Assessment and recommendations

Norway has made progress on the path towards green growth over the past decade. The country is a frontrunner in many environmental areas and invests heavily in technological development and innovation to support its green transition. Norway’s low-carbon transition is comparatively well advanced. The country has a low-carbon energy mix thanks to its widespread use of renewables. It is a world leader in electric vehicle adoption, and is advancing the decarbonisation of all transport sectors. However, the country still faces multiple challenges, including sustainable consumption patterns and biodiversity protection.

Norway set ambitious national environmental targets across all sectors. Its national targets on climate mitigation are among the most ambitious worldwide. The country aims at achieving climate neutrality by 2030 and enshrined in law the target of becoming a low emission society by 2050. While Norway is a climate mitigation and adaptation forerunner at home, it is also one of the world’s largest energy exporters, thereby contributing indirectly to greenhouse gas (GHG) emissions abroad. Norway has the capabilities and financial means to accelerate a just transition within its own borders and abroad. The country already supports developing and emerging economies through the Norwegian International Climate and Forest Initiative, which is the largest single element in Norway’s public climate finance. The government intends to double its total climate finance to NOK 14 billion (USD 1.6 billion) by 2026.

While not a member of the European Union, Norway is part of the EU internal market through the Agreement on the European Economic Area. As such, it implements large parts of EU environment and climate policies. The country also has a long tradition of applying a wide range of economic instruments to green its economy. Norway has a well-functioning environmental governance and management system with a high level of co-operation, vibrant civic engagement in decision making and strong advisory bodies. Citizens have generally free, open access to high-quality environmental information. The short distance between research and policy-making bodies is an asset of the Norwegian system. The integration of environmental concern into other policy areas has been at the core of policy making for several decades.

Norway has increasingly decoupled energy demand and related environmental effects from growth. Over the past decade, it has accelerated deployment of renewables and improved energy efficiency thanks to enhanced technology and the electrification of the transport and residential sectors. Nevertheless, Norway’s energy consumption per capita, which historically has been among the highest in the OECD, is still above the OECD average. This is due notably to high energy consumption in the industry sector, as well as households’ heating needs due to the cold Scandinavian climate. Improving energy efficiency thus needs to remain a priority for such an energy-intense economy.

Norway has one of the most decarbonised power sectors in the OECD area (Figure 1). It builds on widespread use of renewable electricity, primarily hydropower and more recently wind power. The country is energy self-sufficient with a surplus of renewable electricity in normal years, and has become Europe’s largest energy exporter. Norway has reduced the share of fossil fuels in energy consumption since 2013 and decided to phase out its only coal-fired power plant in Svalbard. In 2020, it became the first country that formally prohibited use of fossil oil for heating in existing buildings and in new buildings altogether.

Following Iceland, Norway has the second largest share of renewables, representing 51% in its energy mix and 99% of its electricity output (Figure 1). It overachieved its national target of 67.5% share of renewable energy in gross final energy consumption in 2020 in line with the EU Directive on renewable energy. Norway’s renewables sector is rapidly growing. The country has a competitive advantage in large-scale deployment of offshore renewables, particularly wind.

The 2017 Climate Change Act, the 2020 Nationally Determined Contribution (NDC) under the Paris Agreement and the Climate Action Plan 2021-30 lay out the framework of Norway’s climate action. Norway also adopted its Climate Adaptation Strategy 2021. The government provides annual reporting on both mitigation and adaptation efforts to Parliament.

Norway has raised ambition on legally binding climate targets. Within its NDC 2020, Norway aims to reduce GHG emissions by at least 50% and towards 55% by 2030 compared to 1990 levels, including through international emissions trading, such as the EU Emissions Trading System (EU ETS). The 2017 Climate Change Act sets the long-term target of becoming a low-emission society by 2050. Moreover, in 2016, Norway’s Parliament pledged to become climate neutral by 2030 (previously 2050). This means it must offset remaining emissions through emissions trading systems or international co-operation.

Norway plans to fulfil its climate commitment in close collaboration with the European Union. Its objectives are aligned with the enhanced ambition of the new EU-wide 2030 Climate and Energy Framework under the EU Green Deal. Emission taxation and participation in the EU ETS are the main elements of the government’s climate policy. The Climate Action Plan outlines economy-wide and sector-specific measures for reducing emissions, as well as its policy for increasing CO2 sequestration and reducing emissions from forestry and land use. The government committed to applying the no-debit rule under the EU Regulation on Land, Land-Use Change and Forestry and intends to enhance climate sinks.

Norway is a relatively small GHG emitter with absolute emission levels similar to other Nordic countries. The country has decoupled emissions from gross domestic product (GDP) growth. In 2020 energy industries, including oil and gas production, contributed to 30% of the country’s GHG emissions, followed by transport, industry, agriculture and buildings. After peaking in 2007, domestic GHG emissions have declined, albeit more consistently in the second half of the 2010s. In 2020, they were about 10% lower than in 2010, but only about 4% lower than in 1990 (Statistics Norway, 2021[1]).

The starting point for emission reductions in Norway is low because its energy mix is already largely decarbonised, leaving few remaining quick wins. The expansion of offshore oil and gas resources over the past decades also contributed to increasing GHG emissions. These emissions have been relatively decoupled from production since 2016. The Norwegian petroleum industry has comparatively high environmental and climate standards. Many companies operating on the Norwegian shelf have set net zero targets.

Meeting the enhanced climate target through domestic emission cuts will be challenging (Figure 2). According to projections of the 2022 National Budget, Norway will emit around 41.2 million tonnes of CO2 equivalent (CO2-eq) by 2030, which represents a reduction of 19.5% of emissions compared to the 1990 level. These estimates do not yet include measures of the Climate Action Plan 2021-30 or the effects of Norway’s participation in the EU ETS. However, the government still expects a gap to achieve the 2030 emissions reduction target.

