Report to the Storting No. 41 (1994-95) on Norwegian policy to mitigate climate changes and reduce emissions of nitrogen oxides (NOx) - Summary

Norwegian policy to mitigate climate changes and reduce emissions of nitrogen oxides (NOx) - Summary

On 2 June 1995, the Government of Norway submitted Report nr. 41 (1994-95) to the Storting (Parliament) on Norwegian policy to mitigate climate change and reduce emissions of nitrogen oxides (NOx ). The following text is an unofficial English translation of the Summary (Chapter 0) of the Report

Introduction
Climate change
Nitrogen oxides (NO_x)

Summary

On 2 June 1995, the Government of Norway submitted Report nr. 41 (1994-95) to the Storting (Parliament) on Norwegian policy to mitigate climate change and reduce emissions of nitrogen oxides (NO_x ). The following text is an unofficial English translation of the Summary (Chapter 0) of the Report

Introduction

In Report to the Storting nr. 41 (1994-95), the Government wishes to give a complete account of Norway's policy for reducingglobal emissions of greenhouse gases and emissions of nitrogen oxides (NO_x). The environmental threat associated with the greenhouse effect and environmental damage and injury to health caused by emissions of NO_x are among the most serious environmental problems facing us both nationally and internationally, and can only be solved through binding international cooperation.

Climate change

The problem of climate change

The UN Intergovernmental Panel on Climate Change (IPCC) has established that human activity plays a major role in the rise of atmospheric concentrations of greenhouse gases. Anthropogenic emissions of greenhouse gases, such as carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O) and fluorine-containing gases are mainly generated by combustion of fossil fuels, industrial processes and agricultural activities. Because of the global nature of climate change, its negative impact is not dependent on where emissions originate. When atmospheric concentrations of greenhouse gases rise, the atmosphere traps a greater proportion of the heat radiated outwards from the earth, thus raising the global mean temperature and altering the world's climate system. Unless effective new measures to reduce emissions of greenhouse gases are introduced, the IPCC regards a rise in global mean temperature of about 3 °C by the year 2100 as the best current estimate. There is some uncertainty as to the extent of the global mean temperature rise, particularly how rapidly it will occur, and as to what the regional effects will be.CO₂ accounts for the largest proportion of anthropogenic greenhouse gas emissions. According to the IPCC, global emissions of CO₂ from the combustion of fossil fuels totalled about 22 billion tons in 1990. The IPCC concludes that anthropogenic emissions of CO₂ must be reduced by more than 60 per cent compared with the 1990 level in order to stabilize the atmospheric concentration at today's level. If emissions are stabilized at the 1990 level, the atmospheric concentration of CO₂ will have reached almost twice the preindustrial level by the year 2100. It is expected that this would nevertheless lead to the most rapid rise in global mean temperature for the last 10,000 years.

Climate change may be so rapid that ecosystems do not have time to adapt to its impact, and the least adaptable species may disappear entirely. If sensitive areas experience drought more frequently, this may intensify the problems of desertification and deforestation. Flooding, drought and a rising sea level may force millions of people to leave their homes. This applies especially to low-lying island states and coastal regions. Despite such changes, it will probably be possible to maintain the current level of food production in the world as a whole, but regional changes in food production may result in serious problems, and many poor developing countries will be particularly hard hit by a drop in food production.

There is still considerable uncertainty as to the extent of regional and national climate change and the ecological and socio-economic effects of climate change, for instance in Norway. There will probably be major regional variations both in the extent of climate change and in its effects. The IPCC also points out that climate change may lead to changes in the frequency and severity of extreme weather conditions. Given Norway's geographical situation, such changes might have a greater impact on infrastructure and ecosystems than a rise in mean temperature. This report illustrates the possible impacts of climate change in Norway on ecosystems, economic activity, land use patterns and health. Climate change may also have a positive impact on certain industries; for example, a substantial rise in hydropower production is expected as a result of higher precipitation levels.

Climate change is a global problem

Because climate change is a global problem, it will be of decisive importance in the long term whether the countries of the world can act together to devise an ambitious joint policy to realize the long-term objective of the Convention on Climate Change, which is to prevent undesirable anthropogenic changes in the climate system. Unless new measures to reduce emissions are introduced, the world's total CO₂ emissions are expected to rise by 50 per cent by 2010 (World Energy Outlook, IEA 1994) as a result of economic growth and rising energy use. The projected growth in emissions shows that technological innovation and a gradual change in patterns of production and consumption in both industrial and developing countries are essential elements of efforts to reduce global emissions to a level in accordance with the long-term objective of the Convention. The OECD countries are currently responsible for about 48 per cent of total global emissions of CO₂, and have a special responsibility to take the lead in implementing active policies to reduce emissions of greenhouse gases. However, 70 per cent of the growth in CO₂ emissions up to the year 2010 is expected to take place in non-OECD countries. In the longer term, it is therefore vital to ensure that large developing countries such as India and China are also included in a global climate strategy.

Further development of the Convention on Climate Change

The UN Framework Convention on Climate Change was adopted in May 1992. It entered into force on 21 March 1994 and has so far been ratified by 125 countries and the EU. Its ultimate objective is to stabilize greenhouse gas concentrations at a level that will prevent dangerous anthropogenic interference with the climate system. The Convention states that industrial countries should take the lead in mitigating climate change and its undesirable effects. The developing countries have also undertaken commitments to draw up national strategies and report to the Conference of the Parties, but these are of a more general nature.

The text of the Convention contains no quantitative obligations or specified time frames within which the parties are required to limit emissions of greenhouse gases and increase the amounts absorbed by sinks. On the other hand, it does include binding commitments for industrial countries, including countries with transitional economies, to adopt national policies and take measures in accordance with these to limit emissions and enhance sinks of greenhouse gases. The Convention also sets out binding commitments for industrial countries to report on their policies and the measures they implement, which stipulate that the aim of industrial countries should be, either individually or jointly, to reduce emissions to their 1990 level. In accordance with its obligations, Norway submitted a report on its climate policy by 21 September 1994, which was the deadline for the first group of countries.

According to the Convention, a country may consider all greenhouse gases collectively in efforts to fulfil its obligations, and implement measures in cooperation with other countries (Joint Implementation, or JI). The international process of implementing the Convention includes further work on the criteria for JI, and on ways of comparing measures to enhance sinks and reduce emissions of various gases. When the JI system is fully developed, it will be an important means of ensuring that we gain the maximum benefit from the money invested in solving the problem of climate change. In addition, it may provide a new source for the transfer of funds and technology to developing countries and Eastern Europe.

The Climate Convention provides a framework for the development of close global cooperation on climate issues. In the view of a substantial proportion of the parties to the Convention, including Norway, we already have sufficient information to establish that the Convention must be strengthened by the adoption of new, more quantitative commitments, and that these should be set out in a binding protocol. In Norway's opinion, the protocol should include all greenhouse gases, and should focus particularly on the period after 2000 in order to achieve the Convention's long-term objective. Norway also believes that joint, quantitative commitments for emission reductions should be established for groups of countries, e.g. the OECD countries. These should take account both of where it would be most cost-effective to take action and of how the economic burden can be fairly and equitably distributed among the countries involved. In this context, JI will be an important instrument, and could also include developing countries which have not undertaken specific quantitative commitments to reduce emissions.

