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Norway Could Retire Permits To Meet CO2 Goals: OECD

Date: 20-May-11
Country: NORWAY
Author: REUTERS

Norway could buy and retire carbon permits from the European market to achieve promised deep cuts in greenhouse gas emissions by 2020, the Organization for Economic Cooperation and Development (OECD) said on Thursday.

Norway is not an EU member but is linked to the EU emissions trading scheme (ETS), making it hard to implement a national goal of a cut in emissions of 30 percent below 1990 levels by 2020, tougher than the EU's 20 percent unilateral cut.

"Norway's...2020 target really is problematic," Simon Upton, head of the OECD environment directorate, told Reuters of a review of Oslo's environmental policies. Oslo faces a dilemma of how to avoid soaring penalties on domestic carbon emissions.

"The only way that Norway could achieve what it wants to achieve and overcome its membership of the ETS is to go into the market, buy permits and cancel them," Upton said. He said the idea was merely an option.

Norway's greenhouse gas emissions totaled 51.3 million tones in 2009, up from 49.8 million in 1990. A 20 percent cut from 1990 implies a fall to 39.8 million by 2020. Norway says most of the cuts will be by domestic actions.

Upton said Norway, praised by the OECD for setting tough targets in areas from climate change to protection of natural systems, also had an option of imposing tougher carbon cuts on industries covered by the ETS than those in the EU.

But that could be self-defeating. It would force Norway's emitters to buy more carbon permits but then allow emissions in other parts of Europe to rise since they were all covered by the same overall cap.

Another option was to crack down on sectors in Norway outside the ETS, such as transport. But some calculations showed that could require a doubling of fuel prices by 2020.

"There is a risk that Norway's ambitious environmental agenda may entail excessive costs, and encounter opposition, unless the most cost-effective means are found to achieve its goals," Upton said in a speech.

He said that a "complicated set of exemptions and special measures" were undermining instruments such as Norway's environmental taxes and urged a more cost-effective approach.

The OECD noted that one Norwegian government study had estimated that an economy-wide emissions price of 200 euros ($285.3) a tonne of carbon dioxide would be needed to cut emissions by 12 million tonnes by 2020.

It also estimated that costs would be far higher, at 425 euros per tonne, if sectors currently covered by the EU ETS were exempted. Carbon traded at about 16.5 euros in the EU market on Thursday.

(Editing by Keiron Henderson)

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