Two centuries of Viking raids into Europe tapered off following the adoption of Christianity by King Olav TRYGGVASON in 994. Conversion of the Norwegian kingdom occurred over the next several decades. In 1397, Norway was absorbed into a union with Denmark that lasted more than four centuries. In 1814, Norwegians resisted the cession of their country to Sweden and adopted a new constitution. Sweden then invaded Norway but agreed to let Norway keep its constitution in return for accepting the union under a Swedish king. Rising nationalism throughout the 19th century led to a 1905 referendum granting Norway independence. Although Norway remained neutral in World War I, it suffered heavy losses to its shipping. Norway proclaimed its neutrality at the outset of World War II, but was nonetheless occupied for five years by Nazi Germany (1940-45). In 1949, neutrality was abandoned and Norway became a member of NATO. Discovery of oil and gas in adjacent waters in the late 1960s boosted Norway's economic fortunes. The current focus is on containing spending on the extensive welfare system and planning for the time when petroleum reserves are depleted. In referenda held in 1972 and 1994, Norway rejected joining the EU.

The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas such as the vital petroleum sector (through large-scale state enterprises). The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on its oil production and international oil prices, with oil and gas accounting for one-third of exports. Only Saudi Arabia and Russia export more oil than Norway. Norway opted to stay out of the EU during a referendum in November 1994; nonetheless, it contributes sizably to the EU budget. The government has moved ahead with privatization. Norwegians worry about that time in the next two decades when the oil and gas will begin to run out; accordingly, Norway has been saving its oil-boosted budget surpluses in a Government Petroleum Fund, which is invested abroad and now is valued at more than $150 billion. After lackluster growth of 1% in 2002 and 0.5% in 2003, GDP growth picked up to 3.3% in 2004 and to 3.7% in 2005.

Norway: Environmental Issues

Introduction
On March 17, 2000, Jens Stoltenberg was sworn in as Norway's prime minister in the wake of an energy and environment controversy that prompted the preceding prime minister's resignation. Former Prime Minister Kjell Magne Bondevik stepped down after losing a parliamentary vote of confidence over his attempt to prevent the construction of two natural gas-fired power plants. (Norway is now 99% reliant on hydropower for domestic electricity generation.) Plans to construct the plants have gone forward.

Norway often has been touted as Europe's cleanest country in terms of energy use. Norway is the world's third largest oil exporter, behind Saudi Arabia and Russia, yet the country has no petroleum-fueled power plants. Hydropower from rain and melting snow in the mountains, along with electricity imports, provides the electricity needed in a country with a cold climate and a long, dark winter.

Statoil, the largest Norwegian oil company, is currently in the midst of a program, launched in September 1997, that attempts to identify ways to reduce carbon dioxide emissions from the company's operations. In September 1998, Statoil initiated a pilot program to separate carbon dioxide from the waste products of power production and subsequently inject the carbon dioxide into the seabed of the North Sea. Statoil has noted that while the technology has been refined, the process is not yet cost-effective.

Norsk Hydro, Norway's second largest oil company, also has investigated the effectiveness of capturing carbon dioxide from flue gas and subsequently injecting the carbon dioxide into oil wells. This process, known as enhanced oil recovery, not only sequesters carbon dioxide (thereby reducing emissions of this greenhouse gas into the atmosphere), but also increases the quantity of oil that can be retrieved from wells.

The efforts of Statoil and Norsk Hydro only begin to illustrate the efforts that Norway is undertaking to reduce its emissions of carbon dioxide as part of its commitments under the Kyoto Protocol. Norway has agreed to limit its greenhouse gas emissions to a 1% maximum increase from 1990 levels by the 2008-2012 commitment period.

Air Pollution
Air pollution in the capital city of Oslo is not as severe as in other major world cities. Between 1980 and 1997, sulfur dioxide emissions in Norway were reduced by 78%. This exceeds the goal of a 76% reduction in sulfur dioxide emissions by 2000, as negotiated in the Oslo Protocol, and can be attributed to the use of oil products containing less sulfur, installation of better pollution abatement equipment, and restriction measures on vehicular emissions. Norway instituted a sulfur tax in 1975 as an instrument to reduce sulfur emissions.

The most common sources of local air pollution in Norway are nitrogen oxides (NOx) and particulate matter. Per capita NOx emissions in Norway, which are produced primarily by road traffic, oil and gas extraction, and shipping, are among the highest in countries of the Organization for Economic Cooperation and Development (OECD). Particulate matter becomes a more severe problem in the winter when cold air combines with wood-fired heating.

