ICTSD Programme on Competitiveness and Sustainable Development
on the global arena, and by 30 percent when an equivalent effort is being made by other major emitting economies under a satisfactory international agreement37). Many of the changes to the existing ETS have already been mentioned above, and concern inter alia the allocation mechanism, the adjustment of the EU-wide cap where national allocation plans will be abandoned in favour of an overall EU limit, the use of credits from the flexible mechanisms JI and CDM, and potentially additional types of credits and/or mechanisms foreseen under a future international agreement.38 As a step in this process, the European Commission released a communication to the other European institutions in May 2010, discussing the options for moving beyond an emission reduction of 20 percent.39 Any decisions will have to be made by the legislative institutions, the Council and the Parliament, but at this point the Commission recommends sticking to the 20 percent target. It does, however, also advise the Union to prepare for a future movement towards the 30 percent target. 2.2 The Norwegian ETS The Norwegian ETS was launched in 2005. During the first phase, from 2005 to 2007, the scheme covered only 10 percent of the total Norwegian emissions. An over-allocation of emission allowances took place and, as a result, the carbon price was close to zero.40 Since the beginning of the second phase in 2008, the Norwegian ETS is linked to that of the EU. The discussion of the Norwegian ETS below is based on the design of the scheme for the second and current phase, lasting until 2012.41 Coverage During the years 2008 to 2012, allowances for approximately 75.2 million tons (Mt) of CO2e have been and will be distributed, which is on average a little over 15 Mt per year. This cap should be seen in the light of the expected 2010 emissions of Norwegian covered installations of 21 Mt CO2e.
The Norwegian ETS covers approximately 40 percent of the GHG emissions from Norwegian sources.42 The scheme covers CO2 emissions from the activities listed in Annex I of the EU Emissions Trading Directive and, in addition, any installations that are opted into the system under Article 24 of the Directive. Article 24 allows countries to include additional activities and GHG emissions in their trading scheme. Under this provision, Norway has, from 1 July 2008 onwards, unilaterally included N2O emissions from nitric acid production.43 Beginning in 2010, Norway has included aviation into its trading scheme.44 Installations covered by the Norwegian ETS can together rely upon credits from the Kyoto flexible mechanisms, CERs and ERUs, accounting for up to 20 percent of the total quantity of emission allowances. The same qualitative restrictions that apply under the EU-ETS regarding the use of these apply under the Norwegian ETS. Mode of allocating allowances In terms of the ratio of allowances that Norway allocates through auctioning, the country has different rules than the EU. Norway can auction up to 50 percent of its allowances per year. This reflects the “inclusion in the Norwegian cap of the Norwegian off-shore oil industry that had previously been subject to a USD 50/ton tax on CO2e emissions”.45 During the period 20082012, Norway auctions allowances for 31.6 Mt overall, which is 42 percent of the total amount of allowances. Land-based industries covered by the EU Directive are allocated allowances free of charge based on the installations’ historical emissions over the period 1998-2001. Revisions made to the Norwegian ETS provide for free allocation to installations established after 2001 but holding GHG emission permits by 28 March 2008, on the basis of their historic emissions during the years 2002-2007. Revisions provide for increased allocation of allowances under specific circumstances to land-based installations with emissions during the 1998-2001 period that have significantly
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