With high marginal costs of reducing domestic GHG emissions, the purchase of foreign emission credits often makes economic sense. Emissions trading within the EU ETS was a major factor in achieving Norway’s commitments under the Kyoto Protocol (2008-12 and 2013-20), along with carbon credits under the Clean Development Mechanism and domestic measures. Moreover, many counties, cities and municipalities have set net zero goals and contribute to fulfilling Norway’s national ambitions. The city of Oslo has an ambitious climate action plan and climate budget covering all relevant sectors.

Norway has by far the largest share of electric vehicles (EVs) worldwide. In 2021, about two-thirds of new passenger vehicles sold were fully electric. The country is making progress towards its goal of registering all new passenger cars and light vans as zero emission vehicles by 2025. While the charging infrastructure is increasingly dense, Norway needs to pursue public financial support with a view to establishing and maintaining public charging stations in areas that lack a commercial market, particularly in the north. Norway electrified a third of its domestic ferries. Norway is also a pioneer in electric aviation, which could help address growing concerns about the large number of short-distance flights.

The government’s transport goals, strategies and priorities are detailed in the National Transport Plan 2022-33. This plan aims to halve the non-quota emissions from the transport sector by 2030 compared with 2005 levels (representing about a quarter of total emissions in 2020). A broad range of economic instruments and regulatory instruments is used to decarbonise all transport sectors. The state-owned enterprise Enova supports technology development and early market introduction.

The implementation of the zero growth goal through Urban Growth Agreements has helped reduce car traffic volumes in Norway’s major cities. This has contributed to reducing GHG emissions, air and noise pollution, and congestion, as well as to improving quality of life in cities. Such agreements should be rapidly extended to medium-sized cities and smaller urban areas. Norway’s small and medium-sized cities could largely benefit from lessons learnt in major urban areas.

Norway needs to redouble its efforts and make more structural changes to establish sustainable transport systems to meet the 2030 target. This involves promotion of behavioural changes, a stronger focus on shared mobility services and a shift from increased mobility towards improved accessibility. The rail system needs to be further modernised and become a cheap alternative to road and air transport. Airport expansion is counterproductive to reducing GHG emissions and environmental concerns need to be better reflected in any new plans. It is an opportune moment to rethink mobility and develop a socially fair and spatially balanced transport system.

Norwegians enjoy good air quality. Norway’s pollutant emissions and intensities of fine particulates (PM2.5), nitrogen oxide (NOx), sulphur oxide (SOx) and black carbon have all decreased over the past decade. Norway complies with the EU directives on air quality standards and will continue to follow the EU zero pollution agenda closely. In addition, the country has set more ambitious local and national targets, supported by excellent nationwide air quality monitoring services. Premature death attributed to PM2.5 exposure in Norway is less than one-third the OECD average. Norway’s 4 major cities rank in the top 20 of the European City Air Quality Index.

Nevertheless, nearly all larger cities in Norway face localised air pollution problems and periodic worsening of air quality with high peak PM10 concentrations during winter and into spring. Thanks to proactive measures (zero growth goal, EVs, replacement of wood stoves), local air quality in urban areas is expected to improve in the coming years. Fees for studded tyres, an important source of airborne particulates, helped considerably reduce their use in urban areas.

While Norway has abundant water resources, total freshwater withdrawal has increased over the past decade, notably due to higher consumption by households and significant water losses. Leakage from the drinking water supply system is estimated at 30% (Environment Norway, 2021[2]). This represents not only a significant loss of water resources but also a potential risk for microbiological contamination in drinking water. Water supply systems are often more vulnerable in small municipalities, notably in terms of water supply stability and the ability of drinking water utilities to prepare and respond to emergencies (bedreVANN and Norsk Vann, 2020[3]). Information on drinking water quality could be made accessible directly on websites of municipalities. This would enable consumers to easily consult relevant information on their drinking water sources, as well as inspection reports.

Most people are connected to municipal wastewater systems. However, only 60% of Norway’s population is connected to advanced wastewater treatment plants, which is one of the lowest shares in the OECD area. According to national statistics from 2020, more than half of the population was connected to wastewater facilities, which do not comply with pollution permits. This calls for regular inspections and the use of coercive fines. As noted in the previous OECD EPR of Norway (OECD, 2011[4]), the country’s ageing water infrastructure requires urgent upgrades. It also needs to adjust to new climate challenges, such as increased precipitation, floods and rising sea levels. The rate of infrastructure improvement has been slow despite substantial investment. Norway has invested by far the largest share in infrastructure renewal in Europe: EUR 225 (about USD 255) per inhabitant per year compared to EUR 82 (about USD 93) in other EU member states (five-year average) (EurEau, 2021[5]).There is scope for improving operational efficiency of water services and co-ordination between different administrative levels.

Norway is not on track to meet its objective of decoupling waste generation from economic growth. Waste generation in Norway reached a record high in 2019. The average Norwegian produced 772 kg of municipal waste, one of the highest amounts in Europe (OECD Europe average = 499 kg per capita). However, the definition of municipal waste has been changing over the years, which makes it difficult to compare data. The Waste Management Plan for 2020-25 includes a waste prevention programme and proposals for changes in waste infrastructure to prepare for tightened directives within the EU zero waste strategy.

Nearly half of Norway’s municipal waste is treated by incineration with energy recovery, while landfilling has almost disappeared. The country will need to significantly increase its recycling capacity. Norway has excellent waste treatment facilities, with cutting edge technology for waste sorting. While more flexible regulations are needed, extended producer responsibility schemes and better incentives are key to creating demand for secondary raw material, notably in the construction sector. Technical building standards would need to be adjusted to enable increased use of recycled building materials.