The first session of the Conference of the Parties under the Convention was held in Berlin from 28 March to 7 April 1995. The most important political issue discussed at the meeting was whether to strengthen the commitments of parties to the Convention. The Conference of the Parties adopted a mandate to continue negotiations on further commitments under the Convention. The mandate includes all the main issues of concern for Norway, and is an important step in the long-term process of strengthening international cooperation on climate issues. It follows a comprehensive approach, focusing both on all greenhouse gas emissions and on possible sinks (including absorption by forests). The objective is for OECD countries and economies in transition (Annex I countries) to elaborate climate policies and measures and establish quantitative targets for limitations and reductions of emissions of greenhouse gases within specified time-frames, such as 2005, 2010 and 2020. In this connection, the importance of following the principle of equitable economic burden-sharing between the parties in drawing up the commitments is emphasised. No new commitments are to be introduced for developing countries, but the parties reaffirm their existing commitments, and the implementation of these will be continued. The purpose of the mandate is to start the process of drawing up a protocol or other legal instrument as a basis for appropriate action after the year 2000. A separate working group has been appointed to continue the negotiations. The group is to complete its work as early as possible in 1997 so that the results can be adopted at the third session of the Conference of the Parties the same year.

The Conference of the Parties also decided to establish a pilot phase for Joint Implementation of measures to mitigate climate change. JI opens the way for parties to invest in such measures outside their own national borders, and thus improve the costeffectiveness and environmental impact of measures they implement. During the pilot phase, countries will not be able to obtain credit for the emission reductions achieved in their national greenhouse gas inventories. The pilot phase for JI is open to all parties, and intended to provide practical experience of the concept. The countries involved will report to the Conference of the Parties on projects that are implemented, and these reports will provide a basis for further evaluation of how JI can be developed into an operative mechanism for achievement of the Convention's ultimate goal. A final review and evaluation of the pilot phase will be carried out during the current decade.

Norwegian climate policy in a global context

Norway considers the results of the Conference of the Parties to be satisfactory, and will continue its efforts towards the development of effective instruments for implementation of the Convention and to ensure that commitments to reduce emissions are based on an equitable distribution of the burden.

International action to reduce or limit emissions may alter the external framework for the Norwegian economy and result in changes in the prices of important commodities. The impact will depend on the scope and timing of such measures and how cost-effective they are. An international agreement that is cost-effective across greenhouse gases, sectors and national borders, in accordance with the intentions of the Climate Convention, will involve lower costs for the global economy and the Norwegian economy than one involving a large number of exceptions. However, in practice there may be some difficulty in combining cost-effective emission reductions with the equitable distribution of economic burdens between countries. Such considerations may limit the solutions it is possible to negotiate and the level of ambition that can be achieved, thus showing even more clearly that we need to establish commitments for emission reductions for groups of countries and criteria for crediting emission reductions achieved by JI projects.

Analyses of the impact on the Norwegian economy of national and international measures to mitigate climate change show that:

An international climate agreement that reduces the consumption of fossil fuels will also cause a drop in the producer price of crude oil, thus reducing the value of Norway's petroleum reserves. The resulting loss of revenue may be substantial, and is the largest expected cost to Norway of an international climate agreement.
An international climate agreement will increase the demand for non-carbon energy carriers. The overall effect of this will be to raise the value of alternative use of Norwegian hydropower and thus of our hydropower resources. However, the rise would be markedly smaller than the decrease in the value of the petroleum reserves.
The direct effect of a cost-effective international agreement on the Norwegian mainland economy is estimated to be relatively small, if no other factors are taken into account. However, if the price of petroleum drops significantly as a result of such an agreement, the impact on mainland Norway may be substantial.
An internationally harmonized CO₂ tax imposed at a rate high enough to stabilize global CO₂ emissions will not stabilize Norwegian emissions by the end of the century. One important reason for this is that the analyses are based on the assumption that there will be a steep underlying growth in emissions from the petroleum sector during this period. In addition, the costs of implementing further measures to counteract climate change are relatively much higher for many sectors in Norway than in other countries.
If Norway aims to stabilize national CO₂ emissions in addition to taking part in an international agreement designed to stabilize global emissions, the costs of the adjustment process will be higher.
In the long term, a revenue-neutral reorganization of the tax basis in Norway, within the framework of a cost-effective international climate agreement, may improve the working of the economy.
A reduction of Norwegian CO₂ emissions will also result in some reduction of emissions of other gases (NO_x, SO₂, etc) that contribute to local or regional environmental problems such as acidification, injury to health and damage to buildings, etc, and will thus have indirect positive economic effects.

A sensible climate policy strategy would be to start by implementing "no-regret" measures, while at the same time focusing on efforts to further our knowledge of causes and impacts of climate change and of suitable climate policy instruments. "No-regret" measures include those that result in more efficient use of resources in the economy even if the importance of climate change is disregarded, and that in addition reduce global emissions of greenhouse gases. Correct pricing of the various energy carriers will lead to more efficient use of energy resources, and at the same time reduce overall emissions of environmentally harmful gases. In the context of climate change, "no-regret" measures might include cost-effective measures to limit local or regional environmental problems, and energy efficiency measures. However, realization of the ultimate objective of the Climate Convention will presumably require the implementation of much more far-reaching measures than "no-regret" measures alone.

It is the total emissions of all greenhouse gases that are most important in connection with efforts to prevent global warming. According to the Climate Convention, countries may consider all greenhouse gases jointly in efforts to meet their commitments. Norway's total emissions of greenhouse gases other than CO₂ have dropped since the beginning of the 1980s. The reduction has been particularly large for emissions of CF gases from the aluminium industry and SF₆ from the magnesium industry.

To make it possible to compare the contributions of different greenhouse gases to the enhanced greenhouse effect, the concept of Global Warming Potential (GWP), using CO₂ as a reference, was introduced. The influence of other gases is indicated as their GWP values relative to CO₂, expressed in CO₂ equivalents. If no new measures are introduced in Norway, projections of emissions of the most important greenhouse gases, measured in CO₂ equivalents, show that total emissions will rise by about 3 per cent, or 1.5 million tons CO₂ equivalents, from 1989 up to the year 2000. It should be emphasised that the figures quoted in these projections are uncertain, as a result of a degree of uncertainty both in the projection itself and in the estimates of GWP values, which express the relative contribution of each greenhouse gas to warming of the atmosphere. The projections also indicate that it will be possible to limit greenhouse gas emissions at lower cost if the various gases are considered together than if all our efforts are focused on limiting CO₂ emissions. In this report, the Government has therefore chosen to follow a comprehensive approach, and to include instruments to reduce emissions of other greenhouse gases as an important element of our overall climate policy. In the longer term, and as further commitments are established under the Convention, Norway will advocate an approach whereby joint targets are set for all greenhouse gases.

Since 1991, Norway has made substantial use of measures to limit CO₂ emissions. Norway is one of the few countries that have introduced CO₂ taxes, and the overall tax level is considerably higher than in other countries that have such taxes. If Norway continues to step up its use of measures to reduce CO₂ emissions significantly faster than other countries, it may incur high costs in terms of loss of competitive strength and a resulting drop in wealth creation and employment levels. Moreover, such national measures on their own will have only a marginal effect in a global context. It is even possible that global emissions might rise, for instance if the impact of higher taxes is so severe that production is moved to countries where emissions from production and/or transport are higher than in Norway. The actual impact on particular industries will depend on overall changes in operating conditions and their profit margins compared with those of the same industries in other countries.

It has been estimated that given current CO₂ tax rates, Norway's CO₂ emissions will rise by about 16 per cent from 1989 to 2000. However, such estimates are subject to considerable uncertainty. By way of comparison, it has been estimated that without a CO₂ tax such as the Norwegian one, emissions within the EU will rise by 5-8 per cent from 1990 to 2000.

