Greening the economy

rreeninr the economgy

Optimal policy design for greening the economy

Institutional tools such as taxes can be an effective incentive to choose a more sustainable alternative in for example transport or housing. It makes sure that those who use the largest amount of energy and emit the highest amount of CO2 pay a fair price for their choices. However, the question emerges if measures like these are enough to function as incentive.

Emissions of greenhouse gases have increased in Norway According to the Kyoto agreement, average annual emissions in Norway for the period 2008-2012 should not exceed the 1990 emission level by more than one percent. Emissions statistics from Statistics Norway and the Norwegian Environment Agency indicate that for the period 2008-2012, average emissions were about 6% higher than in 1990.

For the petroleum sector and road transport, CO2 emissions were 75% and 30% higher than in 1990, respectively. Norway met its Kyoto requirements through extensive purchase of emissions allowances. If, however, Norway in the future aims at reaching parts of its international greenhouse gas obligations through domestic abatement, the policy instruments aimed at mitigating domestic emissions must be radically sharpen.

Use green taxes to reduce stationary emissions

The Norwegian Parliament has passed a regulation banning oil-based heating from 2020. If effective, most emissions from stationary combustion, which amount to almost 20% of the Norwegian CO2 emissions, will be removed. In order to reduce emissions from the remaining stationary sources, that is, primarily manufacturing and extraction of petroleum, other policy instruments need to be implemented. According to economic theory, a cost-effective emissions reduction can be implemented by imposing the same price on emissions for all sources, either as a tax or as a price of tradable emissions permits. This policy rule reflects that all sources – measured per unit of greenhouse gas emission – cause the same damage, and therefore should be treated equally. By putting a price on emissions, firms and households are encouraged to identify climate-friendly solutions: Firms can save money by switching to more climate-friendly ways of production and households may experience that climate-friendly solutions are cheaper and more attractive than the standard alternatives. Using available information and creativity, agents can choose which abatement efforts to undertake. A nice example is Statoil: According to the company’s web site, early in the 1990s an emission tax on extraction of petroleum spurred Statoil to remove CO2 from extracted natural gas by injecting the gas in deep geological formations below the Sleipner platform.

Supplement green taxes with other instruments to reduce mobile emissions

By imposing a price on CO2, producers and consumers have an economic incentive to choose more climatefriendly technologies. Demand for this type of technology will then increase, making R&D in climatefriendly technologies more profitable. But is pricing CO2

emissions sufficient to spur innovation and diffusion of climate-friendly technologies, for example, in the transport sector?

At present there are two main technologies for climatefriendly road transport; electrical cars and hydrogenbased cars. Transition to each of these technologies requires expansion of load stations. In an early phase when there is few clients willing to acquire a new type of car, there may be limited supply of load stations without government interventions. This is similar to the history of the telephone and email; the first persons using these technologies obtained limited benefit, but as more people started using them the benefit increased for everybody (positive network externalities). Transition to electrical cars or hydrogen-based cars as the main transport technology may therefore require that the government offers either a subsidy to purchase the vehicle or finance investment in infrastructure.

Expansion of infrastructure may be expensive, which suggests that either extensive development of infrastructure should be undertaken infrequently or society should choose technologies that do not need extensive investment in infrastructure. It may be beneficial to investigate a number of alternative technologies, but to implement only very few of them. In addition, it will not be efficient if Norway invests in infrastructure of another road-traffic technology than the other European countries; it may be wise to coordinate the choice of road-traffic technologies.

ne recommendations for prorress

In the national arena Norwegian interests are in focus. Knowledge to support policy decisions and ensure value creation based on our natural resources, and technology development to strengthen our industry’s competitiveness is the main issues. The national effort within the selected strategic areas must cover the value chain from basic, to applied research and demonstrators. The size and quality of the effort must at a level that builds international competitive and attractive research teams.

The European arena is our home market for research. To realize the value of Norwegian energy resources we have to develop European solutions together with actors from our neighboring nations. We have to be attractive partners to European research institutions and industry. We are fully integrated in Europe’s SET Plan effort to rebuild its energy supply system to become sustainable, and should naturally take a lead in several areas based on our strength in renewable energy, renewable energy industry and renewable energy research.