Thanks to voluntary commitments by the food industry, Norway reduced food waste by 12% (2015-18) and aims to halve food waste by 2030. However, NOK 22 billion (about USD 2.6 billion) in food is still wasted each year, representing about 1.3 million tonnes of CO2-eq emissions. Collected food waste is increasingly used for biogas production. Awareness campaigns to promote better consumer choices and better understanding of best-before dates need to be pursued. Binding measures to reduce food waste may be needed.

Promoting sustainable consumption patterns is a key challenge for Norway. The country has one of the world's highest material consumption rates, a high material footprint per capita and a declining material productivity (Figure 3). The government released its first strategy for developing a green, circular economy in July 2021, which sees the transition to a circular economy as an opportunity to foster value creation and sustainability. The strategy has broad scope, and largely applies the new EU Circular Economy Action Plan 2020.

The linear pattern of “take-make-use-dispose” does not provide producers with sufficient incentives to make their products more circular. Only a small share of products is cycled back into the Norwegian economy (Circular Norway, 2020[6]). As the European Union sets global standards in product sustainability, Norway could benefit from a stronger focus on life cycle thinking, eco-design, “the right to repair”, etc. Policy makers need to create an enabling environment to facilitate the circular transition.

As typical for many other developed economies, material footprint originates in part from outside of Norway. A more holistic strategy would allow Norway to better understand and consider embedded emissions of imported goods and related global environmental impacts. Actions should not only tackle all economic areas to reduce Norway’s material footprint (e.g. construction, forestry and wood products, energy transition, circular food systems, green transportation) but also focus on reducing its absolute levels of resource consumption. This involves further educating and empowering consumers to make informed decisions (e.g. use of sustainability labels).

Norway ranked seventh on the 2021 index of countries’ progress towards achieving the SDGs (Sachs et al., 2021[7]). Despite good progress, Norway still faces “significant or major challenges” for several goals, including climate action, sustainable consumption patterns and biodiversity protection. The 2021 National Action Plan for implementation of the SDGs promotes a whole-of-government approach. It establishes measures to ensure better horizontal and vertical co-ordination, as well as stronger co-operation with the private sector, academia and civil society. In 2020, the Ministry of Local Government and Modernisation, which is also in charge of regional development, became the national co-ordinating body for implementing the SDGs with a view to promoting local ownership and increasing cross-sectoral co-operation.

While nearly all municipalities have started working with the SDGs (Hjorth-Johansen et al., 2021[8]), implementation varies greatly across the country. Large, central and network-oriented municipalities have done better overall, thanks to stronger political commitment and better knowledge sharing and co-operation with other levels of government (Hjorth-Johansen et al., 2021[8]). Counties and municipalities need to be fully involved in national decision making from early planning to monitoring and evaluation. They must also strengthen their capacity to work with the SDGs strategically and systematically (OECD, 2020[9]).

The national government needs to further promote policy coherence, multi-level governance and multi-stakeholder partnerships to move beyond a goal-by-goal approach rooted in specific sectors. As in all countries, inter-ministerial co-ordination between different policy areas could still be improved. Specifically, ministerial departments should invest more in interdisciplinary expertise (e.g. internal mobility) and pay more attention to cross-sectoral spillovers to better integrate policies across sectors.

Norway values local democracy and locally tailored solutions in the context of significant regional differences. In 2020, the government implemented a major territorial reform that merged several counties and municipalities. The reform aims at transferring power and responsibility to larger, more robust municipalities and regions. Local authorities are in charge of most aspects of environmental management and their level of responsibilities has been growing over the past decade. Municipalities manage local pollution control, while County Governors and the Norwegian Environment Agency control pollution at the regional and national levels, under the guidance of the Ministry of Climate and Environment. This can contribute to a more efficient and user-friendly public administration. However, differences in implementation capacity, the influence of local interests and greater institutional autonomy have led to uneven application of environmental regulations and national guidelines. Therefore, it is crucial to further strengthen the capacity of small municipalities, particularly in remote areas. They often face trade-offs between economic, social and environmental objectives. A stronger focus on learning from peers, sharing of good practices and more frequent opportunities for policy dialogue could help build institutional knowledge on good environmental management practices and inspire specialised support services.

Evidence from recent surveys (SDWG, 2019[10]) suggests the government has improved overall communication with the Sami community. The right of Indigenous peoples to participate in decision-making processes was formalised in 2005. Beyond mandatory consultations, the government also consults with other Sami interest groups, particularly in matters that directly affect Sami land use. This has contributed over time to enhancing awareness and knowledge of Sami issues in ministries and agencies. In addition, the government has set up dedicated mechanisms to better include minority groups’ perspectives at municipality and county levels (e.g. councils for youth, seniors and persons with disabilities).

Nonetheless, there is still a way to go to better consider Sami-specific concerns in national policies and better protect minority rights. A research project (Ahlness, 2020[11]) found that “Members of the ‘Nordic’ majority population tend to view minority groups as less capable of ecological commitment.” Reindeer herders’ associations suspect consultation processes are undermined by asymmetric information, unequal negotiation power and lack of transparency. Promoting effective and meaningful engagement and incorporating indigenous knowledge remains a common challenge in the Arctic region. Dialogue has to be seen to help find better solutions and more strongly influence project design at an early stage.

Since 2013, the Ministry of Climate and Environment and the Ministry of Local Government and Modernisation have shared responsibility for environmental impact assessment (EIA) and strategic environmental assessment (SEA). These processes are primarily integrated into the ordinary procedure for land-use planning and applications for licences and permits. In 2017, Norway incorporated the two EU directives on EIA and SEA in its legal system as one common system.

