Norway's Carbon Tax Fails to Deliver Emissions Reductions

By ClimateBiz Staff
Published October 7, 2008

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OSLO, NO -- Norway imposed a carbon tax some 17 years ago but emissions have shifted in the wrong direction: Greenhouse gas emissions grew 15 percent.

A Wall Street Journal story last week explored the difficulties of cutting emissions in real world scenarios without stifling economic growth. In Norway, despite the carbon tax, offshore drilling jumped and citizens embraced their cars rather than abandon them. The tax also left out several industries for fear of job losses and unfair trade competition.

The story ran a week after North America's first greenhouse gas cap-and-trade program auctioned off its first carbon dioxide allowances. The Western Climate Initiative also unveiled the design of its own cap-and-trade framework.

Other nations have made carbon taxes work. For example, Sweden and Denmark reduced emissions 14 percent and 8 percent, respectively, without sacrificing economic growth.

Yet the Wall Street Journal story points to some positive signs behind Norway's efforts to reduce emissions. For instance, three of the largest aluminum companies signed and fulfilled an agreement with the government to reduce emissions 55 percent below 1990 levels by 2005.

The extra fee has forced some sectors hardest hit by the carbon tax — oil and
gas, in particular -- to rethink the way they do business.
Oil company Statoil invested roughly $200 million on a project that captures and stores carbon under the sea floor. The CO2 per ton of oil and gas is nearly 40 percent of the industry average. The company, however, has quadrupled overall emissions since 1990, in large part to increased offshore drilling.

The smaller carbon tax imposed on paper manufacturers was too small to spur significant carbon reductions. Meanwhile, emissions have grown in the transportation sector, where the number of registered cars has risen 27 percent in the last 10 years.