Tracing the Steps of Norway's Carbon Footprint: Lessons Learned from Norway and the European Union Concerning the Regulation of Carbon Emissions


TRACING THE STEPS OF NORWAY'S CARBON
FOOTPRINT: LESSONS LEARNED FROM NORWAY

AND THE EUROPEAN UNION CONCERNING THE
REGULATION OF CARBON EMISSIONS

Kathryn M. Merritt-Thrasher

INTRODUCTION

Mainstream media debates regarding global warming run hot and cold
over the question of man's direct contribution to the global warming
dilemma through the massive use of fossil fuels, which create harmful
carbon emissions.' Substantive debates, however, acknowledge the effect of
carbon emissions and seek to determine the relative merits of reducing
emissions through quantity-based regulations versus tax-based approaches.2

The question of quota versus tax is made especially difficult given the fact
that either strategy must be devised and implemented within the political
structures of each country. If the question of tax versus quota was posed in
a social and political vacuum, where only cost efficiency and total
effectiveness of the policies were considered, the best answer would be
much easier to ascertain definitively. Unfortunately, such a vacuum does
not exist, and either strategy must be implemented via political processes
that take into account the short and long-term effects on the citizens of each
country rather than pure economic theory.

It is certain that inadequacies exist for both tax-based and quota-based
strategies when attempting to reduce carbon emissions.4 In a tax-based
approach, the burden of the tax falls more heavily on the poorest segment of
the population, making it a regressive tax, which is exceedingly unpopular
and difficult to impose.5 In a quota-based system, real progress toward the

* Kathryn Merritt-Thrasher is a J.D. Candidate at Indiana University School of Law -
Indianapolis, May 2012, and a Master of Business Administration Candidate, Indiana
University Kelley School of Business - Indianapolis, May 2012. I would like to thank
Professor Daniel Cole for his expertise and guidance. Additionally, my thanks to my
husband, Daniel Thrasher, for his patience and support throughout the writing process and to
my parents, Mark and Julie Merritt, for their constant inspiration and encouragement.

1. See Greenhouse Gases, Climate Change, and Energy, ENERGY INFO. ADMIN.,

http://www.eia.doe.gov/oiafl605/ggccebro/chapterl.html (last modified Apr. 2, 2004).
2. See Eileen Claussen & Judith Greenwald, Op-Ed., Handling Climate Change, in

PEW CENTER ON GLOBAL CLIMATE CHANGE (July 12, 2007), http://www.pewclimate.org/
press room/opinion-editorials/opedmiamih07l22007; discussion infra Part II.

3. See Claussen & Greenwald, supra note 2; discussion infra Part V.C.
4. See Claussen & Greenwald, supra note 2; discussion infra Part II.C.
5. See ERIC WILLIAMS ET AL., NICHOLAS INSTITUTE FOR ENVIRONMENTAL POLICY

SOLUTIONS AND THE CENTER ON GLOBAL CHANGE, A CONVENIENT GUIDE TO CLIMATE

CHANGE POLICY AND TECHNOLOGY 24 (vol. 2 2007), available at



IND. INT'L & COMP. L. REV.

goal of lowered emissions is questionable given the fact that unrealistically
low numbers are likely used as a starting point in order to "cushion" future
emission costs.6 With all of the uncertainties surrounding the correct path
to combating global warming, the best approach is to become educated on
the true causes and effects of carbon emissions along with the success and
failure of the strategies that have already been implemented in the world-
specifically by Norway and by the European Union.

Global warming, or, more generally, climate change, would likely
occur even without the intervention of humans because harmful gases are
released into the atmosphere naturally.! However, humans contribute
greatly to the release of gases such as carbon dioxide, methane, and nitrous
oxide primarily due to the extraction and use of fossil fuels as energy
sources.8 Carbon dioxide releases into the atmosphere due to burning coal,
oil, natural gas, and gasoline for energy production.9 Methane gas releases
into the atmosphere from natural sources such as rice paddies, but also from
unnatural sources such as the burning of fossil fuels.'o Nitrous oxide
releases into the atmosphere naturally from the world's rainforests and
oceans and unnaturally from the manufacture of certain materials such as
nylon and the use of agricultural fertilizers." Fluorinated gases, including
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride are synthetic
greenhouse gases that are created in several industrial processes.12

Although fluorinated gases are usually released into the atmosphere in
smaller quantities than the other gases, the potency level of these gases
makes them especially dangerous to the environment.' 3 Collectively, these
components are known as "greenhouse" gases, so named due to the effect
upon the world's environment.14 They are also frequently referred to as
"carbon emissions." 5 It is believed that the collection and entrapment of
these gases in the atmosphere is a major cause of global warming.

http://www.nicholas.duke.edu/ccpp/convenientguide/PDFs/Climate%20book%2Ovol%
202.pdf; discussion infra Part III.F.

6. DANIEL H. COLE, SELLING HoT AIR: EMIssIONS TRADING AND OFFSETS IN CLIMATE

POLICY, CHAPTER 3: EUROPEAN UNION-EMIssioNs TRADING SCHEME, (Cambridge
University Press) (forthcoming 2011) (manuscript at 21) (on file with author).

7. See Greenhouse Gas Emissions, U.S. ENVTL. PROT. AGENCY, http://www.epa.gov/
climatechange/emissions/index.htm1 (last updated Apr. 14, 2011).