While environmental assessments are conducted at national level for major projects (e.g. national infrastructure, renewable energy projects), local municipalities are responsible for EIA in most cases. As a result, the local authority may be the applicant and the competent authority at the same time. This double role creates a potential conflict of interest, particularly in smaller municipalities, as there is no independent authority in the approval process. Local interests may sometimes lead to sub-optimal decisions as regards environmental outcomes and EIAs may address only direct and immediate on-site effects. This risks underestimating cumulative environmental effects that may occur in the medium and long term or beyond the spatial boundaries of municipalities. Limited local capacity can also undermine the quality of the EIA process. Every municipality should benefit from the expertise of a dedicated environmental officer. More room should be given to independent, critical, inter-disciplinary voices in local decision-making processes.

Norway has a solid legal and regulatory framework for compliance assurance using a combination of compliance promotion, monitoring and enforcement tools. Inspections are conducted by the Norwegian Environment Agency and the county governors. They have a joint monitoring strategy for 2016-20 and share a corporate database of inspection results across all sectors. However, as in all OECD countries, there is still an implementation gap. The country has a high rate of non-compliance (60-70% of the checks, including 10% of serious violations). About two-thirds of breaches are related to weaknesses of self-monitoring systems. Approximately 30% of site inspections are conducted without prior notice. Compliance monitoring also includes desk verification of self-monitoring reports and online checks of products. E-commerce non-compliance is particularly high and requires continued attention.1

Norway’s strong focus on risk-based targeting leads to higher levels of non-compliance detection, which does not reflect the general compliance behaviour of the regulated community. Norway’s inspection results also need to be interpreted in light of more in-depth compliance monitoring. Such monitoring checks the performance of company-internal environmental management systems whose elements are mandated by law. This makes the Norwegian system unique in the OECD area. However, the requirements are challenging for smaller companies; many have not sufficiently invested to meet them. They still lack routine checks and knowledge about safety standards and environmental requirements, including for chemical management of imported products. This underlines the importance of inspection campaigns and compliance promotion efforts, which need to be pursued. The impact of current compliance promotion activities could be more systematically monitored, beyond the annual reporting of the Norwegian Environment Agency.

The health and economic impacts of the global COVID-19 pandemic have been lower in Norway than in other European countries. As elsewhere, local pollution and GHG emissions declined in line with the lower level of activity. While its economy was initially hit hard by slumping oil prices, Norway has so far been recovering quickly from the economic impacts of the global pandemic. In 2021, it already reached close-to-pre-pandemic GDP per capita levels (OECD, 2021[12]).

Economic rescue packages included time-limited income protection measures and business support schemes. These funded investments in key infrastructure sectors such as green maritime transport projects. In addition, they increased funding in technology development and several green conversion packages; the largest of them were channelled through its state-owned enterprise Enova. However, the country also provided substantial support to rescue the oil and gas industry (USD 15.2 billion) and the aviation sector (USD 0.9 billion) (OECD, 2021[13]). Tax concessions to the petroleum sector allow the immediate tax deduction of current and projected investment spending from 2020 to 2024. Thanks to the rebound in oil prices, the petroleum industry recovered more quickly than initially expected. Tax concessions in the early months of the pandemic may have been more generous than necessary (OECD, 2022[14]).

Norway supported implementation of existing green restructuring measures and plans. The government set-up a Green Platform worth NOK 1 billion (about USD 116 million, 2020-22). This aims to stimulate “bigger and more rapid investments from companies in green sustainable solutions and products” (Green Platform Initiative). The initiative is cross-cutting and involves the participation of five ministries. As in other OECD countries, monitoring and evaluation are needed to ensure that funds are spent in an economically efficient, environmentally sustainable and publicly supported manner (OECD, 2021[15]).

Norway invests heavily in research and development (R&D) of energy and climate technology with a view to supporting lasting market changes for climate-friendly solutions. Enova has been strengthened and provides funding for new technology development in all sectors (NOK 3.7 billion – about USD 393 million in 2020, 3 850 projects). The 2021-24 framework agreement defines new priorities to help achieve Norway’s climate commitments and support the transition to a low-emission society.

Launched in 2020, Norway’s carbon capture and storage project (CCS) known as “Longship” is the country’s largest ever industrial climate project (total cost of NOK 25 billion – about USD 2.9 billion, including NOK 16.8 billion – close to USD 2 billion in government funding, 2021-34) (Ministry of Petroleum and Energy, 2019[16]). The project has the potential to create jobs. Longship aims at kick-starting CCS development both in Norway and Europe, as well as enabling other countries to replicate technological solutions. In addition, Norway supports the development of hydrogen production with CCS and hydrogen production using electrolysis with renewable electricity, material recycling from car batteries, etc. A Green Platform encourages investment and innovation in all sectors (NOK 1 billion – about USD 116 million for 2020-22). A new research centre – the Norwegian Research Centre on Wind Energy (NorthWind) – aims to create export opportunities for Norwegian business and industry over the next eight years and to minimise the environmental impacts from future wind power development. Other Norwegian energy research centres focus on CCS, hydropower, solar energy, biofuels, low emission industry, zero emission neighbourhoods, intelligent electricity distribution and zero emission energy systems for transport.

Norway counts heavily on technological developments to achieve its climate goals and strives to reap the gains from innovation and new technology. While strong government support for innovation will further boost Norway’s green transition, technical solutions alone may not be sufficient. Norway’s green transition will also need to involve behavioural changes and require adjustment to consumption patterns.

A greener and more efficient use of public procurement is a powerful policy instrument for aligning public expenditure with green objectives and promoting greener consumption patterns. Norway’s general government procurement spending has more than doubled over the past decade. It was 17% of GDP in 2020 (OECD, 2020[17]). Norway has a strong regulatory framework for sustainable public procurement. According to the 2016 Public Procurement Act, contracting authorities have a legally binding duty to develop and implement sustainable procurement practices. A stronger focus on life cycle costs is encouraged. The Act calls for the entire procurement cycle to consider sustainability criteria.