On the global arena technology does not recognize borders. Energy technology industries are truly operating and competing on a global market. This means that energy technology research in any country must be at an international top level to be competitive, requirements that also apply for Norwegian renewable energy R&D. Small nations like Norway cannot cover all nations and all topics at this level of ambition, and should carefully seek strategic alliances to develop the best technology. We should also take part in lifting the level of wealth in the less developed countries in the world through assisting them in developing their own renewable resources and technology, a cornerstone in growing wealth.

The following recommendations are given within this framework. This does not mean that Norwegian renewable energy R&D only applies to Norway. Its main purpose nationally is to build a solid and sufficient knowledge base to serve its government and industry in acting nationally, in Europe and globally. In times where change and rebuilding is needed, research is a key element to succeed.

nor agy as a countrgy

Towards an innovative knowledge economy

Knowledge-based policy decisions

Over the past few years, Norwegian investments in sustainable energy research and education have built a strong technological, economic and social science expertise in the field of renewable energy. This expertise should be further utilized as a foundation for energy-related policy decisions.

Recommendation:

• Establish a cross-disciplinary ‘Energy Competence Council’ In

Norway inspired by the model for Germany’s ‘Energiwende‘ working operationally with the Government and ministries.

Long term Norwegian targets for research, development and education in renewable energy

Norway is an energy nation. Continued focus on developing these resources and the industry that make use of them are essential for securing our future wealth. Continued maintenance and develop of competence and expertise is at the core of this effort. A long-term education, research and demonstration policy is crucial.

Recommendations:

• Establish clear policies for Norway’s role as a lead nation in building a low emission energy supply system to prevent global heating.

• Continue the strategic R&D commitment initiated by the Climate settlement with substantial thematic research programs like

EnergiX and Climit, and the FME centers to ensure a solid national base for policy decisions, industrial innovation and make our research institutions attractive partners internationally.

Complete the innovation chain sector development of renewable energy

Today’s innovation- and industrial development in the renewable energy sector does not live up to our high national aspirations. A key to realizing our ambition is to strengthen the weakest parts of the innovation chain.

Recommendations:

• Strengthen the ‘Researcher project-Blue Sky’ RCN funding scheme to cultivate the most innovative ideas.

• Expand the ‘Forny’ RCN project scheme to close the gap between research and demonstration.

• Establish large-scale demonstration projects in key national priority areas.

nor agy in europe

Developing a strong European profile

EU - Norway's 'home market’ within Research, Development and Training in Renewable Energy

Harvesting the potential values from our energy resources and related industry development is impossible without European collaboration on a broad basis, from R&D to policy development. Research is often the starting point of these processes and forces an increasingly stronger connection to the European research cooperation, and specifically the SET Plan.

Recommendations:

• Develop and maintain a sustainable funding model that enable

Norwegian research institutions to actively pursue leading and performing roles along the whole specter of the European

R&D arena, in practice strengthening the MVO and STIM-EU instruments.

• Work together with European countries with common interest to establish Berlin model (‘EU FME’) R&D and Demo programs within

Norwegian priority areas, and develop funding mechanisms for this kind of instrument.

Bring Norwegian industry to Europe

To contribute to Europe’s 2020 goals, Norwegian companies, research institutions and governing bodies work will need to work actively and closely with European partners. On the European scene we find the same type of actors involved. Our industry have a best chance of success when the Norwegian triangle is coordinated and in “parallel” interaction with similar actors in other nations or at the European level.

Recommendation:

• Develop processes for targeted joint efforts by the knowledge institutions, government and industry to establish our industry in the middle of the renewable energy innovation market in Europe.

policy

EU, member states

SET SG

institutes, universities

EERA JPs

R & D

industry

ELLS

demo & deploy

nor agy in the orld

Global citizenship through competences

Work with the best research groups in the world

To create a competent, high profile and internationally visible Norwegian research and education environment in renewable energy, we need to work with the very best. We need tools that facilitate active research collaboration with the exchange of people and resources (in strategically important areas). This type of cooperation is not given enough credit in today’s evaluation scheme and needs to be given special consideration to give the predictability and trust needed for international collaboration.

Recommendations:

• Portfolio considerations in the annual RCN calls (in e.g. the EnergiX program) to ensure funding for truly collaborative projects and researcher exchange.

• Initiate ‘joint calls’ with selected countries (Japan, U.S., China) on selected topics of common interest.