8. See id.
9. See id.

10. Id.
11. Id.
12. Id.
13. Id.
14. Id.
15. Id.
16. Id.

320 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 321

The true cost of industrialization is measured by the negative impact
on the Earth's atmosphere.17 While energy is vital to the existence of every
country in the world, the current dependence on fossil fuels is creating a
serious debate regarding the potential of an atmospheric nightmare due to
the greenhouse gas emissions from burning fossil fuels. 8 While an
impending ecological catastrophe is unlikely, seriously negative effects are
being brought upon the environment with the ever increasing levels of
greenhouse gas emissions.' 9 It is imperative that technology turns in the
direction of capturing, reducing, and eliminating these emissions in order to
preserve and protect the Earth.20 While technology is advancing in the
direction of protecting the Earth, world politics and policy will play the
greatest role in either advancing or delaying measurable progress in
reducing greenhouse gas emissions.2 1

To understand the basic science of greenhouse gases, it is necessary to
identify the main sources of carbon emissions along with possible
alternatives to the fossil fuels which cause a majority of the emissions.22

The world is currently so dependent upon fossil fuels to produce energy that
it will be a cumbersome and expensive process to move from fossil fuels to
clean energy sources.23 While the environmental effects of carbon
emissions are very real, there are also economic realities related to creating
safe, sustainable clean energy alternatives.2 4 Nations that take on the task
of creating and utilizing clean energy sources may face a competitive
disadvantage in the world marketplace as the extra cost of sustainable clean
energy use is factored into the cost of production.2 5

Interestingly, one small country in the world that has spent nearly two
decades aggressively attacking the problem of greenhouse gas emissions is
Norway.26 Much information can be learned from the strategies Norway
has implemented in an effort to curb carbon emissions, both independently
and in cooperation with the European Union's carbon emission reduction
strategies.27 A fundamental basis of Norway's plan is to create "an
economy for the Earth-an economy for the common good." 28 In other

17. See discussion infra Parts L.A-C.
18. See discussion infra Part L.A.
19. See discussion infra Part I.A.
20. See discussion infra Part I.C.
21. See discussion infra Part I.C.
22. See Greenhouse Gas Emissions, supra note 7; infra Parts I.B-C.
23. See discussion infra Part I.D.
24. See discussion infra Parts II, III.
25. See discussion infra Parts II, III.
26. See discussion infra Part II.
27. See discussion infra Part II.
28. Hans Chr. Bugge, Keynote Address at the Commemoration Seminar for the 10th

Anniversary of the Centre for Development and the Environment at the University of Oslo:
Sustainable Development-the Challenge for Norway (Mar. 29, 2001), in Preface to



IND. INT'L & COMP. L. REV.

words, Norway is not simply seeking to create a plan for environmental
protection; it is seeking to create a thriving economy with the responsible
use of its natural resources for both the country's and the environment's
good. Norway began by implementing one of the highest carbon tax rates
in the world. These taxes were initially imposed on the amount of
emissions created by any given industry in an effort to induce industries to
reduce carbon emissions and invest in clean alternatives through a monetary
incentive.29 The results of this strategy are mixed, as one major problem
stems from the exemption of several key industries possibly responsible for
creating the greatest amount of emissions.o It is important to consider how
much of an improvement could be made in carbon reduction if no
exemptions were allowed from the carbon tax.3 1

Although there are mixed reviews on the effectiveness of the carbon
tax, there has been environmental progress.32 Additionally, much of the
revenue collected by the carbon tax has been funneled into the support of
research and development of "Carbon Capture and Storage" (sometimes
called Carbon Capture and Sequestration), or CCS. 33 Norway realized that
the continued use of fossil fuels would be necessary and invested in a plan
to capture and store the harmful emissions created by burning fossil fuels. 34

Technology now exists to capture a large portion of these emissions and
store them within the ocean floor, with the likelihood that only twenty
percent of the carbon will return to the atmosphere in a time span of
300 years. The possibility of successfully capturing and storing carbon
emissions provides a tremendous benefit because a majority of the world
bases its infrastructure on the use of fossil fuels. The investment of time
and money that is necessary to switch to clean energy sources is vast;
therefore, the chance to continue to use fossil fuels while reducing harmful
emissions provides an opportunity to make that transition in a slow,
manageable progression.

WILLIAM LAFFERTY ET AL., REALIZING Rio IN NORWAY: EVALUATIVE STUDIES OF

SUSTAINABLE DEVELOPMENT, at xix (2002), available at http://www.prosus.uio.no/
publikasjoner/Boeker/ relizing rio kapitelvis/04_preface.pdf.

29. Annegrete Bruvoll & Bodil Merethe Larsen, Statistics Nor., Research Dep't,
Greenhouse Gas Emissions in Norway-Do Carbon Taxes Work? 16 (2002), available at
http://www.ssb.no/publikasjoner/DP/pdfldp337.pdf.

30. Id. at 22.
31. See discussion infra Parts II.A., II.C-D.
32. See discussion infra Part II.D.
33. Sonal Patel, Norway Leads the Way on CCS, POWER (Apr. 01, 2009),

http://www.powermag.com/coal/Norway-Leads-the-Way-on-CCS_1 820.html.
34. Id.
35. E. A. Parson & D. W. Keith, Fossil Fuels Without C02 Emissions, 282 SCI. 1053,

1055 (1998), available at http://www.pulp.tc/ParsonFieldFossilFuelswithout
C02.Science.pdf.

36. See discussion infra Part II.B.
37. See discussion infra Part II.B.

322 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 323

Although it is a sovereign nation, Norway has strong geographic and
economic ties to the rest of Europe. The European Union has introduced
its own strategy to reduce carbon emissions, and although Norway is not a
Member State, there is a cooperative effort between the two bodies.39 The
European Union has put in place an Emissions Trading Scheme,
comparable to the proposed Cap and Trade policies in the United States.4 0

A thorough analysis will evaluate the positive and negative effects of
Norway's strategy not only in isolation but also in relation to and in
cooperation with the strategies of the European Union.4 1 This Note will
determine the advantages and disadvantages of Norway's strategy to reduce
carbon emissions,42 both on its own and in conjunction with European
Union strategies,43 in order for countries around the world to integrate the
most beneficial tactics in a cohesive, worldwide attack against global
warming."