However, there is still room for improvement when it comes to implementation. Norway also needs to enhance countrywide uptake and strengthen the accountability framework. Audit and control are weak points in relation to sustainable public procurement in Norway (OECD, 2020[17]). Some good practices to follow up on sustainability considerations are available. However, as noticed by the previous OECD Environmental Performance Review (OECD, 2011[4]), there is no systematic approach for monitoring outcomes of sustainable procurement. Availability of data for monitoring purposes also remains a challenge. Data on the share of green spending in public procurement could usefully inform decisions, but they are not yet systematically available. Preliminary findings of the Norwegian Agency for Public and Financial Management indicate an increase in the share of green public procurement spending in food purchases and meal services as well as in the construction sector in 2021. A new action plan for 2021-30 proposes to increase the share of green public procurement.

Norway is a pioneer in using economic instruments for environmental protection, one of the first countries to introduce a carbon tax in 1991. To date, CO2 taxes and emissions trading (EU ETS) cover approximately 85% of Norway’s GHG emissions, including offshore production. Norway is also among the few countries that tax non-road emissions at more than EUR 30 per tonne of CO2.

Norway’s Climate Action Plan 2021-30 proposes to raise the carbon tax from NOK 590 (USD 69) per tonne of CO2-eq in 2021 to NOK 2 000 (about USD 233) by 2030. Compensation measures may be used to ensure that specific groups or regions are not affected disproportionally. Households in Norway’s northern regions already benefit from some tax exemptions for the use of electricity and energy from alternative sources or are charged a reduced rate for various excise taxes on energy products. The precise arrangements to operationalise the required tax shift will be part of a negotiation process and approved by Parliament within its annual budget cycle. By 2030, the scheduled increase in carbon prices is expected to reduce emissions by an estimated 8 million tonnes of CO2-eq. This gradual carbon tax increase would provide a long-term perspective on carbon pricing and a strong price signal to encourage increased investments in renewable energy and low-carbon technologies. The next step is to ensure an effective and socially-balanced implementation over the next eight years.

Norway’s support to fossil fuels declined over the past decade, thanks to the gradual phase-out of several energy and carbon tax exemptions and reduced consumption of transport fuels with the uptake of EVs. Direct budgetary transfers to the oil and gas sector also declined over the decade. Most support measures are related to fiscal taxes (e.g. exemptions from the tax on mineral oil used for domestic shipping and fishing). Norway reports on tax expenditures diligently; debate is underway whether it makes sense to consider some of these expenditures as fossil fuel subsidies. Norway should systematically screen actual or proposed subsidies, including tax provisions to identify those that are not justified on economic, social and environmental grounds, and develop a plan to phase out fossil fuel and other environmentally harmful support. The government should also strengthen transparency by disclosing fossil fuel production and support plans in its commitments under the Paris Agreement (SEI et al., 2021[18]).

Furthermore, it would be useful for Norway to engage in a self-review and/or peer review of inefficient fossil fuel subsidies. Such reviews, similar to the ones within the G20, could help identify scalable good practices. Norway has been supporting various global initiatives to phase out fossil fuel support. The country is a member of the informal grouping of non-G20 countries known as the “Friends of Fossil-Fuel Subsidy Reform”. In line with its international commitments, Norway should further reduce fossil fuel support and set quantified, time-bound targets.

Having more vehicles that are fully electric generates important environmental benefits in relation to emissions of CO2 and local air pollution. However, it has also strongly reduced revenues stemming from taxes on motor vehicles and motor-vehicle fuels. Responding to this loss of tax revenue, the government presented principles for a vehicle-taxation system that would be both environmentally and fiscally sustainable. The current taxation of vehicles and transport fuels has two main challenges. First, the tax largely does not apply to zero-emission vehicles. Second, it does not reflect differences in externalities depending on where and when the driving takes place. The government therefore plans to explore if it can reform the current system. An introduction of a time and place-based road use tax would be a welcome development.

Moreover, the government recently aligned the traffic insurance tax for EVs with the amount charged for motorcycles (70% of the traffic insurance tax for gasoline and diesel cars) and will apply the full rate as of March 2022. The government is also considering introduction of VAT on the most expensive EVs. These are first steps towards sharing the financial burden of road maintenance, infrastructure development and other externalities. As EV uptake becomes stronger, other measures (e.g. gradual removal of VAT exemption for EVs) may become necessary.

Norway has a well-developed road toll system. All major cities established toll rings using environmentally differentiated rates to discourage urban traffic and reduce related congestion problems. A recent road toll reform reduced the number of road toll companies from 60 to 5. It also simplified the price and discount schemes through an electronically managed AutoPass; some tolls serve as congestion pricing. The city of Oslo intends to transform the central area into a zero-emissions zone (ZEZ). Bergen is planning to implement a pilot ZEZ in 2023. Congestion charges are powerful tools that can address many externalities from road transport more effectively than fuel taxes (van Dender, 2019[19]).

Norway needs to better consider emissions associated with foreign investments. The equity-portfolio carbon emissions of Norway’s Government Pension Fund Global (GPFG) are estimated to be twice the country’s total emissions (OMFIF, 2021[20]). The GPFG, which invests the surplus revenues of the petroleum sector, is the world’s largest sovereign wealth fund. It pioneered ethical guidelines for investment decisions based on active ownership and the exclusion of firms from its portfolio. While climate risk is not explicitly anchored in its mandate, the fund has started incorporating some climate risks in its strategy.

The government should follow through on recommendations from an expert group that propose to base the responsible investment of the GPFG on the Paris Agreement’s goals. At the COP26 in November 2021, Norway’s prime minister announced government plans to make the GPFG “the leading fund in responsible investment and the management of climate risk”.2 This would help make the fund’s activities more consistent with Norway’s goals under international climate agreements. To date, despite its huge potential, the GPFG plays almost no role in the domestic or global green transition (Kattel et al., 2021[21]).

