A little over 120 kilometers off the west coast of Norway sits the world’s largest aquatic windfarm. The project dubbed Hywind Tampen, is part of the country’s aggressive push into offshore wind and other renewable energy sources. According to the International Trade Administration (a U.S. agency), the Norwegians expect to have 1,500 turbines in operation, producing upwards of 30 GW in renewable energy by 2040 (ITA, 2024). Yet at the same time, a significant percentage of Norway’s GDP comes from fossil fuel extraction. Just 400 kilometers south of the Hywind Tampen project, some of the world’s largest oil and gas platforms occupy the North Sea. While Norway relies primarily on renewable energy at home, they are a major player in the international fossil fuel market. For example, Norwegian natural gas exports cover roughly 3% of global and 25% of European demand (NP, 2023). All told, fossil fuel extraction accounted for nearly a quarter of Norway’s GDP in 2023 (CNBC, 2024). This dependence on fossil fuels and Norway’s status as a green leader make the country an intriguing case study. More importantly, their success at widespread EV adoption, use of renewable energy, and reliance on fossil fuels to pay for it all, provide a template for the green transitions of other western economies.
Policy and Literature Review
Along with rich natural gas deposits, Norway has some of the world’s most well-suited geography for producing renewable energy. For example, 98% of Norway’s electricity is provided by renewables with the overwhelming majority of that coming from hydroelectric dams (Ritchie et al, 2024). Interestingly, while electricity production in terms of TWH has increased steadily since 1970, green energy on a per capita basis has remained relatively flat over the same period (secs. 1-2). This is due in large part to the legacy of Norway’s reliance on hydroelectric power. While much of the world invested in coal and gas-powered plants, Norway built dams. Nonetheless, Norway’s overall GHG emissions have climbed steadily since 1970, peaking around 2004 before gradually declining over the last 20 years (EC, 2023). While this constitutes a surprise, it illustrates that a green economy is much larger than the electric grid and moratoriums on gas powered cars.
Figure 1 Norway's total GHG emissions by sector (EC, 2023).
For example, according to the European Commission (EC, 2023), the majority of Norway’s GHG emissions are from fossil fuel extraction. While global GHG emissions have doubled since 1970, Norway’s emissions related to the production of oil and gas have expanded by a factor of 30.
It's also worth contextualizing Norway’s performance against the United States. Surprisingly, America’s total GHG emissions on a per capita basis have remained relatively flat since 1970 (EC, 2023). CO2 emissions peaked between 2004 and 2007 before declining for much of the next 15 years. By the same measure, Norway’s CO2 emissions peaked around 2010 and have declined only modestly since. This is likely due to a much smaller population and a continued policy of maximizing fossil fuel exports.
Figure 2 Norway's total CO2 emissions by sector (EC, 2023).
Finally, while Norway’s specific policies will be discussed more in the next section, it’s helpful to review international trends in green policy adoption. Ohio State University dean of law, Lincoln Davies (2018) writes that green policies generally follow a three-phase arc, beginning with policy proliferation (at the federal and local level), then by a period of iteration and improvement, and finally a widespread redistribution of successful policies across other green initiatives (p. 315). Furthermore, Davies notes that policymakers are shifting toward market-based solutions rather than feed-in-tariffs and taxes. Such moves are a sign of a maturing green economy (pp. 316-317) and evident in Norway’s transition to a low emission society.
