Press Release

Date: 17.12.1999

Report from the commission that has outlined a system for domestic greenhouse gas emissions trading

The Commission that has outlined a system for domestic emissions trading in greenhouse gases released its report today. The Commission recommends a system that would cover as many sectors and sources as possible, and that those included would have to surrender quotas to the authorities starting in 2008. The system could include nearly 90 per cent of Norway's total emissions. The Commission is split regarding whether there should be grandfathering.

All suitable sources should be included
The Commission recommends that the system should be as broad as possible, including all sources and sectors where technically feasible. The Commission suggests that the system could include close to 90 per cent of total greenhouse gas emissions given the way these were distributed in 1997.

Allocation of quotas.
If there is a well functioning international market, the Commission recommends that the Government should sell those quotas that are to be sold, directly therein. In the absence of such a market, the Commission recommends auctions.

The Commission is split regarding whether there should be any grandfathering of quotas, that is giving out quotas for free. The majority is of the view that all actors should pay full market price for the quotas, consistent with the polluter pays principle. A minority advocates grandfathering for the industries presently excempted from CO2-taxes, and recommends that these industries should get free quotas corresponding to 95 per cent of their 1990 emissions. Another minority argues that deciding who will get free quotas and to what magnitude this will be given, is mainly a political choice. These members do not give a recommendation.

If it is politically decided to use grandfathering, the whole Commission recommends that the allocation should be based on historical emissions, for example that each plant could choose between 1990 and 1998 as the base year. The Commission's mandate from the Parliament and Government says that new activities should not get free quotas, and the Commission takes that statement further to include activities that did not have emissions in the base year. The total amount of free quotas should be proportional with the emissions in the base year.

Certificate to emit
The Commission recommends that the quotas are allocated and traded as certificates that give the right to emit a certain quantity of CO2-equivalents. The obligation to surrender certificates to the authorities should be put downstream at the polluter level where feasible, while for some sources it should for practical purposes be placed upstream on the producers or at the importer or wholesale levels.

The market for quotas
The state authorities are responsible for the initial sale in the market. The Commission argues that the institutions needed to make an international secondary market work effectively, such as one or more exchanges and/or brokers, would be established without government intervention. If there are no limitations to countries' access to the use of the Kyoto mechanisms, all participants should be allowed to use these directly.

Phasing in the system
The Commission advocates that the main features of system should be decided as soon as possible, and in particular that development of reporting and control routines starts early. When and how the authorities should start allocating quotas for the first commitment period under the Kyoto Protocol should be closer examined, inter alia in light of what other countries do. Having considered pros and cons in relation to achieving the Kyoto target for 2008-2012, the Commission does not see the need to establish a broad system for emissions trading for years before 2008.

Institutional needs for selling quotas
The Commission recommends a closer examination of whether it will be useful to establish a separate organisation to administer the assets that the state has been allocated through its assigned amount under the Kyoto protocol. This administration would be subject to guidelines drawn up by the authorities.

Background for the Commission's work
Following the submission of White Paper no 29 Norway's follow up of the Kyoto Protocol and Proposition no 54 Green Taxes the Parliament asked the Government to set up a broad public commission of experts to study a system for domestic emissions trading, taking the Kyoto Protocol as the point of departure. Through a Royal Decree of 23 October 1998, the Government appointed the Commission ("Kvoteutvalget"). Members of the Commission are: Adviser Eva Birkeland, Statistics Norway (chair), Director for Health, Environment and Safety Gerd Halmø, Statoil, Chairman of the Board Øystein Dahle, the Nordic branch of Worldwatch Institute, Research Fellow Cathrine Hagem, Cicero, Professor Michael Hoel, University of Oslo, Adviser Nina Bjerkedal, Ministry of Finance, Adviser Peer Stiansen, Ministry of Environment, Assistant Director General Bent Fester Sunde, Ministry for Trade and Industry, Adviser Ingun Hagesveen Weltzien, Ministry of Transport, Adviser Lars Erik Aamot, Ministry for Petroleum and Energy, Judge Anders Haugestad, Tromsø.

Contacts: Anne Beate Tangen, + 47 22 24 60 33
Håvard Toresen + 47 22 24 59 73