Norway ranks number one on the Net Zero Readiness Index (KPMG, 2021[22]). It has a better track record than most other oil exporters in diversifying its economy. The country has many comparative advantages in other industries (e.g. low-carbon manufacturing in electricity-intensive industries, offshore wind, aquaculture, CCS). Building on its human capital with high education levels, well-functioning institutions, effective tax system and robust fiscal policy framework, Norway has the capabilities and financial means to accelerate a just transition within its own borders and abroad.

The transition to a less petroleum-dependent economy is already underway. The share of the petroleum sector within national GDP shrank from a peak of 25% in 2008 to 15% in 2021.3 Employment in the petroleum sector dropped following the oil price plunge in 2014-16 and is set to decline in the long term; a more circular economy could create many new job opportunities. Shifting employment will require strategic planning and co-ordination.

According to the OECD Economic Survey of Norway 2022, the speed of the transition will determine any critical macroeconomic consequences for the Norwegian economy. If labour and capital resources can be reallocated from the oil and gas sector at a speed that avoids massive unemployment or stranded assets, then the transition will be comparatively benign (OECD, 2022[14]). While reduced oil and gas activities will create important economic and societal repercussions, the impact will probably be less than previously feared (Government of Norway, 2021[23]).

Beyond Norway’s general system of workers’ rights, the government has not yet developed an action plan for a “just and equitable transition” from fossil fuel production (SEI et al., 2021[18]). More clarity about the “just and equitable” transition in the Norwegian context would be useful. The government also needs to show it will address economic, social, spatial and gender inequalities beyond traditional support for affected communities or unemployment relief for workers. This involves a reflection on root causes to address structural changes and avoid replicating the same inequality patterns in new green industries. Equity issues concern uneven exposure to risk, uneven ability to capture the benefits and uneven responsibility for damage. Transformative change necessarily impacts lifestyle and consumption patterns.

The role of the private sector could be further leveraged by better integrating sustainability into business models. Civil society groups, communities and – more broadly – citizens are important sources of creativity and innovation, which policy makers could engage more strategically (Bruyninckx, 2021[24]). Today’s children can drive the behavioural and lifestyle changes of tomorrow. Environmental education is of paramount importance.

Norway has one of the most diverse landscapes in Europe. While the country is dominated by forest and bare mountains, it has a wide range of climatic conditions, landscapes, vegetation and land use in close proximity. In addition to its diversity, Norway contains the largest or most pristine representations of many European landscape types. Thus, Norway plays an important role in landscape and species conservation for the whole continent (Ciglič and Perko, 2013[25]).

Land use and land-use change place the greatest pressure on Norwegian biodiversity, negatively impacting 90% of threatened species (Norwegian Biodiversity Information Centre, 2018[26]) (OECD, 2020[9]). Climate change adds to the pressure, and is considered to have an increasingly negative effect (Ministry of Climate and Environment, 2015[27]). Development is the most important factor, but commercial forestry operations alone put pressure on 41% of threatened species (Norwegian Biodiversity Information Centre, 2018[26]); (Miljoverndepartementet, 2011[28]). According to the Nature Index for Norway, ecosystem quality has declined in several important ecosystem types since the early 2010s (Lier-Hansen et al., 2013[29]). From 2000 onwards, the Nature Index shows a weak positive development for forests and freshwater, while the impact of development is slightly negative for mountains. For open lowlands, there is a clear decline. The other ecosystems have been fairly stable but with smaller fluctuations between years and regions.

Almost a quarter of the endangered species live in agricultural landscapes. Populations of farmland bird species are declining at a faster rate than other Nordic countries. The area suitable for farming is scarce, with cultivated land accounting for less than 4% of the country’s surface. Agricultural activity creates a cultural landscape that is valued for its own sake and for the biodiversity it supports. The most productive areas are often near fast-growing towns, which has led to the conversion of agricultural land to housing, roads, industry and other purposes. Norway set an annual target to convert no more than 400 hectares of cultivated land, which it has met in the last several years.

Norway is clarifying its vision of sustainable land use even as it adopts new tools for assessment and new means of co-operation to achieve its goals. The situation remains a work in progress but is moving in the right direction. If the government implements all its plans, it could generate positive outcomes for the health of biodiversity and ecosystems in Norway and in benefits for its people.

The Nature for Life Biodiversity Action Plan 2015, adopted by Parliament in 2016, sets out ambitious goals for biodiversity preservation with clear direction on how to achieve them (Ministry of Climate and Environment, 2015[27]). This is supported by the mapping system Nature in Norway (NiN), which provides detailed geo-referenced information on the status of species and ecosystems (Halvorsen et al., 2015[30]). The NiN has the potential to underpin specific, measurable, achievable, realistic and time-bound objectives for ecosystem management. In 2016, the Ministry of Climate and Environment initiated development of a system for assessing ecological conditions in Norwegian ecosystems. As of January 2022, three ecosystems have been assessed: forests, arctic tundra and mountains. The system of integrated ocean management plans has matured and has proven a highly successful mechanism to balance multiple interests in the marine space.

Implementation of the EU Water Framework Directive is well structured, involving all levels of government, as well as multiple sector agencies. Key elements are broad inclusion of stakeholders but with co-ordinating responsibility clearly assigned, measurable objectives with a reporting process attached and strong local anchoring of decision making. This framework could serve as a model for other aspects of ecosystem and land management, especially with regard to cross-sector co-ordination.

The most important risks to biodiversity and loss of ecosystem services in Norway come from land-use change. Reflecting this, the main policy tool for biodiversity conservation is protection of habitats and landscapes. Protected areas in Norway cover 17% of the mainland (25% including Svalbard) (Figure 5). This is in line with the 2020 Aichi target and above the OECD average. However, protected areas need to include more representative and significant landscape types, especially productive forest land.

