The scheme came about following the EU’s introduction of the EU’s Emission Trading Scheme (EU ETS) introduced in 2005. It meant that industries using hydropower still had to pay quota prices despite zero CO2 emissions.

Calling this “completely unreasonable”, Prime Minister Jens Stoltenberg declared in a statement, “We want to provide a good framework for further development of this [the manufacturing] industry in Norway.”

Government officials say the CO2 compensation scheme will apply from 1 July 2013 to the end of 2020, and include “all 15 sectors listed in the EU’s state aid guidelines”, including aluminum, ferroalloys, chemical products and paper producers.

It will also be limited to power agreements established in 2005 that include CO2 costs. Moreover, both pre-2005 power agreements resold on market conditions from 2005 are covered, as well as electricity bought on the spot market.

“Norwegian manufacturing industry is at the front of their business sector when it comes to low emissions and energy efficiency,” said Minister of Trade and Industry Trond Giske. 

“We must ensure that the industry is able to develop further in an environmental friendly direction without strict climate regulations resulting in relocation of emissions and carbon leakage. A well-designed CO2-compensation scheme in a transitional period will contribute to this goal,” he continued. 

According to the government, the 2005 EU ETS has led to an increase in electricity prices in Norway. Minister of the Environment Bård Vegar Solhjell stated, “The scheme will ease the burden for the power intensive industry and will ensure that a good climate policy is combined with a good industrial policy.”

It will not be operative until informing EFTA surveillance authority the ESA, and is estimated to cost about NOK 500 million (approximately EUR 67.68 million) per year.

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