biofuel quota obligation (the required proportion of biofuels in annual sales of road traffic fuels) to 20 % in 2020; and a decision by the Storting to request the Government to introduce a standard carbon tax rate for non-ETS emissions. Negotiations are also in progress on a CO₂ fund for commercial transport.

In the strategy described in the present white paper, the Government shows that the estimated emissions gap of 20–25 million tonnes can be closed by means of domestic emission reductions. The white paper discusses mitigation measures that the Norwegian Environment Agency estimates have the overall potential to reduce emissions by more than is needed to close the emissions gap. The Government considers it appropriate to consider a broad range of mitigation measures because estimates of the emission reduction potential and costs of measures are highly uncertain. This strategy takes into account the possibility that some of the emission reduction potential may not be realised. The strategy does not present a final list of mitigation measures or policy instruments to achieve emission reductions by 2030. It will be important to be able to adjust the use of policy instruments throughout the period, for example to take into account technological developments. The strategy therefore charts a course for the use of policy instruments in the years ahead and indicates mitigation opportunities within each sector. Mitigation measures are discussed in more depth in Chapter 5.

The transport sector accounts for about 60 % of non-ETS emissions in Norway, and a large proportion of domestic emission reductions must therefore be achieved in this sector. A good many political ambitions and goals have been formulated for the transport sector in recent years. The National Transport Plan 2018–2020 presents various quantitative targets for new zero-emission vehicles for 2025 and 2030. Analyses show that ambitious targets for emission cuts in the transport sector will not be achieved without the use of incentives. Policy instruments already adopted by the Government are expected to contribute significantly to achievement of the quantitative targets. The targets are based on the assumption that the technological maturity of zero-emission vehicles in different segments will improve so that they become competitive with fossil-based transport solutions.

The biofuel quota obligation is to be increased in line with the 2016 budget agreement. However, if biofuels are produced in Norway, emissions from their production may be included in Norway’s emission inventory, primarily in the ETS sector (manufacturing) and/or the LULUCF sector.

To ensure judicious use of policy instruments and cuts in emissions in urban areas, Norway has established arrangements for urban environment and urban development agreements for the larger urban areas. These are now to be coordinated in a single system of integrated urban land-use and transport agreements. These agreements are intended to be instrumental in achieving the target of using public transport, cycling and walking to meet the growth in the volume of passenger transport (giving zero-growth in passenger car traffic) in the larger urban areas that are included in these arrangements.

Decisions have also been made that may reduce non-ETS emissions in sectors other than the transport sector. The Government will ensure that the prohibition on the use of mineral oil for heating buildings from 2020 also includes the use of mineral oil to provide peak-load capacity. The Government also intends to extend the prohibition further to include farm buildings and temporary buildings. Furthermore, the Government will review possibilities for reducing emissions from the use of natural gas to heat buildings. Another goal must be to ensure that construction sites are as fossil-free as possible in future. In the course of 2017, the Government will therefore review ways of reducing the use of mineral oil for heating and drying buildings during construction. In addition, the Government is working on an action plan for fossil-free construction sites in the transport sector.

The Norwegian Environment Agency has estimated that action to achieve the political goals and ambitions mentioned above can result in emission reductions of the order of 16 million tonnes CO₂-eq over the period 2021–2030. In its analyses, the Environment Agency has divided mitigation measures into several cost categories. Mitigation measures related to policy objectives and ambitions for the transport sector vary greatly in cost. Cost levels will depend to a large extent on further developments in low- and zero-emission technology for the transport sector. This technology is mainly being developed outside Norway.

The Environment Agency has estimated that there is an additional potential for reducing non-ETS emissions by 18 million tonnes at an economic cost of less than NOK 500 per tonne CO₂-eq in sectors including transport, agriculture, industry and petroleum. The estimated emission reduction potential and costs are uncertain and sensitive to the underlying assumptions. Developments in costs and in the feasibility of implementation will determine which mitigation measures are actually implemented. The Environment Agency has not assessed the policy instruments that would be needed or how they should be applied, and this is another source of uncertainty.

The Storting has adopted a decision requesting the Government to introduce a standard carbon tax rate for non-ETS emissions. The Government intends to follow this up in the 2018 budget. A standard carbon tax rate for all sectors may result in emission reductions in addition to those already included in the baseline projections. Almost 60 % of non-ETS greenhouse gas emissions are currently subject to the standard tax rate of NOK 450 per tonne CO₂. However, certain industries and uses are exempted from the carbon tax or are taxed at a reduced rate. In non-ETS sectors, these include the use of natural gas in greenhouse nurseries; domestic maritime transport (goods and passengers); fisheries less than 250 nautical miles from the coast; and offshore vessels. There is also a reduced mineral oil tax rate for fisheries less than 250 nautical miles from the coast. A reduced carbon tax rate applies to domestic aviation and the use of natural gas in manufacturing and mining. Emissions from domestic shipping and a proportion of domestic aviation are non-ETS emissions.