Norway has set objectives to preserve significant or representative ecosystem types and those areas needed to protect threatened or endangered species. However, progress to fill gaps in the network of protected areas has been slow. An in-depth evaluation of habitat and landscape types identified 275 sites (totalling 584 km2) that contain habitat types under-represented in protected areas or with low protection coverage (Miljødirektoratet, 2017[31]). As one reason for the low coverage, areas representing ecosystem types in need of additional protection may be small, scattered, already partially degraded or have high development value. Moreover, about 27% of protected areas are at risk of degradation and require additional action to secure their conservation values.

Norway has made progress in wetland conservation. This ecosystem type was the first to have a management system based on clearly defined objectives for ecological status as foreseen in the Nature for Life Biodiversity Action Plan. The aim is to slow conversion of wetlands to other uses, and accelerated restoration of wetlands. A ban on conversion of peatlands to agricultural use to avoid GHG emissions is a rare example in the OECD of agricultural regulations specific to climate change.

Every four years, the national government provides input into local decision making. To that end, it expresses expectations for local planners and provides information, support and guidance for the regional and municipal planning process (currently covering 2019-23) (Ministry of Local Government and Modernisation, 2019[32]). County governors and county municipalities provide advice but may also object to local plans if deemed against national or significant regional interests. Management boards with local and regional representation manage protected areas, while county governors mainly handle smaller protected areas. Both operate within the limit of special rules set for each protected area. Sector regulations aim to ensure environmental performance, and sector ministries have significant responsibility for environmental objectives within their domains.

Increased reliance on voluntary protection of forest land, reduced use of the objection process in the Planning and Building Act, and refocusing national guidance on process issues rather than outcomes are all ways to reduce land-use conflicts. In the past, such conflicts have impeded progress on environmental protection. However, eliminating conflicts by increasing local self-determination puts national objectives at risk. A better approach is to find ways to deal with conflict constructively, and the following recommendations are intended to help in this regard.

Municipal land-use planning is a primary mechanism affecting the environment, landscape and welfare of citizens. While responsibility for land-use planning is shared among Norway’s three levels of government, local municipalities assume most of the environmental management. This division of labour provides important autonomy for decisions whose impacts are often primarily local. However, it is a challenge to ensure that decisions reflect the values and desires of all Norwegians, especially if these effects are small but cumulative over time (Chapter 1, Section 1.4.2).

Local and national priorities for conservation of landscapes and biodiversity may not match. Small municipalities with ageing and shrinking populations, in particular, may prioritise economic and social development over environmental concerns. Differences in competence and local capacity can also be a significant problem.

The central challenge is managing the nationwide effect of local decisions. Closing the gap between local decisions and national objectives requires active engagement by the national government and the public. In the past, the government provided more guidance in its national expectations document regarding desired environmental outcomes of the planning process. However, in recent years it has focused more on ensuring the process is working well (Strand and Næss, 2017[33]). This is perhaps a consequence of the change in responsibility for the Planning and Building Act from the Ministry of Climate and Environment to the Ministry of Local Government and Modernisation. Providing clear national objectives to the different planning actors can improve the probability of achieving them. This is especially important when these objectives are non-local in nature (climate change, biodiversity), and any trade-offs with local, other regional and national objectives may not be appropriately weighted. The Ministry of Climate and Environment is better placed to co-ordinate local planning with respect to national environmental objectives and is already responsible for most related tasks. On the other hand, the Ministry of Local Government and Regional Development has greater expertise in the processes themselves. Sharing responsibility between the ministries can lead to more effective engagement with local planning.

The public has access to local deliberations on land-use plans and can provide comments or raise objections when national issues are at stake. However, more could be done to ensure a broader spectrum of people can participate. In particular, smaller communities may lack capacity to support extensive consultations and the ability to use the existing digital opportunities to facilitate participation.

The costs of participation can be reduced through increased use of digital- and web-based tools to notify citizens of when and how they may provide feedback, share documents and participate in the process. A national nature and environmental appeals board, following the Danish or Swedish model, can help ensure civil society has an effective means to engage in the planning process. This extra venue can help ensure the environment is given more “standing” in government processes. Norway already operates similar types of boards such as for real estate services or consumer complaints.

County governors (who are national entities) and government agencies represent national interests in the planning process. The objection mechanism lets these bodies, regional authorities and the Sami Parliament raise concerns regarding the compatibility of local plans with national priorities. Most of these objections are addressed through mediation and negotiation, but some are referred to the responsible ministry. The government has de-emphasised this objection process in the last decade, preferring increased guidance and negotiation during the planning process (NORUT, 2016[34]; Strand and Næss, 2017[33]). Consequently, the number of objections is expected to continue declining. Between 2008 and 2013, the ministry accepted 112 objections, a figure that dropped to 29 between 2014 and 2019.

The use of objections is a symptom of goal conflicts in the planning process. These will not be eliminated by discouraging the use of objections. Not all such conflicts can be resolved in every planning process at local level. Progress has been made in refocusing the role of the county governors from raising objections to providing more guidance and assistance at earlier stages of the planning process. This helps build capacity in the local municipality and reduces uncertainty. However, county governors must use their discretion in deciding when a local plan may not be compatible with national interests. The Circular T-2/16 provides guidance to county governors regarding issues of national significance but is not definitive. This is because limited tools are available to measure the impact of local decisions on ecosystem health, and to understand how local outcomes contribute to a total effect nationwide. A better solution is more quantification of outcomes to make the process more data-driven.