Part I of this Note will examine and explain carbon emissions, also
known as greenhouse gas emissions or greenhouse gases. 45 This section
will detail the effects of the emissions on the environment as well as the
human toll created by the release of greenhouse gases into the atmosphere
and oceans.46 The various types and sources of harmful emissions will be
identified including both man-made sources and naturally occurring
sources. Given the fact that fossil fuels create a large percentage of the
harmful emissions, a variety of alternative energy sources are presented,
ranging from solar and wind power to the ultimate alternative energy-
nuclear power.48 Finally, Part I of this Note will examine the global
dependence on fossil fuels as a primary source of the vital energy necessary
to survive, along with the unique energy mix utilized by Norway.49

Part II of this Note will focus on Norway, which has taken an
aggressive stance on attacking the problem of greenhouse gas emissions.so
The discussion will examine the various strategies implemented by

38. The World Factbook - Norway, CIA, https://www.cia.gov/library/publications/the-
world-factbook/geos/no.html (last updated Apr. 6, 2011).

39. See discussion infra Part III.
40. See Sergey Paltsev et al., MIT Joint Program on the Science and Policy of Global

Change, Assessment of U.S. Cap-and-Trade Proposals 2 (2007), available at
http://apolloalliance.org/wp-content/uploads/2009/03/mitreport-cap-and-invest.pdf

41. See discussion infra Parts II-III.
42. See discussion infra Part II.
43. See discussion infra Part III.
44. See discussion infra Part V.
45. See discussion infra Part I.
46. See discussion infra Part I.
47. See discussion infra Part I.
48. See discussion infra Part I.
49. See discussion infra Part I.
50. See discussion infra Part II.



IND. INT'L & COMP. L. REV.

Norway, with primary emphasis on the introduction of carbon taxes for
many industries.5 Additionally, Part II details the introduction of CCS,
which Norway has successfully implemented in an effort to capture many
harmful emissions created during the extraction and use of fossil fuels. 52

Part 11 concludes with an examination of the economic effects of the carbon
tax on consumers and industries along with the measurable results of
Norway's efforts.

Part III of this Note will outline the carbon policies put forth by the
European Union.54 Part III begins with a basic overview of the Kyoto
Protocol along with detailed information regarding the groundbreaking
European Union Emissions Trading Scheme (EU ETS). 5 A discussion of
the progression of the EU ETS policies from Phase I through the current
version will be presented. Additionally, the actual environmental progress
made due to those policies will be examined.5 ' Finally, this part will look at
the compatibility of the EU ETS with non-Member States of the EU and
with Norway in particular.s

Part IV of this Note examines the direction toward which Norway's
carbon footprint is leading. 59 The current status of the serious debate over
the existing carbon tax rate and exemption scheme will be discussed.60 This
section will look at changes that Norway has made and continues to make
due to the influence of and cooperation with the EU policies. 6 ' The
successes and failures of Norway's two-decade long attempt to mitigate
harmful carbon emissions will be evaluated.62 Finally, this Note will look
at Norway's next steps as it continues its own plan of attack on climate
change in cooperation with the European Union and the world as a whole.

Part V of this Note provides an overview of what other nations in the
world need to learn from the efforts put forth by Norway over the past two
decades.64 Specifically, this Note highlights the importance of integrating
CCS technology for countries to continue the extraction and use of fossil
fuels while simultaneously reducing carbon emissions.65 Additionally, as

51. See discussion infra Part II.A.
52. See discussion infra Part II.B.
53. See discussion infra Parts II.C-D.
54. See discussion infra Part III.
55. See discussion infra Parts III.A-B.
56. See discussion infra Parts III.C-D.
57. See discussion infra Parts III.C-D.
58. See discussion infra Parts III.E-F.
59. See discussion infra Part IV.
60. See discussion infra Part IV.A.
61. See discussion infra Part IV.B.
62. See discussion infra Part IV.C.
63. See discussion infra Part IV.D.
64. See discussion infra Part V.
65. See discussion infra Part V.A.

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2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 325

other countries consider legislative policies to induce emissions abatement,
the structure and results of Norway's carbon taxation scheme should be
carefully analyzed, especially with regard to the detrimental effect of
subsidies and exemptions from the tax. Finally, when considering the
current position of the United States, it is recommended that legislative
progress start at the state or regional level and work upward, as it has
proven nearly impossible to enact meaningful legislation at the national
level.67 Overall, "global warming" is so named because it is a problem that
must be addressed globally if real progress is to be made.6 8 The nations of
the world would be well served to study and consider carefully the
information provided by Norway's efforts, as well as the efforts put forth by
the European Union.

I. WHAT IS ALL THE FUSS ABOUT CARBON EMISSIONS?

Carbon emissions are widely known to cause pollution and play a
major role in climate change.70 Additionally, Mark Jacobson, a professor of
civil and environmental engineering at Stanford University, has directly
linked one specific carbon emission, carbon dioxide, to increased human
mortality.71 According to Jacobson's computer model, "[F]or each increase
of 1 degree Celsius caused by carbon dioxide, the resulting air pollution
would lead annually to about a thousand additional deaths and many more
cases of respiratory illness and asthma in the United States."72 A direct
cause and effect relationship is asserted between mortality and carbon
dioxide, and as Jacobson states, "The study is the first specifically to isolate
carbon dioxide's effect from that of other global-warming agents and to find
quantitatively that chemical and meteorological changes due to carbon
dioxide itself increase mortality due to increased ozone, particles and
carcinogens in the air."73 The link between carbon emissions and mortality
extends beyond the effect on humans; the effect extends to every living
species on the planet, and indeed, the planet itself.7 4

A. The Effect of Greenhouse Gases on the Environment

In addition to releasing carbon dioxide (CO2), the burning of fossil

66. See discussion infra Part V.B.
67. See discussion infra Part V.C.
68. See discussion infra Part V.C.
69. See discussion infra Part V.C.
70. See Greenhouse Gas Emissions, supra note 7.
71. Louis Bergeron, Study Links Carbon Dioxide Emissions to Increase Deaths, STAN.