Developments in the petroleum sector will have a major impact on trends in Norwegian CO₂ emissions. Projections of petroleum production up to the turn of the century are now much higher than at the end of the 1980s, when we set our target for CO₂ emissions. It is expected that at least 70 per cent of the rise in Norwegian CO₂ emissions from 1989 to 2000 will be generated by the petroleum sector. The rise in emissions from mainland Norway will thus be relatively modest, and will be primarily a result of increasing economic activity. Nevertheless, the rise in emissions from mainland Norway is considerably smaller than earlier projections suggested. This is because Norway has already introduced effective measures to reduce emissions in its national policies (cf the discussion of the CO₂ tax).

According to current projections, emissions from the petroleum sector will reach a peak about the year 2000 and then gradually decrease to below the current level in 10-15 years' time. However, the discovery or development of fields not included in the basis for the projections may change this picture.

A substantial proportion (about 70 per cent) of the projected rise in emissions from the petroleum sector is expected to be the result of an increase in gas production and transport. Gas production and transport will account for about half the total projected increase in Norwegian emissions. The energy required to transport gas by pipeline to other European countries accounts for the largest proportion of emissions from the gas sector. According to current international rules for reporting greenhouse gas emissions, the exporting country must include emissions from pipeline transport in its national inventory. However, the corresponding emissions from oil transport by ship are not included in the national emissions inventory. Thus, an increase in gas exports at the expense of oil would increase Norway's emissions as recorded in its national inventory.

However, gas used as a fuel generates smaller emissions of CO₂ per energy unit than coal or heavy fuel oil, and does not generate any SO₂. Norwegian exports of gas thus improve other countries' emissions inventories and reduce overall CO₂ emissions in Europe. The discrepancy between the treatment of shipping and pipeline transport will be further reviewed during the international work of drawing up guidelines for estimating and reporting national emissions.

Norwegian gas exports may thus have a substantial positive impact globally and regionally if they replace existing energy sources such as coal and heavy fuel oil, or prevent further expansion of their use. If Norway takes part in binding international cooperation which includes the determination of a quantitative ceiling for emissions, Norwegian emissions should be evaluated in the light of joint efforts in this field.

The commercial possibilities for domestic use of Norway's gas reserves have been thoroughly reviewed. A separate committee is evaluating the use of gas in the transport sector. Even though using gas to generate power in Norway would in itself result in higher national emissions, we must also consider the international perspective. If gas replaces coal as a source of thermal power, global emissions of CO₂ may be reduced. The question of whether a gas-fired power station should be built in Norway will be further discussed in a Report to the Storting on the use of gas in Norway, which is to be submitted in June 1995.

Like most other OECD countries, Norway has established a national target for emissions of the most important greenhouse gas, CO₂. The Norwegian target is to limit CO₂ emissions so that they do not exceed the 1989 level in the year 2000. It was made clear at the time that this is a preliminary target and will be considered in the light of further studies, technological advances, developments in the international energy markets, international negotiations and agreements and action taken by other countries.

The target of stabilizing CO₂ emissions at the 1989 level by the year 2000 will continue to be the basis for the Government's climate policy. However, this target was determined at a time when the Government expected international cooperation to make more progress during the 1990s than has been the case so far. For instance, important, influential countries have not introduced taxes on emissions. The result has been that Norway has been more isolated in its use of policy instruments than we had hoped at the beginning of the decade.

In the Government's opinion, it is not possible to find a practical policy that will ensure stabilization of Norway's total CO₂ emissions by the year 2000. As an illustration of the difficulties involved, it has been estimated that if other conditions remain unchanged, carbon taxes would probably have to be raised to 4-5 times the current level to make it possible to stabilize emissions at their 1989 level in 2000. The highest Norwegian CO₂ tax rate now corresponds to about USD 20 per barrel of oil. By way of comparison, the most ambitious plans that have been discussed within the EU would result in an increase of the carbon tax from USD 3 in 1993 to USD 10 per barrel of oil by the year 2000.

However, the target of stabilizing emissions is still important. Norway should for example implement an active climate policy if the country wishes to maintain its catalytic role in future international negotiations on climate issues, and in setting the framework for them, and the Government will continually evaluate the extent to which this target can be achieved.

As international work on climate change progresses, it will be important to find costeffective solutions for all gases and across national borders. This means that it will be more appropriate to work towards other targets than equal percentage reductions of emissions of particular gases by all countries. Binding international cooperation based on quantitative ceilings for emissions, joint action and an equitable distribution of the burdens between countries will also enable us to reduce emissions more than if each country only sets national targets and implements national measures. One solution might be to strengthen commitments under the Climate Convention by setting overall emission reductions which groups of countries, for instance the OECD countries, are required to achieve. This could provide a suitable framework for trends in emissions well into the next century. In this context, the national targets so far set by various countries, most of which only apply till about the year 2000, should be regarded as only a first step towards a longterm international strategy to reduce greenhouse gas emissions. International developments also reflect this idea: the first Conference of the Parties in Berlin in April 1995 adopted a mandate for further negotiations to extend the commitments of the parties under the Convention into the next century.

The production and transport of gas is expected to account for half of the projected 16 per cent increase in national emissions of CO₂. Norway could achieve a substantial reduction in national emissions by reducing the growth of exports of gas to Europe. However, this is not a possible in practical terms. One reason is that Norway has entered into gas supply contracts which will result in doubling of gas exports in 10 to 15 years' time. Moreover, as mentioned above, sales of Norwegian gas may in certain circumstances result in lower global emissions of CO₂. We must also remember that emissions from gas transport are included in the Norwegian emissions inventory, thus putting Norway in a particularly difficult situation compared with most OECD countries. In addition, Norway is the only country that has introduced a CO₂ tax on which applies to the offshore industry, and Norwegian climate policy instruments will continue to apply to the petroleum sector. It should also be noted that Norway is in a favourable position if we consider total greenhouse gas emissions (measured in CO₂ equivalents) from other sources than the production and transport of gas. These are expected to decrease by about 3 per cent from 1989 to 2000. This is partly a result of the climate policy Norway has pursued since the end of the 1980s.

However, we must continue to pursue an active short- and long-term climate national climate policy; one reason for this is that we wish to maintain Norway's catalytic role in international negotiations. The Government therefore intends to strengthen climate policy instruments gradually and make them more effective in order to advance its policy for limiting greenhouse gas emissions (cf the discussion of policy instruments and measures in the Government's climate policy).

The Government will continue to follow trends in emissions closely and will evaluate the use of policy instruments at regular intervals, for instance in view of their effects on emissions. In this way, the Government will lay a foundation for a long-term policy which takes account of the knowledge we acquire, the actions of other countries and further developments in international cooperation in this field. For example, the policies followed by other OECD countries, and particularly by the EU, will be important. The Government intends to ensure that policy instruments are applied to an equal extent in Norway compared with like-minded countries.

It is also important for Norway to contribute to the development of practicable and effective policy instruments at international level. We are currently working on specific JI pilot projects in order to gain experience of measures implemented outside Norway's borders. This is particularly important in order to clarify how JI best can be used to achieve the ultimate objective of the Convention. To this end, Norway has so far taken part in two pilot projects in Poland and Mexico, in cooperation with the World Bank, UNEP and UNDP. Norway will step up its involvement during the pilot phase and take part in more such projects. A more concerted effort in this field will be important to improve international understanding of the need for an operative mechanism for cost-effective reductions of greenhouse gas emissions across national borders. As soon as binding commitments enter into force and there is agreement on the criteria for JI, it will be possible to give credit for emission reductions achieved in other countries by means of such projects. However, the Government will also continue to take part in JI projects before Norway can be credited for emission reductions in its national inventory, both in order to gain valuable experience and knowledge and as a means of achieving reductions in global emissions.

