Norway's Plans for Trading in GHG Emissions

The Norwegian government today announced a NOK 500 million appropriation for the purpose of purchasing Emission Reductions eligible for Kyoto Protocol compliance. The appropriation is administered by the Ministry of Finance, which is also authorised to contract a further NOK 3 600 million for payments against deliveries in 2009 and subsequent years.

In a report to the Norwegian Parliament this spring, the Government proposes a very ambitious climate policy for Norway, including specific targets for emission cuts. The Norwegian climate policy targets will be met by both domestic and international cuts in emissions. By 2050 Norway will be carbon neutral.

- A first step is to over-fulfil our Kyoto commitment by 10 per cent. While increasing our efforts to reduce domestic emissions in the National Budget, we will support measures to reduce GHG emissions by purchasing Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs) from projects abroad. The development of an international carbon market will be a cornerstone when it comes to achieving cuts in global emissions to sustainable levels. Our participation may contribute to the development of these markets. By doing business in the Clean Development Mechanism (CDM), we will also give important contributions to growth and sustainable development in developing countries through the transfer of technology and significant financial resources, says Minister of Finance Kristin Halvorsen.

Norwegian businesses will be connected to the European Union Emissions Trading Scheme, EU-ETS. The Government expects to supply significantly fewer allowances to the trading system than the total of expected emissions from the Norwegian companies that will be connected to the EU-ETS. Thus, the Norwegian allocations will contribute to scarcity of allowances in the system. Norwegian allowances which are not allocated free of charge will be sold generally in the market, and will not be targeted at Norwegian buyers. The total volume of these sales will be indicated in the National Allocation Plan which will be presented later.

Final figures for both sales and purchases will follow negotiations on the implementation of the EU Emissions Trading Directive in the Agreement on the European Economic Area. Developments in the introductory conversations with the European Commission and Norway's partners in the European Free Trade Association indicate that a sales volume of 12 million tons, as stipulated in the 2008 budget, may be too high. In light of the final outcomes of these processes, this issue will be revisited in the Revised National Budget, which is to be published in May 2008.