REP., Jan. 3, 2008, http://news.stanford.edu/news/2008/january9/co-010908.html.
72. Id.
73. Id.
74. See discussion infra Part I.A.



IND. INT'L & COmP. L. REV.

fuels for energy also releases nitrous oxide (N20) and sulfur dioxide (SO2)
into the air. These chemicals rise very high into the atmosphere where
they mix with water and oxygen to become acid rain. The acidic pollution
becomes a part of not only rain but also snow, sleet, and fog. 7 The long-
term effect of acid rain causes damage to waterways, vegetation, crops,
animals, and humans.7' These chemicals also become trapped in the
ground-level ozone layer and create a haze known as smog.79 In addition to
being unappealing and damaging to the environment, smog is deadly to
humans, causing lung damage and respiratory diseases.80

While carbon dioxide released into the air causes health problems,
carbon dioxide emissions are also making their way into the world's
oceans, with nearly six million tons of carbon being absorbed into the
oceans every day.8 ' The huge amounts of carbon are turning the ocean
water acidic, creating a corrosive effect that will eventually affect food
sources and habitats of many forms of ocean life, followed by many types
of shellfish being affected, with the final human toll occurring when
commercial fishing is no longer viable.82 More carbon is absorbed by the
cold arctic waters, and research suggests that "10% of the Arctic Ocean will
be corrosively acidic by 2018; 50% by 2050; and 100% [of the] ocean by
2100."8 Furthermore, "'[o]ver the whole planet, there will be a threefold
increase in the average acidity of the oceans, which is unprecedented during
the past 20 million years.' 8 4

Finally, a fundamental cause of global warming or climate change85 is
linked to the effects of greenhouse gas emissions. The trend for global
warming, or increases in average temperature ranges, is evidenced by
increases in extreme weather conditions, the disappearance of glacier mass,
the melting of Arctic Sea and Antarctic Sea ice, and even the increased

75. What Causes Acid Rain?, U.S. ENVTL. PROT. AGENCY, http://www.epa.gov/acidrain/
education/sitestudents/whatcauses.html (last visited Apr. 14, 2011).

76. Id.
77. Id.
78. Id.
79. World of Earth Science, Smog, ENCYCLOPEDIA.COM (2003),

http://www.encyclopedia.com/topic/smog.aspx.
80. Id.
81. See Robin McKie, Arctic Seas Turn to Acid, Putting Vital Food Chain at Risk, THE

OBSERVER, Oct. 4, 2009, http://www.guardian.co.uk/world/2009/oct/04/arctic-seas-turn-to-
acid.

8 2. Id.
8 3. Id.
84. Id.
85. Throughout this Note, the terms "global warming" and "climate change" are used

interchangeably.
86. See supra text accompanying notes 80-85.

326 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 327

spread of tropical diseases. 87 The National Climatic Data Center reports
that the current progression of average temperature increase per century is
between 5.4 and 6.3 degrees Fahrenheit. 8 This compares to a reported
increase between five and nine degrees Fahrenheit in the past

18,000 years.8 Given the current and potential destruction related to the
effects of greenhouse gases on humans and the environment, the subject of
carbon emissions, and the quest to reduce these emissions is an important, if
not a vital, topic.90

B. Sources of Carbon Emissions

The largest source of carbon emissions across the globe occurs during
the combustion of fossil fuels used to produce energy.9' Burning coal, oil,
and gas in power plants, factories, and transportation devices releases the
carbon stored in fossil fuels in the form of CO2-92  In addition to the
production of energy, CO2 is released during the production of certain
minerals, such as cement and lime; metals, such as iron, aluminum, and
lead; chemicals, such as ammonia; and through the use of certain petroleum
based products.93 Since trees and plants naturally absorb carbon emissions
from the air, mass deforestation can also lead to increased CO 2 levels. 94

Although CO2 is the primary gas emitted during unnatural and natural
processes, additional gases such as methane and nitrous oxide are also
released and are included in the "greenhouse" gases.9 5 Given the likelihood
that global warming and environmental damage are directly linked to
carbon emissions from burning fossil fuels, 96 it is logical that the world
would seek scientific methods to mitigate the emissions caused by
extraction and combustion of fossil fuels while simultaneously exploring
alternative sources to supply global energy needs.

C. Alternatives to Carbon and Fossil Fuels

As a substitute to fossil fuels, energy can be produced from a variety

87. Evidence of Global Warming, EcoBRIDGE, http://www.ecobridge.org/evidenceof
global warming.html (last visited Apr. 14, 2011).

88. Id.
89. Id.
90. See discussion supra Part I.A.; discussion infra Parts LB, I.D.
91. Human-Related Sources and Sinks of Carbon Dioxide, U.S. ENvTL. PROT. AGENCY,

http://www.epa.gov/climatechange/emissions/co2_human.html (last updated Apr. 14, 2011).
92. Id.
93. Id.
94. Id.
95. Id.
96. See discussion supra Part I.A.



