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Responding to Climate Change 2011

Home | Defining Business Commitment | Arntzen de Besche Norway: climate aware future
 

Norway: navigating a climate-aware future

Arntzen de Besche

Arntzen de Besche is a leading Norwegian firm in climate change and environmental law. Over the last five to six years, its Energy and Environmental group has been engaged by stakeholders over emission trading and carbon capture and storage (CCS). Its experience spans from regulatory work to contracts, financing and project development.

Global energy demand will continue to rise in the foreseeable future. Although the world has seen an increasingly rapid development of renewable energy sources over the last two decades, fossil fuels will continue to be the dominant energy carrier for a long time. As a major producer and exporter of fossil-based energy, Norway is clearly positioning itself to become a world-leader in deploying and applying environmentally-friendly ways of producing and consuming oil and gas.

CCS – the Norwegian way

Innovations and technology development have a strong foothold in Norway’s approach to combating climate change. The government has initiated the development of two megaprojects involving the capture and storage of approx 2.5 million tons of CO2 per year. These projects entail government funding of around US$6-7 billion, and will apply the latest technological developments in large-scale carbon capture facilities. In one of these projects, selection of contractors has been initiated and the procurement process is expected to continue until the end of 2013. This process will in itself contribute to development of technology and provide a learning arena for suppliers and stakeholders.

The Norwegian state is also a co-owner in the CO2 Technology Centre Mongstad DA (TCM), together with international companies such as Shell, Statoil and the South African energy company Sasol. TCM is currently investing approx US$1 billion in a test centre aimed at testing two different state-of–the-art CO2 capture technologies – and creating an important arena for capture technology demonstrations which will provide invaluable experience for future CCS developments.

The state has set up a company to manage governmental engagement within the area of capture, transportation and geological storage of CO2. This company has a key position in the Norwegian government’s strategies on CCS, and one of its objectives is to stimulate international partnerships and knowledge sharing. The company also manages a support scheme aimed at environmentally-friendly gas technologies to ensure access to energy through fossil fuel power without CO2 emissions.

Essentially the government has created a link between the industrial stakeholders and the policymakers. This has proven to be a powerful tool in launching specific projects aimed at curbing emissions as well as providing authorities with information and guidance on key strategic drivers and business opportunities the industry is pursuing when it comes to combating climate change.

Regulatory and policy measures

Since the end of the 1980s, Norway has initiated many policy measures around climate change, such as the International Climate and Forest Initiative from Bali in December 2007. This is a support scheme where Norway pledged up to US$500 million a year towards REDD+ efforts to cut emissions from deforestation and forest degradation in developing countries. To achieve the desired reductions, development of international finance and support systems, through close cooperation with multilateral organisations, as well as tropical forest countries, is crucial.

Domestically, the project Climate Cure 2020 is by many observers regarded as the single most important recent policy action. The purpose of Climate Cure 2020 is to evaluate the sufficiency of existing policy measures in reaching the Norwegian climate objectives in 2020, and to elaborate additional mitigation options and policy measures in the longer perspective. It has been carried out by five different directorates, drawing on resources from other directorates and state agencies, and underwent a broad public hearing on delivery of the report in February 2010.

The work is based on two methods; sector analysis and macro analysis both assess the possibilities for, and the effects of, climate measures. The two methods complement each other and provide a solid basis for decisions. Climate Cure 2020 indicates various possibilities for achieving the national emissions targets, and points out the consequences of the different solutions, without making recommendations.

Emissions monitoring and pricing

To follow up ambitious goals on sustainable development, Norway has integrated sustainability into the annual national budgets – the most important political and economic steering documents. There are 18 indicators, which have been developed for monitoring progress in a systematic manner, including one on Norwegian greenhouse gas (GHG) emissions compared with the Kyoto target. All ministries report on their policies to the Ministry of Finance, which is responsible for coordinating the government’s work on sustainable development.

In terms of regulatory measures, a whole bouquet of instruments, aimed at reducing GHG emissions, has been implemented. Most sources of GHG emissions are currently addressed through economic measures (taxes, emissions trading) that put a price on emissions. As early as 1991, a CO2 tax was introduced in the petroleum sector.

The single most important of these measures is the emissions trading scheme (ETS). In force as early 2003, the emissions trading legislation has been amended and expanded several times, and now covers all carbon-intensive industrial sectors. The government has stated that the goal is to abolish the system of free allowances under the ETS for the post-Kyoto period (e.g. after 2012 and onwards). This will create a much stronger incentive for industry to reduce emissions than the existing scheme.

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