Climate policy in other countries

Norway's climate strategy and its use of policy instruments must be viewed in close connection with those of other countries. This Report includes a broad-based discussion of emissions, targets and the use of policy instruments in other countries, particularly within the OECD area. In 1991, the OECD countries accounted for 48 per cent of global emissions of CO₂, and countries outside the OECD for 52 per cent. The USA was responsible for 23 per cent of global emissions, the former Soviet Union for 17 per cent, and the EU for 15 per cent. Norway, Switzerland and Portugal are among the OECD countries which account for the lowest proportions of global emissions of CO₂ (about 0.2 per cent) per country.

If we correct for the population of each country and compare per capita CO₂ emissions from different countries, we find that the global mean was 3.9 tons of CO₂ per capita in 1990 (IPCC, 1990). Per capita emissions in OECD countries averaged 11.4 tons of CO₂, whereas the equivalent figure for developing countries was 1.3 tons. The highest per capita emissions, 20.2 tons CO₂, took place in North America. Norway's per capita emissions were about 8.2 tons CO₂, about the same level as in other OECD countries outside North America. In Eastern Europe and the former Soviet Union, per capita emissions of CO₂ were 11.7 tons .

Despite the fact that Norway is an oil and gas producer, its per capita emissions of CO₂ are roughly the same as in the rest of Western Europe. This is primarily because electricity production in Norway is mainly hydropower-based and does not generate CO₂ emissions. On the other hand, this means that it is more costly to limit the growth of emissions than in many other countries.

Important OECD countries vary widely in their climate policy targets, and in the action they have taken or plan to take in this respect. There are also large differences between them in the energy carriers on which production and use are based, the potential for reduction of CO₂ emissions and the marginal costs of measures to reduce emissions of CO₂ and other greenhouse gases. The United Kingdom and Germany could for example close down coal-fired power stations and thereby achieve substantial emission reductions at relatively low cost compared with Norway, where electricity production is largely hydropower-based. Moreover, the countries vary in their views on the use of policy instruments and what is the appropriate level of ambition for a climate policy. These factors help to explain why different countries within the OECD formulate their targets and use policy instruments in different ways, and also why the probability of national targets being attained varies.

Most OECD countries have focused on energy efficiency measures, often combined with voluntary agreements with various sectors and different types of grants, in their efforts to reduce CO₂ emissions. In some countries, such as the USA, the Netherlands and the United Kingdom, voluntary agreements are a key element of climate policy. In addition, standards, energy labelling, information and advisory services are used to promote energy efficiency. Most countries are also making efforts to expand the use of renewable sources of energy and develop them further. Many are also focusing on greater use of bioenergy (wood, etc) and combined heat and power (CHP), which consists of a combination of electricity production and the exploitation of waste heat for local heating purposes.

Only the Netherlands, Denmark, Sweden, Finland and Norway have introduced CO₂ taxes. The EU countries have not been able to agree on the introduction of a CO₂ or energy tax at community level. The EU Commission has put forward a modified proposal for a common framework for introduction of such a tax on a voluntary basis by member countries in the period up to the year 2000, and for a mandatory tax after this. The structure of current and proposed CO₂ taxes varies greatly between OECD countries, as do the arrangements for exemptions. There is also a tendency for many countries to wait until other countries, particularly those that compete on the same markets, have introduced CO₂ taxes before they do so themselves. Most countries already have or are planning special arrangements for energy-intensive industries that compete on the world market. The arrangements for other sectors of industry vary. All countries have exempted international air traffic, and most also exempt sectors that can readily buy fuel in other countries (fisheries, domestic air traffic, shipping). With the exception of Finland, no country levies a CO₂ tax on onshore power generation from fossil fuels. In general, energy commodities used as raw materials in industrial production are not taxed either, even though they may generate in substantial CO₂ emissions.

The total tax levied on fossil fuels varies widely between countries. However, the crucial factor as regards efforts to limit CO₂ emissions is the total price of fossil fuels. In Norway, the prices of petrol, diesel and heavy fuel oil are higher than in other countries. In the USA and Canada, petrol and diesel prices are much lower than in other OECD countries.

There are also substantial differences between the tax levels for different types of fossil fuels which do not necessarily reflect their environmental effect. For example, oil is generally taxed more heavily than coal, whereas the reverse should be true in view of the difference in environmental impact.

It is difficult to compare the effects of CO₂ taxes on emissions in different countries. These will depend for instance on how the costs of measures to reduce emissions vary between countries, the structure of the industrial sector and the price sensitivity of customers. To study the effects on competitivity, etc, it is necessary to take into account the total taxation level, including all exemptions and exceptions and other relevant factors.

Norwegian greenhouse gas emissions

The preliminary figure for total Norwegian emissions of CO₂ in 1994 is about 37.2 million tons. In 1993, the corresponding figure was about 35.7 million tons. Road traffic accounted for about 24 per cent of the total in 1993, and coastal shipping and fishing vessels for about 10 per cent. Oil and gas production accounted for about 23 per cent of the total, and industrial processes for 19 per cent. About 20 per cent of the total was generated by heating using oil, gas and solid fuels.

Norway's CO₂ emissions increased steadily from 1960 to 1980, only interrupted by a drop during the increase in oil prices in the early 1970s. Throughout the 1980s, CO₂ emissions were relatively stable, despite a steep increase in petroleum production and thus in the consumption of natural gas for energy purposes by this sector. This is primarily because the rise in emissions from the continental shelf has been offset by a drop in the consumption of fuel oils. From 1989 to 1992, precipitation levels were high and there were large supplies of cheap hydropower. This, combined with lower economic activity and the introduction of CO₂ taxes, kept CO₂ emissions below the 1989 level. In 1993, emissions reached about the same level as in 1989, and in 1994 they increased further, mainly as a result of higher consumption of fuel oils, particularly by the wood-processing industry.

The net sink of CO₂ in forests, soils and aquatic ecosystems in Norway is estimated at about 15 million tons. This net uptake, which corresponds to about 40 per cent of total CO₂ emissions (1992) is a result of natural processes in ecosystems and forests, and thus takes place without the introduction of special climate-related measures to increase the uptake of CO₂. About 10 million tons of CO₂ per year is absorbed by forests because the annual increment (in standing volume) in Norwegian forests is larger than the amount of timber removed by the forestry industry. However, the most important factor in relation to trends in net emissions (emissions minus net sink) is the change in annual increment. An increase in the annual increment would tend to counteract the impact of a rise in CO₂ emissions on the climate, whereas a decrease in the annual increment would enhance their impact. However, the changes in annual increment to be expected if Norway's forestry policy is continued have not yet been reviewed. Possible changes in the amounts of CO₂ absorbed by forests, etc, have not been included in the projections of emissions, because no analyses are available.

Anthropogenic emissions of methane (CH4) in Norway totalled about 290,000 tons in 1993. Preliminary figures indicate that there was a small increase in emissions from 1993 to 1994. It is estimated that methane emissions, which are generated largely by landfills, more than doubled in the period 1950-1990, but they have been relatively stable during the last few years. There is a large degree of uncertainty in the estimate of emissions and sinks of nitrous oxide (N₂O). The dominant sources of anthropogenic emissions are the use of nitrogenous fertilizer in agriculture and nitric acid production, and emissions totalled about 13,800 tons in 1993. Preliminary figures for 1994 indicate that emissions increased by 3 per cent from 1993. Emissions are estimated to have doubled from 1950 to the end of the 1980s. From 1990 to 1994, they were reduced by about 8 per cent by improvements in production processes and lower production of nitric acid. Emissions of perfluoridized carbons (CF₄ and C₂F₆) from Norwegian aluminium refineries are estimated to have been reduced by about 40 per cent since 1985. The main source of emissions of sulphur hexafluoride (SF₆) is magnesium production, and Norwegian emissions were estimated at 31 tons in 1993. Emissions from magnesium production have been reduced by 80-90 per cent since 1988. Preliminary figures show that emissions rose by about 14 per cent in 1994. Only small amounts of HFCs, which are substitutes for the ozone-depleting substances CFCs and HCFCs, are used at present. However, consumption is expected to rise as CFCs and HCFCs are phased out in accordance with the Montreal Protocol.