IND. INT'L & COMP. L. REV.

of alternative sources. These power sources include solar, wind, water
(hydroelectric), hydrogen, and biofuels.98 While sun, wind, and water are
readily available around the world and pose no threat of pollution, these
sources are often downplayed as being unreliable.99 Skeptics question what
will happen when the sun does not shine and the wind does not blow.oo
While the technology to produce solar and wind power is readily available
and relatively inexpensive, neither of these clean energy alternatives can
provide adequate energy to replace fossil fuels.o'0  Waterpower, or
hydroelectricity, has the capability to produce fairly vast quantities of
electricity, but the proper sources are only available in certain areas, and
degradation to land occurs both upstream and downstream of a dam.' 02

Biofuels such as ethanol or biodiesel have gained a great deal of support,
and many countries have pursued biofuels as a cleaner, renewable
alternative to gasoline. 03  While it is true that biofuels are created from
renewable sources such as corn, soy, barley, sugar cane, or animal fats, and
that they produce significantly lower emissions when burned than fossil
fuels, a significant amount of energy (electricity) is required to produce the
fuels.'"0 The question that remains is whether biofuels create an overall
advantage in the reduction of total emissions, or whether they simply create
a reduction in the emissions from the transportation sector.105

Finally, the substitution of nuclear power for fossil fuels is extremely
attractive from the perspective of reducing carbon emissions but is a
volatile issue for the public due to both immediate and long-term safety
issues. '0 Nuclear power is created when energy is released by splitting
heavy nuclei (fission) or by fusing light nuclei (fusion) in a nuclear
reactor. 0 7 Although the process of fission releases a great deal of useable
energy and is C0 2-negative, safe, long-term storage of the radioactive
byproduct of nuclear waste is a matter of significant concern. 08 Nuclear

97. See generally Renewable Biofuels and Other Alternative Fuel Sources, BEYOND
FOSSIL FUEL, http://www.beyondfossilfuel.com/altemativefuels.html (last visited
Apr. 14, 2011) (highlighting the various sources of alternative fuels).

98. Id.
99. Id.

100. Id.
101. See id.
102. Id.
103. Biofuels: Ethanol and Biodiesel Explained, U.S. ENERGY INFO. ADMIN.,

http://tonto.eia.doe.gov/energy in-brief/biofuelsuse.cfm (last visited Mar. 21, 2011).
104. Id.
105. Id.
106. See M.S. Dresselhaus & I.L. Thomas, Alternative Energy Technologies,

414 NATURE 332 (2001), available at http://docencia.izt.uam.mx/hcg/231236/material_
adicional/AlternativeEnergy.pdf.

107. Id.
108. Id.

328 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 329

fusion could theoretically provide limitless, carbon-negative power;
however, a safe, manageable engineering process has not been
established.'09 Therefore, due to safety concerns, nuclear power's value as
an alternative fuel source will likely continue to decline."o

D. Dependency on Carbon and Fossil Fuels

The difficulty inherent in producing continuously reliable, affordable
energy from any of the aforementioned alternative fuel sources brings the
world back to dependence on fossil fuels."' The entire world is dependent
upon fossil fuels for one reason-reliable energy.1 2 In the United States, as
of 2006, eighty-five percent of all energy was produced from burning fossil
fuels, accounting for approximately sixty-six percent of total electricity and
nearly all energy used for transportation."'3  Forty-seven percent of this
energy was created by burning petroleum, followed by twenty-
seven percent from the burning of coal and twenty-six percent from the
burning of natural gas.' 14 In addition to the environmental and health
problems caused by the burning of fossil fuels, a secondary problem for the
United States is that in 2004, nearly sixty percent of the country's
petroleum products were imported from non-domestic sources."s The
United States' reliance on other countries for its supply of energy is an issue
that needs to be addressed and radically altered."'6  While other nations
have varying energy mix structures, fossil fuels are a predominant source of
energy worldwide.1 17 Strategies for reducing the emissions from fossil fuels
and eliminating the reliance on fossil fuels are a global concern.

E. A Case Study of Norway

Norway is unique in the fact that fossil fuels are an important part of
the country's economy, yet fossil fuels are a relatively unimportant
domestic energy source."'9 Norway is in the enviable position of having
vast amounts of clean energy in the form of electricity produced from
readily available hydro-power, providing many industries and residents the

109. Id.
110. Id.
111. See discussion supra Part I.C.
112. Fossil Fuel and Energy Use, SUSTAINABLE TABLE, http://www.sustainabletable.org/

issues/energy/ (last visited Apr. 14, 2011).
113. Id.
114. Human-Related Sources and Sinks of Carbon Dioxide, supra note 91.
115. See Evidence of Global Warming, supra note 87.
116. Id.
117. See Fossil Fuel and Energy Use, supra note 112.
118. See discussion infra Parts II, III.
119. See BRUVOLL & LARSEN, supra note 29, at 5, 11.



IND. INT'L & COMP. L. REV.

ability to utilize emission-free electricity as a primary energy source.120
However, Norway does produce and export vast amounts of oil and natural
gas; in fact, this sector of the economy was responsible for approximately
twenty-five to thirty percent of Norway's total carbon emissions between
1990 and 1999.121 Over the same period, even though Norway
implemented an aggressive carbon taxation plan, CO 2 emissions increased
by nearly nineteen percent.122 Given the increase in carbon emissions even
in the face of aggressive taxation, Norway has also placed a great deal of
importance on the future of Carbon Capture and Storage as a means of
reducing emissions at the source of extraction and production of fossil
fuels.123

II. NORWAY'S CARBON MANAGEMENT STRATEGY

In 1991 Norway introduced carbon taxes as the primary instrument of
a multi-pronged national strategy to reduce greenhouse gas emissions.124