The Norwegian government has implemented policies to reduce the impact of road traffic on air pollution. The Ministry of Transport and Communications, for example, introduced a tax on car ownership. In addition, the government also periodically increases refund payments given for scrapped cars, in an attempt to remove older, less energy efficient cars from the streets. Oslo also has experimented with reducing speed limits during peak pollution hours, in an effort to cut the emission of particulate matter into the air. Finally, bus and rail transport are subsidized in order to make these forms of public transportation more attractive to consumers than individual car ownership.

Energy Use and Carbon Emissions
Norway has significant offshore oil and natural gas reserves, in addition to substantial hydroelectric resources. In 1999, 23.7% of Norway's total energy consumption was derived from oil combustion, 8.9% from natural gas, and 2.3% from coal. Over 99% of electricity consumption in Norway comes from hydro power plants. In 1999, total primary energy consumption registered 1.9 quadrillion Btus (quads). The industrial sector was the primary consumer of energy, responsible for 52.1% of final energy consumption in 1998, followed by the residential sector at 21.7% of final energy consumption, the transportation sector at 13.1%, and the commercial sector at 13.1%.

In 1998, the industrial sector accounted for 57% of total carbon emissions, the commercial sector accounted for 2.5%, the transportation sector for 37.9%, and the residential sector for 2.6% of total carbon emissions. Norway's energy-related carbon emissions in 1999 totalled 11.9 million metric tons. Under the Kyoto Protocol, Norway has agreed to keep emissions under 1% increase from 1990 levels over the 2008-2012 commitment period.

The Norwegian government has had a carbon dioxide tax scheme on energy use in place since 1991 and has recently developed a comprehensive domestic emissions trading system that covers carbon dioxide and other greenhouse gasses.

Energy and Carbon Intensity

Norway's relatively high energy use per unit of output results primarily from energy-intensive oil and gas extraction activities. The Norwegian government views energy efficiency in all sectors as an important means of reducing energy use, as well as meeting strict environmental goals. One means of encouraging less carbon-intensive energy use has been through the imposition of a carbon tax, first introduced in 1991. Initially the tax applied to about 60% of carbon emissions, with some sectors, including civil aviation and domestic sea freight, receiving exemptions from the tax. However, in Norway's 1999 budget, a carbon tax for these sectors was introduced as well. Norway is the only country that has introduced a carbon dioxide tax on oil extraction.

Per Capita Energy Use and Carbon Emissions
Norway has the lowest population density in Europe. Along with a large energy sector, this gives the country one of the highest per capita energy use levels in the world. In 1999, per capita energy consumption in Norway registered 424.9 million Btu, higher than the United States level (355.9), Sweden (248.7), and Finland (253.8), but relatively close to Canadia (410.7).

While Norway's per capita energy consumption is high, per capita carbon emissions remain relatively low due in part to a large hydroelectric energy sector that emits no carbon dioxide. In 1999, Norwegian per capita carbon emissions totaled 2.7 metric tons of carbon equivalent.

The major renewable energy resources in Norway, outside of hydroelectricity, have been solar and biomass. In 1999, nearly half of Norway's $25-million market for alternative energy was in solar panels and associated accessories. The major market for solar has proven to be electricity generation for leisure boats, as well as seasonal cottages along the fjords and mountain areas that do not have access to the national power grid.

At the same time, wind power generation is getting considerable attention in Norway. The Norwegian government is planning to develop three wind farms, with a total production of 800 MW, along the country's west coast. Present development plans are being protested by environmental groups for fear that they might have an impact on the wildlife in the area.

Outlook
The Norwegian government strives to make environmental considerations an important facet of all energy and development issues. Measures taken thus far, including sulfur and carbon taxes, have been successful in reducing many harmful pollutants. However, carbon dioxide emissions are still increasing, as are emissions of nitrogen dioxide. Environmental concerns and competition from natural gas are expected to reduce coal use over the next 10 years, offsetting the projected growth in carbon dioxide emissions. Additional government measures to make use of natural gas in buses, ferries and in supply ships in the petroleum sector, will also play a key role in emissions reduction.

A study undertaken by Statistics Norway projected future emissions levels of criteria pollutants based on government projections for car ownership, as well as the successful implementation of emissions standards as mandated by the European Union. According to the study, by 2020, carbon dioxide emissions from road traffic alone will increase 11%, while emissions from particulate matter, NOx, carbon monoxide and volatile organic compounds will decrease by 6%, 3%, 5% and 6% respectively per year. Sulfur dioxide emissions are projected to decrease by 80% during the same time period.

Return to Norway Country Analysis Brief