Hopes to Encourage GHG Emissions Savings, Clean Energy Technology Development
Tamar Hallerman
GHG Monitor
05/04/12
The Norwegian government said it plans on nearly doubling the carbon tax rate on the country’s offshore oil and gas industry, a move meant to cut greenhouse gas emissions that could also help spur domestic carbon capture and storage and other clean energy technology development. In a white paper released late last week, the government said it wants to pursue a package of policy measures in the country’s Parliament this year that aims to decrease Norway’s carbon footprint and cut greenhouse gas emissions 30 percent below 1990 levels by 2020. The centerpiece of the proposal is a CO2 tax rate increase on the offshore oil and gas industry—which produces a sizable chunk of the country’s greenhouse gas emissions—by 200 Norwegian kroner ($34.80)/ton, nearly double the current rate. A government fact sheet said the move would give companies a “stronger incentive to use electricity generated onshore,” that is often low- or zero-carbon.
The white paper also indicated the government’s desire to establish a new climate and energy fund totaling 30 billion kroner ($5.2 billion) in 2013 and 50 billion kroner ($8.7 billion) in 2020 to help spur the development of greenhouse gas emissions reduction technology, including CCS. The government said it would also aim to improve public transportation and promote energy-efficient housing while continuing to scale-up climate research. “Norway is already one of the countries with the most ambitious climate policy targets, and we are now going to step up our efforts further,” Prime Minister Jens Stoltenberg said in a statement. The ideas presented in the white paper must still technically be considered and passed by Parliament, but given that the ruling center-left coalition has a majority of seats, passage is considered all-but-guaranteed.
Tax Increase Could Spur More CCS Projects
The white paper indicates that an increased CO2 tax could help spur more early-mover CCS projects like those the country’s 1991 carbon price initially prompted. After the government established a price of roughly $51/ton on hydrocarbon fuels produced offshore at the time, Statoil, the Norwegian oil company majority-owned by the government, decided to begin its Sleipner carbon capture and storage project in the North Sea in 1996, which became the world’s first commercial CO2 storage project. Statoil kicked off a similar project in 2008 with its Snøhvit CO2 storage project also in the North Sea.
Norway’s oil and gas trade group said this week that the rise in carbon prices would not have the same effect on CCS investment this time around and that new industry investment is unlikely given the current state of the technology. “There is still necessary technology development that needs to be done, and the cost is still far too high,” Tom Gederø, a spokesman for the Norwegian Oil Industry Association, told GHG. He added that while the industry was pleased that the white paper provided some form of certainty on future climate policies, further increases in the carbon price would be an economic burden on an already heavily-regulated industry. “The petroleum industry has been subject to strict policy instruments since the introduction of the CO2 tax in 1991. The industry also purchases climate quotas for all its emissions,” he said. “The most reasonable reduction measures have therefore already been implemented, and further measures will generally be expensive. The proposed increase in CO2 price will not result in further reductions in CO2 emissions on the Norwegian continental shelf.”