Preliminary figures for 1994 show that overall Norwegian greenhouse gas emissions have been reduced by about two per cent since 1989. CO₂ is much the most important greenhouse gas in Norway. It accounts for 72 per cent of total emissions measured in CO₂ equivalents. Methane and nitrous oxide are next in importance, and account for 14 per cent and 9 per cent respectively of the total. Emissions of perfluoridized carbons and sulphur hexafluoride from industrial activities also make an important contribution to Norwegian greenhouse gas emissions.

Policy instruments and measures in the Government's climate policy

The fundamental strategy of Norway's climate policy is in accordance with the principles set out in the Climate Convention. An essential element of this strategy is to ensure that our targets as regards climate are met at the lowest possible cost to society. An effective international climate strategy should seek to find the most cost-effective solutions for all countries, sectors and greenhouse gases considered jointly. This will ensure that we obtain the greatest possible environmental benefit for our investments, and thus make it possible to set ourselves more ambitious targets.

Because of the global nature of climate change, its negative impact is not dependent on where emissions originate. In principle, emissions should therefore be reduced where the cost of doing so is lowest, and we should not be bound by national borders. It is also important to ensure that climate policy includes all greenhouse gases wherever possible.

Since the cost of taking action in Norway is high, we must demonstrate our willingness to support cost-effective measures in other countries and thus enhance the effect of climate policies. The Government intends to intensify its involvement in JI projects. In 1991, the Government established a "climate fund". Its purposes include meeting Norway's contributions to the Global Environmental Facility (GEF), which support projects in fields including water resources, biodiversity, ozone and the climate. The fund has also been used to meet Norway's contributions to the two pilot projects in Poland and Mexico. The Government will increase its total contributions to JI projects during the international pilot phase and will work towards the establishment of an operative mechanism which also includes arrangements for crediting emission reductions. This should take effect from the year 2000, when the pilot phase comes to an end.

Taxation is a suitable means of limiting CO₂ emissions, both because there are many sources of emissions and because it is easy to define a tax base, since there is a clear relationship between emissions and the use of fossil fuels. Taxation is the instrument that should be used as a general rule, both on administrative grounds and because it is most cost-effective, but it is also appropriate to supplement it with other measures than general taxes to limit CO₂ emissions. In the case of industrial emissions of gases such as N₂O, CF₄, C₂F₆ and SF₆, it is less clear which measures are most effective. The measures to be implemented to limit emissions of these gases must therefore be carefully evaluated in each case.

International coordination of national climate policies is essential to avoid unwanted distortion of competition between enterprises in different countries. If one or more countries make significantly stronger use of policy instruments than others, e.g. in the form of taxes, industrial enterprises subject to such taxes may move to other countries where costs are lower. However, the coordination of cost-effective climate policies in different countries may also have an impact on the equity dimension, and this issue will require international solutions (see the discussion on an equitable distribution of burdens between countries).

Norway introduced CO₂ taxes in 1991. About 60 per cent of all CO₂ emissions are now subject to such taxes. Thus, various sectors are excepted or exempted from CO₂ taxes, mainly for reasons of competition; moreover, the tax rate varies considerably depending on the area of use.

The structure of the CO₂ tax system should be evaluated in relation to the objectives of Norwegian climate policy. In this connection, it will be important to encourage a costeffective approach to the reduction of CO₂ emissions and to persuade other countries to make use of cost-effective instruments to reduce emissions. One of the main conclusions of an interministerial working group which reviewed the CO₂ tax system and its structure (July 1994) was that there should be one CO₂ tax rate, based on a fixed amount per kg carbon. At present, the tax structure in Norway varies from one fossil fuel to another. The working group considers that it would be appropriate to split the tax system for fossil fuels into two parts, a basic tax and a CO₂ tax, the latter based on the carbon content of the fuel. In the opinion of the working group, this would make it easier to separate taxation introduced as part of climate policy from other types of taxation. The working group also indicates the importance of taking the costs of the readjustment process into account, and states that Norway should use policy instruments in a way that takes account of possible indirect effects on emissions in other countries, for example if Norwegian businesses close down or move abroad.

The proposals from the working group would involve major changes in the structure of the taxation system. They should be considered in conjunction with the Government's other efforts to devise an environmentally sound taxation policy. Since the group completed its work, the Green Taxation Commission has been appointed to review the long-term role taxation policy can play in achieving higher employment and improving the state of the environment, so that this is not an appropriate time to put forward proposals for changes in the tax. In the Government's view, it is logical to consider any changes in the CO₂ tax structure or base or in tax rates in conjunction with the work of the Green Taxation Commission. The Commission will submit its report in summer 1996.

The area of application of the CO₂ tax to the petroleum industry is also currently under review. One issue under consideration is whether it should be identical to the area of application of the Petroleum Tax Act , which includes installations for the production and processing of petroleum and pipeline transport both offshore and onshore.

The reservoir gas in some fields also contains CO₂, and one question which will be considered is whether CO₂ emissions originating from this should be taxed. These issues will be discussed in a separate Proposition to the Storting from the Ministry of Finance.

Good results can also be achieved by means of binding cooperation between the authorities and the industrial sector. In 1991, a joint environmental programme on emissions to air and discharges to sea was initiated, involving the Norwegian Oil Industry Association and the Norwegian authorities. This has produced very encouraging results. Cooperation between the industrial sector and the authorities will be further developed to facilitate joint efforts to reduce environmental problems. A forum (Miljøsok) will be established to enable the industry and the authorities to work together to meet the environmental challenges posed by offshore activities.

The Government is also considering the use of voluntary agreements, for instance concerning analyses and declarations of intent concerning greenhouse gas emissions that are not subject to the CO₂ tax. This may be a useful instrument for achieving emission reductions. The Government will encourage branches of industry or individual enterprises to enter into agreements of this type. Such agreements must be drawn up within the framework of the authorities' powers to permit pollution pursuant to the Pollution Control Act. The authorities and the Federation of Norwegian Process and Manufacturing Industries have held talks with a view to starting a pilot project on voluntary agreements covering specific branches or companies. On the basis of practical experience of voluntary agreements in this field, the Government will evaluate whether stronger action, including direct regulation and taxation, will be necessary.

Policies in other fields which are not directly concerned with greenhouse gas emissions may also have positive effects on CO₂ emissions. The purpose of the new Energy Act, which entered into force on 1 January 1991, is to ensure more efficient development and use of energy resources within an environmentally sound framework, by means of deregulation and competition in the energy sector. Since the Act entered into force, the rate of hydropower development has been clearly lower than in the 1970s and 1980s. Since the reorganization of the power supply sector, power companies have set up more stringent priorities for new projects, indicating that resources are being utilized more soundly than before. Stiffer competition in the power market has also been instrumental in lowering power prices, which in turn has led to the replacement of oil by electricity. As a result, emissions of both CO₂ and NO_x have been reduced. In the long term, rising power prices may make fuel oils and bioenergy more competitive in the heating market. The use of bioenergy (wood) does not result in net CO₂ emissions because bioenergy is part of the natural CO₂ cycle. These emissions are therefore not subject to the CO₂ tax. The use of bioenergy for heating purposes in buildings may influence greenhouse gas emissions if it is used as a substitute for fuel oil. An increase in the use of bioenergy and fuel oil in Norway results in lower global CO₂ emissions than importing power from coal-fired power stations in neighbouring countries. Rising power prices will also make it more profitable to implement energy efficiency measures and use alternative energy sources. The growth in the power trade also underscores the need for coordinated environmental taxes that reflect the external costs of energy production, so that the volume of trade and its regulatory framework are environmentally sound.

