Energy Policies of IEA Countries: Norway 2005

Energy Policy Review

About this report

This International Energy Agency review of Norway's energy policies and programmes examines recent developments related to each type of energy as well as environmental and market issues.

Energy policy in Norway continues to be the object of considerable domestic and international political attention. The development of its petroleum resources contributes significantly to Europe’s security of supply. Norway enjoys extensive access to hydro power and its pioneer role in the liberalised Nordic electricity market is commendable. However, Norway is now facing important challenges. Energy consumption growth is outpacing onshore energy production, and CO2 emissions are rising. Better understanding by the general public is essential to overcome these challenges.

Meeting its Kyoto target without compromising security of supply is Norway’s biggest energy policy challenge. We recommend a comprehensive public debate covering all the tools of climate change policy, including intensive use of Kyoto mechanisms. Norway expects a significant contribution from Carbon Capture and Storage (CCS), but the technological and economic realities of CCS need to be considered in the public debate and decision making.

The Norwegian petroleum industry is close to reaching peak of production. The government’s transparent and forward-looking way of addressing this is commendable. It has taken action to increase exploration and to open industrial opportunities further. The partial privatisation of Statoil is an important progress since the last review. Norwegian management of petroleum resources is an example of “best practice” in the management of valuable natural resources in a small economy.

Low rainfall in 2002-03 highlighted the importance of trade and domestic investment in generating capacity to secure reliable electricity services. The planned transmission link between Norway and the Netherlands is therefore important. Increasing domestic access to gas can also make a significant contribution to security of supply in electricity, as it contributes to the diversification of generation sources. Congestion has become a regular feature in the Nordic electricity market, and more integrated regulatory planning and the development of transmission capacity should be addressed in concert with other Nordic countries.