Norwegian renewable energy expertise for development

To reduce GHG emissions, deploying renewable energy in developing countries is essential. Norwegian research communities have great energy expertise on both technology and deployment that we should take advantage of, also in Norwegian aid- and development programs. There are endless opportunities to contribute to the Government’s ‘Energy for All’ initiative.

Recommendation:

• Start a strategy process examining how applied research can be used as a tool for development for self development, combining lessons learned from the Norwegian R&D and Innovation schemes with the development agencies own experience. The Norwegian

Research Council, Norad, the universities and research institutions together with the industry are obvious participants in such a process.

Endnotes

Sustainable energy systems

[1] IPCC Climate Change 2013 - WG 1 Contribution to the Fifth Assessment Report [2] IEA World Energy Outlook 2012

Wind power

[1] GWEC Global Wind Statistics 2012 [2] IEA Energy Technology Perspectives 2012 [3] EWEA (2013) Deep Water. The next step for offshore wind energy. [4] NVE (2010) Offshore wind power in Norway. Proposed areas for strategic environmental assessment [5] NVE Rapport Nr 9/2009: Vindkart for Norge [6] Enova (2007) Potensialstudie av havenergi i Norge [7] TPWind Strategic Research Agenda (draft, published March 2014) [8] INTPOW Offshore Wind Norway Market and Supply Chain, 2012 [9] NVE (2012) Havvind – Strategisk konsekvensutredning

Transport

[1] Petter H. Heyerdahl, UMB [2] www.ssb.no/emner/10/10/10/petroleumsalg/arkiv/tab-2011-03-16-01.htm

Endnotes

Smart Cities

> Conte, E, Monno, V, 2012, Beyond the buildingcentric approach: A vision for an integrated evaluation of sustainable buildings, Environmental Impact Assessment Review, 34, pp.31-40. > EC, 2011, A resource-efficient Europe – Flagship initiative under the Europe 2020 Strategy. COM(2011)21 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. <http://ec.europa.eu/resource-efficient-europe/pdf/ resource_efficient_europe_en.pdf> > EC, 2012, Smart Cities and Communities website, hosted by the European Commission, http://ec.europa.eu/ energy/technology/initiatives/smart_cities_en.htm (last accessed 29 April 2012). > ECTP, 2013a, Towards the creation of a high-tech building industry. Turning energy efficiency into sustainable business. Research & Innovation Roadmap 2014-2020. An initiative of the European Construction Technology Platform ECTP. http://www.ectp.org/cws/params/ectp/download_files/36D2534v2_E2B_Roadmap_draft.pdf > ECTP, 2013b, The ReFINE roadmap. Building up infrastructure networks in a sustainable Europe. An initiative of the European Construction Technology Platform ECTP. http://www.ectp.org/cws/params/ectp/ download_files/39D2500v1_reFINE_Roadmap_Draft_P.pdf > Larsson, N, Hovorka, F, Salat, S, Bourdic, L, 2011, From Smart Grids to Synergy Grids, Proceedings of the SB11 Helsinki World Sustainable Building Conference, Volume 1, pp.46-47. > LEIPZIG CHARTER on Sustainable European Cities (2007) Adopted by the European Council of Ministers on 24 > May 2007. http://www.eukn.org/E_library/Urban_Policy/Leipzig_Charter_on_Sustainable_European_Cities > Salat, S, 2012, Cities and forms: on sustainable urbanism, Editions Hermann.

Credits

This report has been compiled in the period 2013-2014 as part of the activities of the SFFE (Senter For Fornybar Energi/Centre For Renewable Energy) in Norway. The texts have been delivered, checked and screened by their respective contributors. Editing and concept by Gabriella Tranell and Otto Paans.

The photographs in this report have been purchased via Shutterstock, with exception the pictures used on pages 10-11, 24, and 80-81, which have been supplied by TiC,

The cover image has been is a ISS Expedition 34 Crew Image Science & Analysis Laboratory, NASA Johnson Space Center derivative work. The serial number of this photograph is ISS034E016601. Obtained via: [http:// en.wikipedia.org/wiki/Earth#mediaviewer/File: ISS034E016601_-_Stratocumulus_Clouds_-_Pacific_Ocean. jpg]. This picture is available for the public domain.

Graphic design by TiC - Thinking in Concepts (2013-2014), any copyright on individual graphics belongs to TiC.

Senter For Fornybar Energi

NTNU SINTEF IFE UiO Clean Energy For All!

93