The tax rates imposed on carbon are among the highest in the world and are
intended to create significant changes in the total carbon emissions in the
nation. 12 In addition to the introduction of carbon taxes, the Norwegian
Pollution Control Authority implemented regulations aimed at treating
landfills to reduce the methane emissions released during the decomposition

process.126 These regulations were introduced in conjunction with carbon
taxes as another component of the national climate policy.12 7 Finally, an
additional facet of Norway's carbon management strategy is planned forest
expansion in order to help mitigate the effect of carbon emissions on the
atmosphere by absorbing carbon dioxide.128

Norway has aggressively pursued the fight against climate change not
only through governmental policies but also by supporting technological

120. Id. at 8.
121. Id. at 5, 9.
122. Id. at 4, 22.
123. Arne Walther, Ambassador, Royal Norwegian Embassy Japan, Presentation of

Norwegian Perspectives at Norway-Japan Seminar on the Carbon Value Chain Organized
by the Embassy, Mitigating Climate Change (Oct. 9, 2009), in Mitigating Climate Change,
ROYAL NORWEGIAN EMBASSY IN TOKYO, JAPAN (July 1, 2010), http://www.norway.or.jp/
Embassy/english/ambassador/Ambassadors-Speeches/MitigatingClimateChange/.

124. BRUVOLL & LARSEN, supra note 29, at 4.
125. Id. at 21.
126. Id. at 23.
127. Id. at 4.
128. See Rolfe Winkler, Norway Leads, US Lags on Environmental Policy, REUTERS

(Oct. 10, 2007, 7:58 PM), http://www.reuters.com/article/bondsNews/idUSN102814562007
1010? sp-true.

330 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 331

advancements through profits made in petroleum production.12 9  The
country's economic system is a mixture of public and private control,
meaning that the government has partial ownership in the energy
companies.130 The blending of control allowed Norway to set up a fund
derived from oil profits to move the country toward a green economy.131
This fund, the Norwegian National Oil Fund, has grown to the point of
being the third largest sovereign fund in the world, behind the sovereign
funds of Abu Dhabi and Saudi Arabia, which are also state-owned
investment funds.132 Referred to simply as the "oil fund," "it invests the
country's oil and gas income in stocks and bonds to save for future
generations, when the hydrocarbons run out. Investments are made abroad
to avoid overheating the economy." 33  Norway's fight against carbon
emissions is intended to ensure the long-term future of the country.134

Norway's concerted effort to make a difference in global warming has been
implemented in a thoughtful manner that is also producing future rewards
and protections for the country.13

A. Carbon Taxation-Pros and Cons

The carbon taxes imposed on gasoline in Norway are particularly
high, contributing to thirteen percent of the cost of fuel in 1999, followed
by taxes on auto diesel at fourteen percent of the 1999 cost and light fuel oil
at seven percent of the 1999 cost.13 6 Emissions levels caused by automotive
transportation have decreased over the past decade, and although Norway
does not have a domestic automotive industry, the majority of cars imported
include technology to increase fuel efficiency, perhaps as a result of the
high gasoline tax. 1 Even with the high fuel taxes, citizens continue to
drive record miles in record numbers and seem simply to accept the high
cost of fuel as part of the price of the freedom to drive.'

One point of contention in Norway's carbon taxation plan is the fact
that several key industries are either cushioned or exempted from the taxes,

129. Lois Quan, For Opportunities in the New Green Economy, We Should Look to
Norway, NORWAY.COM (Oct. 2, 2009), http://blog.norway.com/2009/10/02/for-opportunities-
in-the-new-green-economy-we-should-look-to-norway/.

130. Id.
131. Id.
132. The Norwegian Oil Fund Still Growing, NORWAY.COM (Sept. 22, 2009),

http://blog.norway.com/2009/09/22/the-norwegian-oil-fund-still-growing/.
133. Id.
134. Id.
135. See discussion supra Parts I.A-D.
136. BRUVOLL & LARSEN, supra note 29, at 5.
137. Id at 11.
138. Id. at 22-23.



IND. INT'L & COMP. L. REv.

while others bear the full burden of taxation.139 Norway is unique in that a
large proportion of the energy consumed in the country is electricity, which
is created by hydropower and produces no emissions. 140 However, Norway
does produce a great deal of petroleum, both for domestic use and for
export.141 The emissions created by petroleum production contributed to
approximately twenty-five to thirty percent of the total carbon emissions for
Norway in the 1990s.142 While the government set relatively high tax rates
on this industry, it either partially or totally exempted other industries that
also create significant emissions, such as the metal processing industry. 14 3

Additionally, "there [are] also exemptions for fishing, air and ocean
transport, manufacturing of cement. . . and land-based use of gas."'" For
example, pulp and paper as well as herring flour manufacturers are subject
to half carbon taxes.145 While these exemptions from the tax scheme may
be necessary either politically or competitively, the fact remains that a great
deal of additional progress could be made toward the goal of decreasing
greenhouse gas emissions if the exemptions were not present. 4 6

B. Norway's Leading Edge Technology: Carbon Capture and Sequestration

(CCS)

Given the looming tax burden, Statoil, a Norwegian oil company,
invested in innovative technology called CCS at its new Sleipner oil and
natural gas field.147 The goal was to create a method of capturing the
emissions created from the extraction of fossil fuels in order to avoid being
taxed on emissions that enter the atmosphere.14 8 Norway's Sleipner Project
for carbon capture and sequestration began in 1996 and is the first
commercial application of emissions avoidance technology. 149 Sleipner is
an oil and gas field in the North Sea, and the carbon emissions created by
operating the field were included in the carbon tax imposed by Norway. 50

Since 1996 nearly one million metric tons of carbon emissions have been
sequestered annually, and the company's investment was paid back in only