The objective of Norway's energy efficiency policy is to promote rational use of energy resources. Moreover, Report No. 41 (1992-93) to the Storting on energy efficiency and new renewable energy sources states that an important element of energy efficiency policy will be to harmonize energy efficiency measures with environmental policy. Energy efficiency policy includes information, training and measures to facilitate the introduction of new energy-efficient technology. It is intended to improve the basis for decisions by participants in the energy market and to ensure that information on cost-effective measures is available and that they are implemented. Energy efficiency measures may therefore be cost-effective on other grounds than those related to climate. The Government will enhance its overall efforts in the field of energy efficiency.

This Report includes a broad-based discussion of the various sectors and the use of relevant policy instruments, particularly those described above. The section below gives a brief summary of the most important instruments and measures the Government intends to use in its climate policy. The Government has also evaluated other policy instruments (see Chapter 8), but these are not recommended either because they are expected only to have a marginal effect, because the cost of implementing them would be very high, or because they require further review.

In the Government's view, it is logical to consider any changes in the CO₂ tax structure or base or in tax rates in conjunction with the work of the Green Taxation Commission. The Commission will submit its report in summer 1996.
The Government will enhance its overall efforts in the field of energy efficiency. The main focus will be on information and training. The Industrial Energy Efficiency Network will be used in connection with drawing up agreements on energy efficiency in the industrial sector. A network of the same type will be established for the building industry. Financial support will be given for the establishment of a regional energy efficiency centre in each county. The grant scheme for energy efficiency measures in government buildings will be continued and strengthened where this is cost-effective, and a similar scheme will be started for the municipal sector.
The Government will continue to maintain and strengthen the system of grants to new renewable energy sources and energy-efficient technology.
The authorities will try to find new measures to limit emissions of greenhouse gases that are not subject to the CO₂ tax through voluntary agreements with branches of industry or individual enterprises. Talks with the industrial sector have already begun. On the basis of practical experience of such agreements, the Government will evaluate whether stronger action should be taken, e.g. direct regulation or taxation.
In collaboration with the industry, the Government will evaluate how emissions from well testing on the continental shelf can be further reduced.
The Government will provide more support for the development of technology to reduce greenhouse gas emissions. Such funds may for instance be used in connection with voluntary agreements with the industrial sector.
It is important for Norway to contribute to the development of practicable, effective instruments that can be used at international level to reduce global emissions. It will be essential to gain practical experience of JI projects with other countries. Norway will step up its involvement in such projects.
The Government intends to support information and training schemes to build competence in land use planning and improve municipal planning processes that have an impact on CO₂ emissions.
Certain measures in the transport sector that are primarily designed to limit local air pollution and noise will also have some effect on CO₂ emissions (cf the discussion of policy instruments used to limit NO_x emissions).
In the authorities' inspection arrangements for fishing vessels and domestic shipping, greater weight will be given to means of saving fuel. This will be followed up with information on the types of measures that are relevant for each category of vessels.
The Government will develop policy instruments to limit emissions of compounds containing fluorine (HFCs, SF₆ and CF gases) from sources other than industrial production of metals. Taxation may be a suitable instrument in this connection.
New guidelines for standards for landfills were laid down in 1994. As a result, the county governors will lay down requirements for the recovery of methane. According to these, gas recovery facilities shall be established at all landfills that receive biodegradable waste. Landfills must also be designed and run in such a way as to maximize the gas yield. The costs will be covered by charges for the delivery of waste.
Norway's forestry policy has thus far considerably enhanced the importance of Norwegian forests as a sink for carbon. The Government intends to facilitate wellplanned, sound forest management regimes that result in higher carbon uptake and at the same time take other interests into account. In the Government's opinion, climaterelated measures within the forestry sector should not include afforestation of mires and wetlands. Climate-related forestry measures in other habitats must be further reviewed before they are implemented.
In accordance with its commitments under the Climate Convention, the Government will continue to promote information and measures to raise awareness of the problem of climate change, in order to give the general public a better understanding of the greenhouse effect, its impact and the need to introduce measures to reduce emissions, and to encourage active participation. Various types of information activities will continue to be important in this connection.

In a longer-term perspective, research is also important. Research on global climate change involves a wide range of disciplines and a number of programmes and projects. Most public funds available for such work are used for technological research and development. In addition, a substantial amount of research within the natural sciences, economics and the social sciences is relevant to various questions connected with climate change.

The following are some of the factors that are important in deciding on priorities for national efforts in climate-related research:

Special efforts should be made to encourage research in fields where Norway, because of its geographical situation, scientific tradition or expertise, is in a particularly good position to provide the international community with new information on climate issues. Research should also focus on extending our knowledge and insight in areas where there is currently a high degree of scientific uncertainty. We also need to examine issues of fundamental importance in connection with developing strategies to prevent climate change, for instance in relation to further development of the Climate Convention and negotiations on protocols under the Convention. Norwegian research must also be closely coordinated with international research programmes, and cooperation between Norwegian research groups and international climate research should be strengthened.
The Government will give higher priority to climate-related technological research, especially in fields where Norway is particularly well-qualified to advance our knowledge. Energy research should be focused on projects that are relevant to the issue of climate change, for instance projects to promote the development and introduction of energy-efficient technology and new renewable energy sources.

Nitrogen oxides (NO_x)

Environmental problems caused by nitrogen oxides

Acidification of soils and water is caused by deposition of nitrogen and sulphur. The most serious effects of acidification that have been observed in Norway are the depletion and loss of fish stocks in fresh water and the loss of diversity or whole populations of other aquatic animals. Acidification results in chemical conditions which these species cannot tolerate. In soils, acid deposition results in nutrient imbalance, which makes the vegetation more sensitive to injury and stresses such as drought, cold and frost. Acidification is therefore believed to be one of several factors responsible for the declining health of Norwegian forests. Norway's hard rocks and thin soils have little capacity to neutralize acid rain. In large parts of the country the critical loads for acidification are therefore very low compared with those in other European countries. It is estimated that in Norway, nitrogen accounts for between 10 and 50 per cent of acidification as a result of critical loads being exceeded.

Damage to fish stocks caused by acidification was first registered in Norway in the 1950s and 1960s. Critical loads for the acidification of surface water are now exceeded across an area of 121,000 km2 in Norway. In southern Norway, critical loads are exceeded across 94,000 km2, and fish stocks have been damaged in 85,000 km2 of this area. From 1960 to 1990, the area of southern Norway where fish stocks have been damaged has grown by almost 500 per cent. Acidification is most severe in the southernmost counties, but studies have shown that the damage is spreading in western and south-eastern parts of the country. Further north, the problem is not as serious, except in eastern Finnmark, which is affected by emissions from the Kola Peninsula. Because of the geographical extent and severity of the damage, the Government considers acidification to be the most serious pollution problem in Norway.

Acidification is a regional problem. More than 90 per cent of the nitrogen deposited in Norway originates in other countries, such as the United Kingdom, Germany, Sweden, the Netherlands, Denmark and Poland. This means that the problem can only be solved effectively through binding cooperation with other European countries.

