Industry action, Green shift | Important framework conditions for the power refining industry in Norway

The industrial action supports the demand from the Cooperation Committees for Electrochemical and Aluminum in Industri Energi (IE)/FLT that the CO2 compensation must be developed as a long-term, predictable and stable scheme for the power refining industry in Norway.

The Minister for Climate and the Environment and the parties in working life recently agreed on a proposal for such an arrangement. A political process on the scheme will continue until the Storting adopts a revised budget before the summer.

Industrial workers and climate activists with common demands

Production of materials that the world’s green shift needs must also in the long future take place in Norway, which has the world’s strictest emission requirements and the world’s cleanest source of energy. In the Hurdalsplattformen, the government states that it will: “Continue and strengthen the CO2 compensation scheme, or similar schemes as long as there is a need, to ensure the industry’s competitiveness and prevent carbon leakage”.

The CO2 compensation scheme compensates electricity-intensive and competitive companies for increases in electricity prices as a result of the EU’s climate quota system (EU ETS). The industry is compensated when the power price increases as a result of an increased quota price for CO2 emissions. The purpose is to reduce the risk of carbon leakage, by companies moving investments or production from Europe to third countries with less strict climate policies, with increased emissions as a consequence.

For example, the total CO2 emissions per tonne of aluminum produced are approximately 10 times higher when production is based on coal power instead of hydropower. The Norwegian power refining industry competes with countries with high emissions and low energy prices, which, unlike Norway, are also not covered by a functioning quota system. Despite the fact that Norwegian industry uses emission-free hydro and wind power, the industry is affected by increased CO2 prices for gas and coal power in the EU.

A floor of NOK 200 was introduced in the state budget for 2023, with the state only compensating for the part of the quota price that exceeds NOK 200. In the proposal for the state budget for 2024, the government proposed to increase the floor further to NOK 375. In the government’s estimates, the scheme will cost NOK 116 billion in the period 2021-2030, if it is continued without restrictions, with a quota price floor or With a floor of NOK 375, the cost estimate is reduced to NOK 76 billion.

Industri Energi and Norsk Industri reacted, with great commitment among members and union representatives in IE. It was reflected in the final state budget for 2024 that the government negotiated with SV. The government undertook to return NOK 500 million to the CO2 compensation scheme through a revised budget in spring 2024. And before the revised state budget is adopted, an agreement must be negotiated with the industry on a long-term, stable scheme.

A climate link to the funds proposed to be introduced means that the industrial companies can obtain additional funds by implementing climate measures.

The CO2 compensation scheme is an important framework condition for the power refining industry in Norway. The scheme is crucial to secure established industrial workplaces, and to facilitate the establishment of new green industry in Norway. This applies to the environment, jobs and welfare. The scheme complies with Norway’s climate commitments and targets.

The process industry is in a sector subject to quotas, and will reduce its emissions as the quota price increases and the emissions ceiling is lowered.