139. Id. at 5.
140. Id. at 8.
141. Id. at 5.
142. Id.
143. Id.
144. Id.
145. Id.
146. Id. at 22.
147. See Howard J. Herzog, What Future for Carbon Capture and Sequestration?,

35 ENvTL. Sci. & TECH. 148, 151 (2001), available at http://sequestration.mit.edu/pdfl
ESTwebarticle.pdf.

148. See id.
149. See id.
150. Id.

332 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 333

a year and a half in savings realized by avoiding the carbon tax.' 5I

According to the Massachusetts Institute of Technology,

[c]arbon sequestration is a way to reduce greenhouse gas
emissions. It complements two other major approaches for
greenhouse gas reduction, namely improving energy
efficiency and increasing use of non-carbon energy sources.
Interest has been increasing in the carbon sequestration
option because it is very compatible with the large energy
production and delivery infrastructure now in place. 5 2

Norway is considered the "Carbon Capture & Storage (CCS) capital of the
world."' 53 The Sleipner Project has safely removed and stored more than
ten million tons of CO2 from the Sleipner natural gas field without any
evidence of leakage into the water. 5 4 The economic and environmental
success of CCS is evident, and this technology is being studied and
implemented in other areas around the world.'

C. Economic Effects of Carbon Taxation

The potentially negative impact of a carbon tax on individual
consumers has long been a stumbling block to imposing such a tax. s1 The
primary problem is that this type of tax is regressive; that is, the tax tends to
affect the lowest income households unfairly, as this sector spends a greater
percentage of income on energy.'5 7 When comparing the economic effect
of a carbon tax that creates an additional ten dollar cost per barrel of oil, it
is projected that households in the lowest twenty percent income level
would realize a 2.4% increase in energy spending as compared to their
wealth, while households in the highest twenty percent income level would
only see an increase of 0.8%.58 The imposition of the heaviest burden of
the tax onto the poorest segment of the population is problematic for
passing such a tax.159 In an effort to address the problems caused by the
regressive tax, Norway allocates a portion of the carbon tax revenue to

151. Id.
152. Carbon Capture and Sequestration Technologies @ AT, MASS. INST. OF TECH.,

http://sequestration.mit.edu (last visited Apr. 14, 2011).
153. David Hone, A Focus on CCS in Norway, SHELL (May 29, 2009),

http://blogs.shell.com/climatechange/?p-469.
154. Id.
155. See supra notes 153-54 and accompanying text; infra notes 156-58 and

accompanying text; discussion infra Part III.
156. See WILLIAMS ET AL., supra note 5, at 24.
157. See id.
158. Id. at 13-14.
159. Id.



IND. INT'L & COMP. L. REv.

offset individual income tax.160  With this strategy, "[i]n 1999, the tax
revenue reduced personal income taxes by an average of 790 Norwegian
krones ($117) per person. Other portions of the tax revenues have been
spent on research and development of renewable energy and energy
efficiency technologies."

A further consideration when implementing a carbon tax is the
possibility of creating a competitive disadvantage in the world marketplace
for industries affected by the tax. 162 The carbon tax increases a company's
production costs, which then contributes to a higher market price or a
company's lower profitability. 6 3 A competitive disadvantage could occur
in a given market if a country unilaterally enacts a carbon tax while all other
international competitors do not.'1 However, the intentions of the Kyoto
Protocol are for all countries to create a method of reducing carbon
emissions, both by enacting taxes and by means of technological
advances.165  Given the proposal of worldwide cooperation within the
Kyoto Protocol,

if carbon taxes were used as the sole means of meeting the
Kyoto emissions obligations, the level of the taxes would
be very high and could thus have significant implications
for competitiveness. However, since all industrial
countries will have to reduce emissions under the Kyoto
Protocol, industries in different countries will almost
simultaneously experience an increase in their costs.'"

There is no doubt that a carbon tax adds cost to the bottom line of any
industry and therefore eventually to the consumer.167 However, it is one
method that can ensure greater efficiencies, new technology, and concerted
efforts to minimize levels of harmful carbon emissions. 68

D. Measureable Effects of Norway's Carbon Policy

Between 1990 and 1999, Norway experienced gross domestic product

160. WILLIAMS ET AL., supra note 5, at 20.
16 1. Id.
162. See ZHONGXIANG ZHANG & ANDREA BARANzINI, WHAT Do WE KNow ABOuT

CARBON TAXES? 17 (2003), available at http://mpra.ub.uni-muenchen.de/13225/1/envwp
carbon tax03.pdf.

163. See id. at 18.
164. See id.
165. See id. at 3; infra Part III.A.
166. ZHANG & BARANZINI, supra note 162, at 20.

167. See id. at 18.
168. See supra Part I.A.

334 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 335

growth of thirty-five percent.'69  With this substantial increase in gross
domestic product, there is an expectation for emissions to increase due to
increased energy demands.o70 During this period, actual carbon emissions
increased nineteen percent, even with an aggressive carbon taxation
policy.' 7 ' While the increase in emissions is less than the percentage
increase in gross domestic product, the main question is how much
influence the carbon tax has on the quantity of emissions.17 2 One study
indicates that the direct effect of the tax has been relatively small; without
the tax, actual emissions during the period would have increased
approximately 21.3%, leaving an estimated reduction in emissions directly
related to the carbon tax of only 2.3%.'" The study instead contributes a
switch in the energy mix to clean hydroelectricity as a major contributor to
the reduction, along with the abatement of landfill gases, which reduced the
emissions of methane, N20, and SF6 .l 74 Even though the direct effect of the
tax may be small, perhaps the high carbon taxes provided incentive to
substitute fossil fuels with clean energy sources, where available, in order to
avoid the tax.17 5