The reductions in emissions which have been achieved in Europe since the 1985 Sulphur Protocol was signed are now beginning to result in improvements in water quality. However, the tolerance of the environment to acidification has been weakened by large inputs of pollutants over a long period of time, and we cannot therefore expect fish stocks to recover quickly. The emission reductions required by the new Sulphur Protocol, which was signed in Oslo in 1994, are expected to improve the situation markedly. It has been estimated that the area where critical loads are exceeded will be reduced to 35,000-40,000 km2 in 2010, assuming that NO_x emissions do not rise above their current level. Nevertheless, even given these assumptions, pollution will continue to exceed critical loads in large areas of the country, particularly in the southernmost counties and parts of western Norway.

Emissions of NO_x to the atmosphere also contribute to other serious environmental problems. The most important of these are injury to health caused by locally high NO2 concentrations, the formation of ozone in the lower atmosphere, which is injurious to health and damages vegetation, and nutrient enrichment in fresh- and salt-water bodies. In addition, NO_x emissions may have indirect effects on the climate.

Small children, old people and asthma sufferers in all age groups are most vulnerable to respiratory complaints caused by NO2. About 660,000 people in Norway are exposed for varying periods of time to concentrations of NO2 that exceed the recommended values specified in air quality criteria issued by the Norwegian Pollution Control Authority and the National Institute of Public Health. The values used are the highest concentrations at which no injurious effects have been observed, even among the groups of people who are most sensitive to this type of pollution. Injury to health results in lower labour productivity and affects people's well-being and sense of security. Health problems caused by local air pollution are largely a result of Norway's own emissions.

Ozone in the lower atmosphere is formed by photochemical reactions between NO_x and methane or other volatile organic compounds (VOCs). In 1992, ozone concentrations substantially exceeding the air quality criteria for both health and vegetation recommended by the Norwegian Pollution Control Authority and the National Institute of Public Health were recorded at all measurement stations in Norway. In 1993, air temperatures were lower in May, June and July, and recommended ozone concentrations were not exceeded to the same extent. High concentrations of ozone in the lower atmosphere can result in health problems, reduced crop yields and physical damage. A large proportion of the emissions that cause the formation of ozone in Norway originates outside the country. Ozone pollution is thus both a national and an international, transboundary problem.

Nutrient enrichment occurs when soils, rivers, coastal waters or the sea receive such large inputs of nutrients that their natural dynamic balance is disturbed. This can change the species composition of ecosystems and lead to excessive growth of certain species, for example toxic algae in coastal waters. The total nitrogen load across ca 100,000 km2 of southern Norway averages more than twice the estimated critical load for certain sensitive types of vegetation. As regards coastal and marine waters, the area that is particularly sensitive, and where the first effects on the species composition of algal communities and other organisms have been observed, is from the border with Sweden to Lindesnes, the southernmost tip of Norway. As much as 30-40 per cent of the nitrogen transported by the most heavily polluted rivers to this stretch of coastline originates from long-range air pollution.

Norwegian NO_x policy in an international context

Norway's target is a reduction of NO_x emissions of the order of 30 per cent from 1986 to 1998. This target is based on international efforts to reduce emissions throughout Europe, which are organized within the framework of the ECE Convention on Long-Range Transboundary Air Pollution. The first NO_x Protocol, in which the parties undertook to stabilize NO_x emissions at the 1987 level by the end of 1994, was signed in Sofia in 1988. Renegotiation of the protocol started in 1994.

A number of countries, including Norway, were of the opinion that the commitments set out in the NO_x Protocol were not adequate to deal with the environmental problems caused by NO_x emissions. At the meeting in Sofia, Norway and 11 other Western European countries therefore signed a declaration of intent to effect a reduction of NO_x emissions of the order of 30 per cent by 1998, using 1986 as the base year. Norway's national target for emission reductions is based on this declaration, cf Proposition No. 82 (1988-89) to the Storting on consent to ratification of the NO_x Protocol and Report No. 46 (1988-89) to the Storting on Environment and Development (Programme for Norway's follow-up to the Report from the World Commission on Environment and Development).

Since these commitments and targets were drawn up, there has been a move in both national and international negotiations towards a more integrated approach to environmental problems, which includes a greater emphasis on cost-effective solutions. The new Sulphur Protocol, which deals with the reduction of sulphur emissions and was signed in Oslo in summer 1994, is therefore based on critical loads and the cost-effective distribution of emission reductions between countries. The emission reductions required therefore vary from one country to another depending on how much impact a country's emissions have on acidification, and on how much it would cost for the country to reduce its emissions.

Further development of international agreements

Norway has played an active role throughout the process of drawing up agreements for the reduction of long-range transboundary pollution in Europe, both politically and by helping to obtain the scientific basis for development of agreements in this field. The Government intends that Norway should continue to play an active part in the further development of international agreements.

At the outset of efforts to draw up a new NO_x Protocol, Norway has expressed the opinion that it should as far as possible be based on the same approach as the new Sulphur Protocol. It would also be appropriate for the protocol to take account of several of the regional environmental problems caused by NO_x emissions, including acidification, the formation of ozone in the lower atmosphere, and nutrient enrichment. The benefits in terms of human health and the reduction of physical damage which could be obtained by emission reductions should also be taken into account in determining the extent of the reductions required. Work on the new NO_x Protocol is at the preparatory stage, and there is general agreement among the countries involved that their efforts should be based on the above considerations. An ambitious protocol, based on the critical loads approach and a cost-effective distribution of emission reductions between countries, would be in Norway's interests.

It is uncertain how long the international negotiations will take and when a new protocol can be signed. However, it is clear that it will be some years before there is a new binding agreement including obligations for greater emission reductions than required by stabilization. Since acidification is such a serious problem in Norway, the Government considers it very important to step up the international cooperation process with a view to achieving an ambitious agreement on the reduction of NO_x emissions in Europe at the earliest possible date. Moreover, the Government considers it important to ensure that a continuous effort is made to reduce emissions in Europe further.

The NO_x Protocol under the Convention on Long-Range Transboundary Air Pollution does not cover international shipping. International legislation governing emissions to air from ships is being developed under the auspices of the International Maritime Organization (IMO). Negotiations on rules that will include standards for NO_x emissions from ships with new engines are now in progress. The Government will continue to advocate an early decision by the IMO to introduce ambitious international legislation in this field.

Norwegian and European NO_x emissions

In 1993, Norway's NO_x emissions totalled 229,000 tons, which is one of the highest levels in Europe measured per capita and in relation to GDP. The relatively high rate of emissions in Norway is explained partly by the importance of the shipping industry. Mobile sources account for 78 per cent of Norwegian emissions, more or less equally divided between road traffic and shipping, including the fishing fleet. The petroleum sector is the main source of stationary emissions and accounted for 13 per cent of total emissions in 1993. The sources of the remaining emissions are industrial activities, motorized appliances and other mobile sources.

NO_x emissions in Europe rose slightly at the end of the 1980s, but have dropped somewhat again in the early 1990s. It seems likely that the target of stabilizing emissions at the 1987 level will be achieved for Europe as a whole.

In Norway, NO_x emissions rose by 29 per cent from 1980 to 1987. This was mainly because of the growth in road traffic and the growing use of natural gas in oil and gas production in the North Sea. Norwegian emissions reached a peak in 1987. Emissions were reduced by three per cent from 1987 to 1993. Preliminary figures for 1994 indicate that emissions were five per cent lower than in 1987. The reduction is a result of new emission standards for private cars, a reduction in flaring of gas in the North Sea, and measures in the industrial sector.

Projections of emissions show that given the measures we have already decided to implement, emissions will have been reduced by about 8 per cent compared with the 1987 level by the year 2000. The reduction will primarily be brought about by more stringent emission standards for motor vehicles. Emissions from road traffic will probably be almost halved during this period. However, emissions from the petroleum sector will probably double during the same period, as a result of a higher level of activity. The CO₂ tax will help to moderate NO_x emissions to some extent.