It is reasonable to assume that a proportion of the emission reduction potential of the measures to reduce emissions that are not subject to the carbon tax will be realised through the introduction of a standard tax rate, although the estimated costs are uncertain. However, of the measures that the Norwegian Environment Agency has estimated will cost less than NOK 500 per tonne CO₂, a substantial proportion target emissions that are already taxed. In some cases it can be difficult to impose a tax on emissions, for example if they are difficult to measure or calculate. There may also be cases where the carbon tax will not function as an incentive to introduce cost-effective measures because of barriers such as a lack of expertise or information. If the carbon tax is not considered to be an adequate or appropriate instrument, other instruments that provide equally strong incentives to reduce emissions will be considered.

For the agricultural sector and the fisheries, industry representatives will be invited to take part in committees appointed to consider ways of reducing greenhouse gas emissions by 2030.

The Government has initiated a process together with relevant industry organisations on the establishment of an environmental agreement and a CO₂ fund for commercial transport. Its environmental target will need to be adapted to the extent and design of the agreement and considered in conjunction with Norway’s 2030 climate targets. The first steps are to commission reviews and obtain data and information as a basis for analyses.

According to calculations by the Norwegian Environment Agency, the measures described above have the overall potential to reduce domestic emissions by about 35 million tonnes in the period 2021–2030 compared with the emission trajectory in the current baseline projections. This is considerably more than the estimated need for further emission reduction (20–25 million tonnes), and shows that the Government’s strategy will most probably result in sufficient emission cuts by 2030. The Government considers it appropriate to present a wider range of possible mitigation measures since there is a high level of uncertainty in the estimates, partly because they depend heavily on future technological advances, prices and the effects of different policy instruments. The Environment Agency’s cost estimates are based on the assumption that the costs of zero-emission solutions will drop considerably in the years ahead. See Chapter 6 for a further discussion of this. It is uncertain how large a proportion of the emission reduction potential outlined here will be realised.

The transport sector is an important element in the green shift. It accounts for about 60 % of non-ETS emissions in Norway, and a large proportion of the reduction in domestic non-ETS emissions must therefore be achieved in the transport sector. Meanwhile, the development of low- and zero-emission technology in this sector is proceeding rapidly. To support efforts to reduce emissions in the transport sector, the Government has set a working target of a cut of 35–40 % in emissions from the sector by 2030 compared with 2005. See Chapter 5.3 for further information. This target is based on the assumption that the technological maturity of zero-emission solutions in different transport segments will improve so that they become competitive with fossil-based transport solutions.

In connection with the work of the Government-appointed expert committee on green competitiveness and the Government’s subsequent work, 15 branches of industry have till now chosen to draw up their own roadmaps for a low-emission path of development. This demonstrates that the Norwegian business sector intends to seize the opportunities offered by the green shift, and are interested in cooperation with knowledge institutions and the authorities to ensure success. A number of Norway’s largest companies have joined the Norway 203040 coalition in order to cooperate on the business contribution to achieving Norway’s climate targets for 2030, see Box 3.2. The same trend is apparent internationally – leading global businesses in various sectors are advocating an ambitious climate policy and calling for clear political signals on this. Previous transformation processes have shown that those who lead the way in the development and deployment of new technologies and create markets for them can build up expertise and competitive advantages for the future. This will be at least as important in the transformation to a low-emission society. The Government is drawing up an overall strategy for green competitiveness.

3.3 Building up the knowledge base

The Government considers it important for Norway’s efforts to meet its 2030 commitment and continue the transition to a low-emission society in 2050 that knowledge about possible mitigation measures, their costs and the effects of policy instruments is strengthened. This knowledge-building process is important and will be given priority. Further analyses will also be necessary as a basis for reporting to the UN and the EU and for the reporting required under the Climate Change Act adopted by the Government in June 2017. The Government will follow up the Storting’s request for the appointment of a technical committee responsible for calculations in the field of climate change mitigation, chaired by the Norwegian Environment Agency.

The Government will continue its work on building up data and developing analytical tools. This will include further development of mitigation analyses, including estimates of emission reduction potentials and the costs of implementing different measures. It will also be necessary to develop methodology so that it is possible to provide better estimates of the effects of policy instruments as part of an effective climate policy.

The Government intends to achieve its 2030 target mainly through domestic emission reductions, and with the use of EU flexibility mechanisms as necessary. The Government will:

• promote the use of cost-effective mitigation measures to meet the 2030 commitment;

• consider the introduction of a standard carbon tax rate for all non-ETS emissions. If the carbon tax is not an adequate or appropriate instrument, other instruments that provide equally strong incentives to reduce emissions will be considered;

• follow up political ambitions and goals for the transport sector, including zero growth in passenger transport by car in urban areas, the decision to increase the biofuel quota obligation to 20 % in 2020 and the quantitative targets for zero-emission vehicles set out in the National Transport Plan 2018–2029;

• make full use of the flexibility Norway can achieve by using emission allowances from the EU ETS;

• if it is necessary and proves to be cost-effective, plan for Norway to be able to make use of flexibility in the form of direct purchases of emission allowances from other countries;

• further develop the knowledge base for Norway’s climate policy.