Norway to contribute to a stronger EU Emissions Trading Scheme

The Government has decided that when Norway joins the EU Emissions Trading Scheme (ETS), its total allocation of allowances will be considerably lower than the projected emissions from the Norwegian installations included in the scheme.

“The Government intends to ensure that when Norway joins the emissions trading scheme, the total quantity of allowances in the system will increase by far less than the emissions generated by the Norwegian installations included in the scheme. We will inform the EU of this decision today,” said Prime Minister Jens Stoltenberg.

The Government proposes that the total volume of allowances in the ETS should only increase by around 15 million tonnes when Norway joins. This is some four million tonnes less than the emissions generated by the relevant Norwegian installations in 2005, and some seven million tonnes lower than projected emissions from these installations in 2010.

In line with EU legislation and practice, a cap is set on the number of credits from the Kyoto Protocol’s project-based mechanisms that installations may use. The cap for Norway is 20% of the total quantity of allowances. Norwegian companies will thus be among the companies in Europe that have the most opportunity to use such credits.

The decision is part of the Government’s efforts to establish a Norwegian emissions trading system that is in line with the EU’s Emissions Trading Directive. The Government considers the ETS to be a cost-effective system for reducing emissions of greenhouse gases. It also provides a predicable framework for the installations involved.

The EEA/EFTA countries Iceland, Liechtenstein and Norway are negotiating with the EU on conditions for the incorporation of the Emissions Trading Directive into the EEA Agreement. The Government expects formal agreement on this to be reached in the near future.

Participation in the ETS will not otherwise affect how Norway seeks to implement its Kyoto commitment.

Minister of the Environment Helen Bjørnøy commented: “We expect a formal decision on this issue to be taken in the EEA in the near future. It has taken a long time to find solutions that are compatible with the EEA Agreement. I am pleased that this now seems to be falling into place.”

The details of the allocation of allowances to Norwegian companies will be set out in a national allocation plan. The plan is to be approved by the EFTA Surveillance Authority (ESA).