Given these projected trends in emissions, Norway will meet the commitment set out in the NO_x Protocol. Most of the other countries that signed the Protocol will probably also be able to fulfil this commitment. However, the projected reduction in emissions of about five per cent from 1986 to 2000 means that, given the measures we have already decided to implement, Norway is still some way from being able to achieve its target of reducing emissions in the order of 30 per cent. Several of the other countries that signed the declaration are also unlikely to achieve this target, but Denmark, the Netherlands, Germany and Switzerland have stated that they will be able to achieve the required reduction in emissions. These differences between countries are primarily explained by differences in their industrial structure and in which sources of emissions are most important.

The Government's policy instruments for reduction of NO_x emissions

The Government must base its choice of the level of ambition for our future national NO_x policy on an evaluation of the damage caused by our own emissions, the role Norway wishes to play in setting the framework for further efforts to reduce emissions in Europe, and the progress of negotiations on the new NO_x Protocol. In parallel with the negotiations on the new Protocol, the Government wishes to propose policy instruments, as described in this Report, that can be used to reduce national emissions.

It is more complicated to choose appropriate instruments for cost-effective reductions of NO_x emissions than in the case of climate policy. It is not possible to adopt a crosssectoral tax as the main policy instrument, as we can in the case of CO₂ emissions. The type of action to be taken must be chosen, for instance, on the basis of our knowledge of how NO_x emissions are generated and of the factors that determine the amounts released.

Nitrogen oxides are formed by the combustion of fossil fuels. We distinguish between emissions of fuel NO_x and those of thermal NO_x. Emissions of fuel NO_x vary with the nitrogen content of the crude oil or biofuel. Thermal NO_x is formed during combustion, and the amounts generated depend on the combustion technology in use. Because NO_x can be removed, emissions also vary according to the purification technology used. The factors that have most effect on emissions vary from one source to another. If the emissions contain a large proportion of thermal NO_x, policy instruments should be chosen to influence technological solutions. Certain industrial processes, such as the production of fertilizer, are also sources of NO_x.

The choice of policy instruments will to some extent be determined by the international agreements Norway has signed. For instance, further work on new emission standards for motor vehicles will take place within the framework of the EEA Agreement.

All these factors mean that the choice of instruments for our NO_x policy must be based on a sectoral review of the potential for reductions and of the costs and benefits. This Report therefore includes a review of possible NO_x policy instruments for the following sectors: energy production, the petroleum industry, transport, the fishing industry and industrial processing.

As far as possible, the Government has tried to estimate the costs and benefits to society of the measures implemented in response to various policy instruments. In choosing policy instruments to bring about cost-effective emission reductions, we must also take into account the fact that the impact of emissions from different sources on various environmental problems depends on the geographical location of the source. For example, the benefits to health will be far greater if we achieve a certain reduction in emissions from combustion for heating purposes and from urban traffic than if the same reduction takes place in emissions from coastal and fishing vessels or from the petroleum industry. However, there are only small differences between the various sources with respect to their effects on acidification. The most effective means of countering nutrient enrichment in marine ecosystems is to reduce emissions from heavy industry and oil production.

A comparison of the estimated costs and benefits of the measures and instruments evaluated in this report indicates that the greatest benefit in relation to costs will be achieved by more stringent measures designed to reduce emissions from new motor vehicles even further. Next follow measures to reduce emissions from coastal shipping and the fishing fleet, the use of gas in motor vehicles, measures in certain branches of industry and the use of low-NO_x technology in gas turbines in the petroleum industry. It should be emphasised that there is a large degree of uncertainty associated with the estimates on which these evaluations are based. On the basis of this review, the Government will give priority to the following instruments in its NO_x policy:

Standards for motor vehicles will continue to be an important instrument in efforts to reduce NO_x emissions. Such standards will be further developed within the framework of the EEA Agreement. The EU is currently drawing up new, ambitious emission standards which are to apply from the year 2000. In this connection, Norway will advocate more stringent requirements as regards product durability, and a clearer producer responsibility for durability.
A working group appointed by the Ministry of Finance has proposed that the annual road tax for all categories of vehicles should be differentiated according to their NO_x emissions. This would encourage purchasers of new cars to choose environmentally sound models, and at the same time accelerate the replacement of older cars. The group's proposal has been submitted to public consultation. The Government will continue its efforts to devise ways of ensuring that taxation of the oldest cars, which generate most pollution, more closely reflects the environmental costs to society of their use.
NO_x emissions can to some extent be reduced by improvements of the conventional fuels, diesel and petrol. The EU's European Programme on Air Quality, Emissions, Fuel and Engines is expected to provide a basis for devising policies and drawing up legislation in this field. On the basis of the results of this research programme and Norwegian analyses, the Government will consider whether fuel taxes should be differentiated even further on environmental grounds.
The Ministry of Transport and Communications has for several years provided grants for trials of alternative fuels in the transport sector. This scheme will be continued.
The Government will continue to advocate an early decision by the International Maritime Organization (IMO) to introduce ambitious international legislation to regulate emissions to air, including NO_x, from shipping. For the present, this will only apply to ships with new engines.
The Government will ensure the implementation of simple technical measures (or measures with comparable effects) to reduce NO_x emissions from the engines of fishing vessels, ferries and other coastal vessels. Government support will be provided in connection with the introduction of these measures. In the case of fishing vessels with older engines where such measures cannot be implemented, a requirement to replace the engine by 1 January 2001 will be introduced.
As regards NO_x emissions from industry, the Government plans to evaluate whether more enterprises should be made subject to licensing requirements pursuant to the Pollution Control Act, particularly in cases where there are local environmental problems. The Government plans to review NO_x emissions from processing industries, and to implement measures where this is cost-effective in relation to local and regional environmental problems.
The Government intends low-NO_x burners to be used when new gas turbines are installed by the petroleum industry on the continental shelf. Cooperation with the industry will be initiated with a view to achieving this. The future use of policy instruments will be considered on the basis of experience of such cooperation. The installation of low-NO_x technology may also be evaluated within the framework of this cooperation when existing gas turbines are to be replaced, provided that technical, economic and environmental considerations are taken into account.
For mobile installations on the continental shelf, the Government intends to make use of instruments to encourage the implementation of simple technical measures. The Government will consider the choice of such instruments at a later date.
Emissions from the energy sector will be reduced by means of a greater focus on energy efficiency, and by the continuation of grant schemes for the development and introduction of new, renewable sources of energy.
Environmental and transport policy instruments that are more closely adapted to local conditions may also help to reduce NO_x emissions. Coordinated planning of land use and transport can reduce the volume of transport needed and encourage the development of environmentally sound transport systems. The principles of the National Policy Guidelines for coordinated land-use and transport planning issued by the Ministry of the Environment will be used as a basis for planning governmental development projects. The Government will evaluate whether guidelines for air quality should be drawn up for planning pursuant to the Planning and Building Act. This will be done in the light of the adoption of regulations pursuant to the Pollution Control Act relating to threshold values for local air pollution and noise.
The Government will ensure that Norwegian expertise concerning the dispersion and impact of NO_x emissions is maintained and supplemented. Moreover, the Government will further technological research and development in relevant fields such as shipping and the petroleum industry.

If the policy outlined in this report is implemented, the Government expects that a reduction of Norwegian NO_x emissions of the order of 12-14 per cent compared with the 1986 level will be effected by the year 2000. This is a reduction of about 7-9 percentage points in addition to that Norway is expected to achieve as a result of measures that have already been introduced or approved.

Even though a reduction in emissions of the order of 30 per cent compared with the 1986 level cannot be fully achieved by 1998 by means of the instruments and measures presented here, they will represent an important step towards this target.

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