Policy Actions and Recommendations
Norway’s modern relationship with environmental policy began in 1991 when they became one of the first nations to adopt a carbon tax. Today, 85% of the country’s GHG emissions are covered either by EU or domestic CO2 policies (IEA, 2022, p. 10). Norway has been an active participant in the Paris Climate Agreement as well, adopting so-called NDCs or National Determined Contributions to reduce emissions to half of their 1990 levels by 2030. The NDC targets were given legal backing in 2017 by the Climate Change Act, and in 2021, the country introduced the Climate Action Plan, which sets emissions targets on all areas not covered by NDC or EU regulations (p. 10). Norway has also taken aggressive steps to push EV adoption, including setting goals to eliminate all new gas-powered car sales by 2025, waving EV VAT taxes, instituting exemptions on tolls, ferry passes, and parking, and offering free public charging for EV owners. (CNBC, 2024). These policies and the proliferation of electric vehicle manufacturers have resulted in a dramatic increase in EV adoption. For example, according to CNBC reporting, 82% of Norway’s new car sales were electric in 2023 (CNBC, 2024). The rise of EV’s has resulted in an almost 16% reduction in transportation-related CO2 emissions since 2014 (EC, 2023) and a 20% improvement in Oslo’s air quality, according to Sture Portvik, the city’s manager of electromobility (CNBC, 2024, 3.15).
Yet Norway’s electrification has carried unintended consequences and challenges. For example, increased EV adoption has resulted in a dramatic reduction in CO2 tax revenue. At the same time, an increase in EVs has led to increased traffic, wear and tear on the city’s infrastructure and less tax revenue to pay for repairs. In a nod to the policy arc outlined by Davies (2018), policymakers have begun phasing out EV incentives and redistributing the public tax burden more evenly across EV owners (CNBC, 2024). Nonetheless, for all of Norway’s efforts, their GHG emissions remain relatively high. Future policies must work to wean Norway’s economy off fossil fuel production. For example, CNBC (2024) reported that Norway intends to double its electricity output through wind power alone by 2040 (18.30). At the same time, the Norwegian Ministry of Finance has proposed implementing a resource rent on onshore wind power and reinvesting those funds in green technology (NMF, 2024). Another option is to gradually wind down fossil fuel exploration by limiting new permits. Under this model, Norway would exit the fossil fuel industry by 2050 (Statistics Norway, 2020). Such policies could be further paired with subsidies to help ease the industry’s transition to green energy.
Using policies to spur innovation, particularly in battery technology and agriculture is another option. Freyer Battery CEO Bergen Steen cites the American Inflation Reduction Act (IRA) as an example European policymakers could follow (CNBC, 2024, 11.00). The IRA has resulted in hundreds of billions of dollars in green tech investment from battery alternatives to better steel (Worland, 2023). Green technologies could also be applied to agriculture alongside taxes on corporate farms or moratoriums on industrial fertilizers. In short, it is essential that future policies work to transition existing carbon-heavy industries to low emission technologies, while reducing the footprint of those systems through better batteries and more sustainable practices.
Conclusion
Limiting GHG emissions matters as the impact of pollutants carries global consequences. Norway’s example, even if local, provides at least one possible approach to limiting emissions. That said, it’s important to discuss why some countries fail to address climate concerns. One reason already covered here is geography. Few countries have Norway’s rivers or coastline and therefore don’t have access to hydro or wind alternatives. Another reason is a lack of national wealth. Green tech, while cheapening, is still costly. The infrastructure alone is not conducive to geopolitical instability, nor do developing nations have the resources to invest in such technologies. Domestic concerns play a role as well, from special interests in the oil and gas industries, to a lack of affordability. The rivers of the Pacific Northwest are a terrific source of renewable energy but garner resistance from environmental groups and the EPA. The diverse landscape of the United States similarly prohibits the widespread adoption of solar or wind. Finally, political will makes environmental change difficult. In Norway, there is a culture of shared utility around the use of public funds, and a track record of using that money for the public good. The United States, on the other hand, has no comprehensive energy policy (Kraft & Furlong, 2019), nor does such national trust exist. None of these reasons preclude the adoption of green technology, but they illustrate the complications associated with going green.
In summary, Norway is leading the world’s transition to a green, low emission society, but that transition is predicated on a continued reliance on fossil fuels. While this might seem hypocritical, it illustrates the complexities of going green in an advanced economy. More importantly, the Norwegian model illustrates that fossil fuels are part of the green solution, whether by funding green industries, or transitioning themselves to new technologies.
References
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