Norway will seek to more than triple its tax on carbon dioxide by 2030, increasing its charge for a ton of emitted CO₂ equivalents from €60 to €200, the government said in a wide-ranging white paper spelling out the country’s climate action plan.

Released on January 8, the white paper outlines how Norway will achieve a 45% reduction in emissions not falling under the Emissions Trading System by 2030, but the new increase in the CO₂tax has sparked the most debate. The government’s position is that by increasing the cost of emitting CO₂, there will be stronger incentives to reduce emissions.

Combined carbon price proposed for the first time

The increase in CO₂ tax is applicable to sectors both covered and not covered by EU ETS. For operators covered by EU ETS, the combined cost of the national tax and of ETS payments will be set at €200 per ton CO₂ by 2030, under the latest plans. The proposed CO₂ tax is therefore probably the most ambitious carbon tax in the world.

If approved by the parliament, this will be Norway’s first combined carbon price. Until now, the CO₂ tax have been adjusted annually in the national budget independent of the EU ETS carbon market price, and has typically increased by 2-10% annually in recent years.

Newly introduced CO₂ tax in the Netherlands indicated a new trend in Europe

As the EU Emission Trading System (EU ETS) has underdelivered on its promises on carbon price and emission reductions, the Dutch government has also introduced a carbon tax setting a minimum price for CO₂ emissions compared to the EU ETS-price.

The Dutch CO₂ tax on industrial CO₂ emissions starts at €30 per ton CO₂ in 2021 and is planned to reach €125 per ton CO₂ by 2030. The tax payable will be the difference between the tax level and the price in the EU ETS for that year, so that total carbon price is equal to the full tax.  In addition to installations covered by EU ETS, the carbon tax also covers waste incineration plants and nitrous oxide installations. Electricity production and installations producing district heating are already covered by a CO₂ tax introduced last year, which is at a lower rate.

No increase in overall taxation

The Norwegian Government’s policy is not to increase the overall level of taxation. Any tax increase will therefore be offset by reducing other taxes correspondingly to avoid decreased competitiveness and carbon leakage. Environmental NGOs have made clear that other environmental taxes must not be lowered to compensate for the increased CO₂ tax as this might reduce the incentive to reduce emissions.

The CO₂ tax aligns well with the “polluter pays principle” for most industries and can serve as an efficient and technology-neutral catalyst for emission-free solutions across sectors.

Many support the CO₂ tax, while waste incinerators are concerned

Waste incinerators oppose the increased CO₂ tax, and suggests the CO₂ tax should be allocated to the producer of fossil carbon in products for market and claim they have little influence over the volume of fossil carbon being combusted in their waste incinerators.

The Norwegian Government’s white paper is currently on hearing and has received input from 120 organizations who participated in the hearing on February 2^. and 4. The date of voting in parliament is currently not set.

Many of the organizations participating at the hearing on February 2 supported the increased CO₂ tax, and many stipulated that the increase in CO₂ tax should be allocated to a dedicated CO₂-fund/CCS-fund to finance carbon capture. Among the supporters were The Confederation of Norwegian Enterprise (NHO), The Federation of Norwegian Enterprise (Virke), The United Federation of Trade Unions (Fellesforbundet), The Norwegian Oil and Gas Association and The Federation of Norwegian Industries (Norsk Industri).

Facts about the Norwegian CO₂ tax

The CO₂ tax covers both EU ETS-sector and non-EU ETS sector. The CO₂ tax is levied on combustion of fossil fuels and CO₂ emissions from petroleum industry. Some sectors are exempt from the tax, e.g. agriculture.

Norway was one of the first countries in the world to introduce a carbon tax, in 1991. In the National Budget of 2021, the tax rates are NOK 1.27 per standard cubic metre of gas or per litre of oil or condensate (NOK 543 per tonne CO₂) and NOK 8.76 per standard cubic metre natural gas emissions.

The expected total tax levied is NOK 6 billion in 2021.

The introduction of a tax on CO₂ emissions in 1991, and the European requirements for CO₂ content in sales gas laid the foundation for developing the two Norwegian CO₂ storage projects Sleipner (1996) and Snøhvit (2008).