Norway: Environmental Policy and the Impact on the Energy Sector

Tine Sundtoft

Today we face global warming, higher fuel costs and pollution of the soil, air and water that we humans so desperately depend upon. This is leading to a growing need for clean and renewable energy. The Norwegian energy sector, being unique in several ways, is of particular interest.

The abundance of hydro power has made our power system almost 100% renewable. It has also made us a large exporter of energy intensive products produced in an environmentally friendly manner. The deployment of large amounts of variable wind and solar production in Northern Europe increases the demand for flexible hydro power production. My government has recently granted license to two new power cables to Germany and UK. These will each be on 1400 MW and are planned to be finished in 2018 and 2020. Increasingly, Norway is becoming Europe’s green battery.

Norway also has a large potential for further development of renewable energy. Due to EUs renewable energy Directive, Norway and Sweden have a common electricity certificate market that was established in 2012. The two countries’ common goal is to increase the renewable electricity production by a total of 26.4 TWh by 2020. This corresponds to the power consumption of more than half of all Norwegian households. The increased production is expected to come mostly from wind, hydro and bio energy. A recent study of the Nordic Energy system from IEA shows that renewable power production in the Nordics may increase substantially by 2050, resulting in a net electricity export to Continental Europe of around 80 TWh in a two degree scenario.

Balancing nature and climate

When renewable energy projects are developed conflicts may arise between companies, authorities and environmental interests. A comprehensive regulatory framework and policy guidelines are established to ensure sustainable tradeoffs between power generation and environmental values. Every license to build a renewable energy project is granted on the foundation that the social benefits shall exceed the disadvantages. This includes making assessments on the negative impacts on biodiversity, such as vulnerable and endangered species, ecological systems, and landscapes.

Since the 1970s, the Norwegian parliament has protected approximately 390 waterways from development of hydropower. This means that we have refrained from utilizing approximately 46 TWh, equal to about 1/3 of Norway’s average power production of approximately 130 TWh. Outside of these protected waterways, we seek to develop sustainable projects with valuable renewable energy production with minimal and thus acceptable impacts on environment. This includes requiring mitigating measures in licenses in order to limit the environmental impact.

One third of the Norwegian salmon rivers are affected by river regulations. The actual impact however, depends on the extent of each project, and to what extent the implementation of measures can reduce the damage. Many of the measures do not necessarily require major investments. Mitigating measures to create a better environment for salmon may include sufficient water flow, physical adaptations of habitats such as restoring side channels, and other fish stabilization measures. At the same time, wind farms impact bird populations negatively in some areas. However, by making use of ecological knowledge one can reduce the risk of collisions and disturbance by carefully positioning each wind turbine in the landscape.

Reducing domestic emissions

Despite the decarbonized electricity supply, Norway has slightly higher greenhouse gas emissions per capita (10 million tons CO2-eqv.) than other industrialized countries in Europe and Asia. According to the IPCC must average emissions in a two degree scenario be 1.5-3.1 tons CO2-eqv. per capita in 2050. Norway is part of the Kyoto Protocol and will by 2020 reduce the global greenhouse gas emissions equal to 30% of Norway’s 1990 emissions. Norway also has a goal to be carbon neutral by 2050.

One reason for the relatively high emissions is that Norway is a major producer of oil and gas. Norway supplies about 20% of the European demand for natural gas, which in the medium term is important in reducing Europe’s emissions. Norway is also a country far north and has a dispersed settlement. This gives a large need for heating and transport services. Due to the large access to hydro power, Norway also has a large and emission intensive process industry.

Norway is working on a broad scale to reduce domestic emissions, and this is affecting the energy sector both directly and indirectly. At the basis of Norway’s climate policy are general means like CO2 tax and participation in the EU Emission Trading System (ETS). Approximately 80% of the Norwegian greenhouse gas emissions are subject to a carbon price. Another major tool in the energy and climate policy is Enova, a public enterprise working on driving forward the changeover to more environmentally friendly consumption and generation of energy. In 2013, Enova awarded support to new energy projects corresponding to 1.4 TWh, with a total of 214 million Euros. Enova also supports new energy and climate technology, to harness experience that will contribute to expertise development, innovation and diffusion of the technology both nationally and internationally.

Approximately 80% of the Norwegian greenhouse gas emissions are subject to a carbon price.

The phase-out of oil heating in buildings and industry sectors is leading to increased consumption of power and district heating. In addition to carbon pricing and strong environmental restrictions, companies in the petroleum sector must investigate electrification on large projects offshore. This is leading to lower emissions and increased consumption of renewable electricity offshore. Norway also has the highest share of electric cars in the world. Thirteen% of all new cars sold in Norway so far in 2014 have been full electric cars. If the electric cars continue to have high market share, this will increase the power consumption over time. At the same time environmental policy is causing energy efficiency improvement across all sectors, releasing energy for other purposes. In sum, therefore, it may be hard to foresee the precise effect on the total energy consumption.

Responsibility to cooperate

Evaluations show that the Norwegian environmental policy is working. It is expected that emissions in 2020 will be 17- 20 million tons CO2-eqv. lower than without CO2 pricing and other measures. This is telling us that the climate policy is working. Still, the absolute level of emissions in Norway has not been declining as expected, mostly due to other factors such as population and economic growth.

To reach the two degree target we need tough emission reductions in all countries in the coming decades. This will have a huge impact on the energy sector and demand tough balancing of the need to increase renewable power production with other environmental goals such as preserving livable habitats for endangered species.

What we urgently need is international cooperation. All countries have a responsibility to participate in a cooperative manner in the forming of a global climate agreement in Paris next year. The world needs to agree on emission reductions adequate to keep global warming within two degrees. This demands action in all countries, both rich and poor.

Tine Sundtoft is the Minister of Environment and Climate Change of Norway

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