Review of climate support schemes in Norway

3. July 2018 | News
Klimapolitiske støtteordninger

The Norwegian authorities spend NOK 3.3bn a year on 41 climate support schemes delivered by a variety of bodies. A review of these support schemes suggests that 13 be continued as they are, and 14 cease to be supported on climate change grounds.

Menon Economics, in collaboration with THEMA and professor Knut Einar Rosendahl (NMBU), have undertaken a review of Norwegian climate support schemes on behalf of the Norwegian Ministry of Finance and the Ministry of Climate and Environment. The review covers climate support schemes managed by Enova, Innovation Norway, Gassnova, the Ministry of Climate and Environment, the Norwegian Coastal Administration and the Norwegian Environment Agency.

As part of the review, the project team considered to what extent the schemes helped to reduce GHG emissions, the implied abatement cost per tonne of CO2e, whether the schemes supported additional innovation or network development and to what extent they were already covered by existing climate taxes or other climate change measures.

Our assessment is that 13 of these schemes are appropriately designed, contribute to the cost-effective achievement of Norway’s climate goals and should continue in their current form. These schemes support cost-effective technology development or target network effects and the sequestration of carbon in forests, which are not covered by tax incentives or supported through other means. We recommend that six schemes continue in an amended form. The proposed changes involve clearer objectives in relation to climate change, technology development and network barriers, the movement of schemes to different managers and the merging of schemes. We believe these changes will improve the schemes’ effectiveness.

Six of the schemes have a socio-economic abatement cost of between NOK 500 and 1000 per tCO2. It is not clear what the true cost of CO2 is, especially in the long term, and therefore at what socioeconomic cost abatement ceases to be cost-effective. If we assume that society has a higher willingness to pay for emissions reductions than implied by the general tax on CO2 emissions, these schemes could be cost-effective. Nevertheless, we recommend increasing the carbon tax above its current level in preference to subsidising mature technologies at this implied abatement cost.

For the seven most expensive climate support schemes, socioeconomic costs are estimated to be more than NOK 2000 per tCO2. We consider this to be far above the cost-effective level. We believe a further seven schemes have little to no effect on GHG emissions. These schemes are generally justified based on other environmental issues, commercial considerations, security of supply, or other impacts, and might, as a side effect, influence emisisons. We recommend that these 14 schemes cease to be supported on the basis of their climate impacts. If they are continued, they should be justified on the basis of the other benefits they provide.

Download the Report here (in Norwegian):

Områdegjennomgang av støtteordningene i klimapolitikken >>

portrettbilde, forfatter

Berit Tennbakk
Partner, PhD
+47 928 68 117