Building a link between data on ecosystems and local planning can clarify the effect of local decisions on ecosystem health. It can also give local planners more certainty that they can produce a plan in harmony with national interests. Area accounts, for example, can provide an overview of the total effects of new plan proposals on climate emissions, biodiversity, local nature and soil protection. Such a land-use accounting system can reduce use of objections and align local planning with national objectives. Use of the UN System of Environmental Economic Accounting–Ecosystem Accounting can also help systematically collect and report the needed information.

Good mapping and data for priority species and habitat types make it easier for municipalities to consider threatened biodiversity in development plans. Norway has made great strides in mapping and reporting on the quality of nature types (habitats) through the national nature map initiative (NiN) and in understanding and reporting of the quality of ecosystems through its Nature Index system. An in-depth evaluation of habitat and landscape types that merit supplemental protection and a survey of such sites identified a large number of candidates. This work sets the stage for more concrete input of information into local planning process with respect to national interests.

The national government can sensitise local governments to important issues surrounding conservation and sustainable use of resources, the value of ecosystem services provided by diverse and healthy landscapes, and the role and importance of local landscapes as part of the larger ecosystem. For example, it could offer funds to help local governments formulate biodiversity plans. Efforts to assist local governments that lack institutional capacity are an important first step and worth continuing, but more can be done to ensure that local action is compatible with national objectives.

Co-financing (or other forms of assistance that put a value on local conservation commensurate with the national benefits that derive from them) can be an economically efficient way to align local and national incentives. Examples include assistance to implement biodiversity plans, increased funding for converting land to protected areas, co-financing of important projects or payments for ecosystem services. Urban Growth Agreements, in place in four major urban areas, are an example of co-financing between local, regional and national governments to achieve the goal of zero increase in vehicle traffic (Chapter 1, Section 1.3.5).

Managing total cumulative environmental impact while preserving the greatest scope for economic growth implies some means by which communities can trade conservation and development opportunities. The idea of “area neutrality” where development in one area is offset by restoration of a similar but degraded landscape elsewhere is worth considering. This approach may also provide a solution where larger cities have ambitious environmental objectives but smaller municipalities view development as essential for their survival. Co-operation between such communities can provide opportunity for both conservation and development where it is most desired.

The budget for forest protection has increased from NOK 231 million (about USD 26.9 million) in 2013 to NOK 435 million (about USD 50.6 million) in 2021. The central government has the right in principle to designate any land for protection and start compensation discussions. However, it may be reluctant to exercise these rights and, indeed, has forsworn doing so for privately owned forest land. Relying on a voluntary approach reduces conflict and reinforces the rights of landowners but may not deliver desired results in a reasonable timeframe.

In 2016, Parliament set the objective to increase protected area from about 5% to 10% of total forest land. This objective aims to protect important habitats and ecosystems and to preserve a representative sample of Norwegian nature for future generations. The government should keep track of progress towards this goal, adjusting the approach if progress is regarded as too slow. For example, it could increase the rate of compensation, particularly for sites most in need of protection.

Sector administrations have responsibility to regulate activities and consider environmental concerns within their domains according to their own objectives. This is an important principle in Norway, but the Nature for Life Biodiversity Action Plan also recognises the need to co-ordinate activities to achieve maximum benefit. There are strong signs of improvement in this regard, including river basin management plans, marine management plans, the Trua Natur 2020 plan and the nature strategy for wetlands presented in 2021, among others (Mijødirektoratet, 2020[35]). Identifying which ministry is best placed to co-ordinate action increases the cost effectiveness of interventions and improves the likelihood of success. Co-ordination of the sectors' use of instruments with respect to individual species, habitat types and ecosystems also increases predictability for affected municipalities.

Forestry and agriculture, as land-use sectors affecting biodiversity in Norway, have a particular need to co-ordinate their actions. Both sectors have objectives to preserve activity in all areas of Norway and to support the prosperity of communities and individuals connected to the sector. In practice, they must balance these with objectives for environmental sustainability. Managing the interactions between these sectors, land-use planning and biodiversity objectives requires particular attention.

Norway’s agriculture sector is small but accounted for about 9% of national GHG emissions in 2020. Agricultural land suitable for arable crops is limited and benefits from many subsidies. In June 2019, the government and farmers’ organisations signed a voluntary agreement to reduce GHG emissions by 5 Mt CO2-eq between 2021 and 2030. Norway is one of few countries with quantified emissions objectives in agriculture. However, the government’s climate plan for the agricultural sector is vague and should place a clear focus on cost-effective measures. Moreover, the short timeframe of annual negotiations may prioritise short-term goals at the expense of long-term perspectives.

Norway delivers unevenly across its four agricultural policy objectives (OECD, 2021[36]). Environmental performance and the efficient creation of value added along the food chain are both compromised by support policies linked to production levels. More analytical tools could help analyse the enormous amount of collected data to better understand conflicting goals in the agricultural sector. Supply constraints (e.g. soy imports) also need to be more strongly taken into account to reduce Norway’s global carbon footprint. Norway should provide greater flexibility and stronger incentives for farmers to improve agri-environmental outcomes and develop climate-smart agriculture. While producer support in agriculture is among the highest in the OECD, farmers remain exempt from GHG emission taxes. Moreover, agriculture is not part of the EU ETS. A lack of progress could make the sector one of Norway’s largest sources of GHG emissions in the future.

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Notes

← 1. In most OECD member countries, non-compliance detection numbers cover only site inspections. In Norway, the coverage is much broader, which makes comparison with other countries difficult.

← 2. Statement by Prime Minister Jonas Gahr Støre at the UN Climate Change Conference in Glasgow, 2 November 2021, www.regjeringen.no/en/aktuelt/statement-at-the-un-climate-change-conference-in-glasgow/id2882242.

← 3. In 2021, the petroleum sector represented 41% of total exports, 19% of total investments and 5.8% of employment (Norwegian Ministry of Energy and Petroleum, 2021, https://www.norskpetroleum.no/en/economy/governments-revenues.

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