Environmentally motivated transfers in Norway 2007

Statistics on economic instruments may contribute to an understanding of the effectiveness and economic efficiency of government environmental policy. Among these instruments are transfers of subsidies, other current transfers and transfers of capital from general government to industry, organisations and households.

This report applies the Norwegian national accounts of 2007 to identify transfers from the general government where the environment is the explicit motivation, and categorises these transfers according to definitions proposed as part of the work by the Eurostat Task Force on environmentally motivated transfers (Eurostat TF 2010)1.

The Norwegian national accounts has already categorised all items in the govern-ment accounts by purpose and kind of transfer. In addition to the categories proposed by Eurostat (subsidies, other current transfers and capital transfers), a category labelled “mixed transfers” has been introduced to encompass transfers that have elements of both subsidies/other current transfers as well as capital transfers.

The rationale for government transfers are found in the budget documents. To which degree environmental concerns are mentioned and being a primary driver varies, and is not always very explicit. This uncertainty is illustrated by dividing environmentally motivated transfers into three categories: 1) Predominantly environmentally motivated where the environment is the decisive motivation, 2) Partially environmentally motivated and 3) Weakly environmentally motivated where an assumed beneficial effect on the environment is part of the motivation, but clearly subordinate to other concerns.

The detailed analysis following to the Eurostat proposal, where also uncertainties in the information on the nature of the transfers and the encoding in the national accounts are considered, estimates that the Norwegian government in 2007 made payments totalling NOK 1 138 million in predominantly environmentally motivated transfers. In addition, there were 714 million in partially environmentally motivated transfers, and 1 358 million in weakly environmentally motivated transfers.

The national accounts shows government expenditure on the environment totalling NOK 2 738 million, of which 1 282 million were environmentally motivated transfers (137 million in subsidies and 1 145 million in other current transfers). The encoding in the national accounts therefore estimates that environmentally motivated transfers to be NOK 144 million (13 per cent) more than 1 138 million found to be predominantly environmentally motivated transfers using the definitions and categories in the Eurostat proposal. The current encoding of the Norwegian national accounts seems therefore suitable to provide a rough estimate of the total environmentally motivated transfers by general government. However, to use the breakdown of the national accounts figures into groups of recipients and transfer categories is less advisable. For example, in the national accounts environmental transfers to industry (subsidies and capital transfers) amount to 11 per cent of the total environmental transfers, whereas the analysis using the Eurostat methodology estimates transfers to industry at 37 per cent of the total predominantly environmentally motivated transfers.

For the national accounts to be a useful tool to identify transfers according to Eurostat methodology, the latter should be further developed, in particular with respect to what is sufficient (environmental) motivation and how explicitly it should be formulated, as well as in defining when a transfer recipient is an entity inside or outside the boundaries of general government.