Reductions in greenhouse gas emissions in Norway

This report describes numerical model calculations undertaken for the Low Emission Commission (LEC). The task has consisted in calculating the effects on the Norwegian economy and on greenhouse gas (GHG) emissions of a concrete policy package drawn up by LEC. Important assumptions made by LEC are that the policy measures are phased in over a long time period and that other countries do not implement any new environmental policy measures. 14 policy measures are part of LEC's package, together with assumptions regarding costs, productivity increases and emission reductions. Evaluation of these assumptions has not been part of Statistics Norway's task. Statistics Norway's computable general equilibrium (CGE) model MSG-6 is employed in the calculations. Concerning some of the policy measures, the CGE model is not very suitable for the analysis. Therefore, very simplified procedures have been employed in order to implement these policy measures.

The phasing in of LEC's 14 policy measures, called the low emission scenario, is compared with a baseline scenario, which is to a high degree based on Ministry of Finance (2004). Comparing the low emission scenario with the baseline scenario shows that GHG emissions in the long run (i.e. 2050) are brought down from 66.9 to 20 million tons of CO2-equivalents. However, most of this emission reduction is determined exogenously, i.e. before the model calculations, since LEC's policy measures are characterised by command and control regarding implementation of new (and less pollutive) technologies covering the major pollutants in the Norwegian economy.

Compared to the baseline scenario, gross domestic product (GDP) is increased by 0.1 per cent and private consumption is reduced by 0.1 per cent in 2050 (measured in constant 1999-prices). These are small changes. The increase in GDP is explained by LEC's policy measures "increased energy efficiency in dwellings", "increased energy efficiency in buildings" and "increased efficiency in transport". These policy measures introduce productivity increases. The positive effect on GDP of these productivity increases outweighs the negative effect on GDP of the commission's costs associated with all the policy measures. Regarding the structure of industries, the effects are larger.

Acknowledgement : This report is financed by the Low Emission Commission.