Again, a primary reason cited for a less than anticipated direct
reduction through the carbon tax is the broad exemption allowed to several
fossil fuel intensive industries.'76 These exemptions from the carbon tax
were

principally motivated by concern about competitiveness.
The industries, in which we expect the carbon tax to be
most efficient in terms of downscaling of the production
and reduced emissions, are the same industries which are
exempted from the carbon tax. The zero-tax industries
consist mainly of the process industry, which explains why
there is a close to zero effect of the tax on process related
CO2 emissions. If the metal sector and industrial chemicals
had not been exempted from the carbon tax, a large share of
these sectors would have proven unprofitable. Likewise,
the low possibilities to substitute from heating oil for

169. BRUVOLL & LARSEN, supra note 29, at 22.
170. Id. at 9.
171. Id. at 22.
172. See id. at 22.
173. Id. at 22.
174. Id. at 16, 23.
175. See id. at 16.
176. Id. at 23.



IND. INT'L & COMP. L. REV.

fishing and sea transport indicate that a tax would have
reduced the production level in these industries.'"

As previously stated, an exemption is likely in place due to political or
economic realities; however, it does lead to a detrimental effect on the
overall goal of measureable emission reduction.178

III. THE EUROPEAN UNION CARBON POLICY

A. The Kyoto Protocol

In December of 1997, the Kyoto Protocol to the United Nations
Framework Convention on Climate Change was signed into agreement.179

The Kyoto proposal allows

countries considerable flexibility in the choice of domestic
policies to meet their emissions commitments. Possible
policies include carbon/energy taxes, domestic emissions
trading, command-and-control regulations and other
policies. Economists and international organizations have
long advocated carbon taxes, because they can achieve the
same emissions reduction target at lower costs than
conventional command-and-control regulations. Moreover,
carbon taxes can act as a continuous incentive to search for
cleaner technologies, while for command-and-control
regulations there is no incentive for the polluters to go
beyond the standards.so

The Kyoto proposal outlined a system of tradable permits of CO2 emissions
among Annex I countries' 8 ' with the intention of creating an efficient

177. Id. at 22.
178. See supra Parts II.C-D.
179. Kyoto Protocol to the United Nations Framework Convention on Climate Change,

Dec. 10, 1997, U.N. Doc. FCCC/CP/1997/7/Add.1, 37 I.L.M. 22 (1998); Kyoto Protocol,
UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE, http://unfccc.int/
kyotojprotocol/ items/2830.php (last visited Apr. 14, 2011).

180. ZHANG & BARANZINI, supra note 162, at 4.
181. Annex I parties include Australia, Austria, Belarus, Belgium, Bulgaria, Canada,

Croatia, Czech Republic, Denmark, Estonia, European Union, Finland, France, Germany,
Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania,
Luxembourg, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania,
Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine,
United Kingdom of Great Britain and Northern Ireland, United States of America. List of
Annex I Parties to the Convention, UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE

336 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 337

method to achieve measurable emissions reductions.18 2

B. The European Union Emissions Trading Scheme

To achieve the goals set forth in the Kyoto Protocol, the European
Union established the European Union Emissions Trading Scheme (EU
ETS), which applies to industries that create approximately forty-
five percent of the total carbon emissions in Europe.183  The industries
covered by the EU ETS include "facilities for electricity generation, the
production and processing of ferrous and non-ferrous metals, energy
intensive activities in the mineral industry and the pulp, paper and board
production."'8 The EU ETS focuses on the point of combustion where
carbon emissions are created.'85 This provides incentive for industries
creating the emissions to invest in improved efficiencies and technologies
to minimize the costs incurred from emissions. As the current EU ETS
covers a rather narrow segment of heavy industry, progress remains to be
made in other areas.187 Specifically, the goal is to include additional
domestic industries not currently included in the EU ETS, as well as
industries abroad, that may eventually join in international emissions
trading.' 8

C. Past, Present, and Future Strategy of the EU ETS

The EU ETS was initiated in 2005, signaling the EU's intention to
become a leading player in the fight to curb carbon emissions.'" 9 As the EU
is one of the world's major contributors to greenhouse gas emissions, it is
fair that the EU has become a leading player in the fight to curb carbon
emissions.' 90 The adoption of an emissions trading scheme instead of a
direct carbon tax provides a level of flexibility for industries.191 In essence,

CHANGE, http://unfccc.int/partiesandobservers/parties/annex-i/items/2774.php (last visited
Apr. 14, 2011).

182. Kyoto Protocol, supra note 179.
183. Gernot Klepper & Sonja Peterson, Emissions Trading, CMD, JI, and More: The

Climate Strategy of the EU, 27 THE ENERGY J. 1, 1 (2006), available at http://www.hm-
treasury.gov.uk/d/Klepper-Peterson-2006.pdf.

184. Id.
185. See PALTSEV ET AL., supra note 40, at 4.

186. See id.
187. See id.
188. Id. at 6.
189. EU Emissions Trading System (EU ETS), DEPT. OF ENERGY & CLIMATE CHANGE

(U.K.), http://www.decc.gov.uk/en/content/cms/whatwedo/changeenergy/tackling-clima/
emissions/eu ets/eu-ets.aspx (last visited Apr. 14, 2011).

190. Atle C. Christiansen & Jorgen Wettestad, The EU as a Frontrunner on Greenhouse
Gas Emissions Trading: How Did it Happen and Will the EU Succeed?, 3 CLIMATE POL'Y 3,
4-5 (2003).

191. Id. at 5.



IND. INT'L & COMP. L. REv.

certain industries that would face high costs to curb emissions could opt to
purchase additional carbon allowances from other industries that have lower
carbon abatement costs.19 2 Industries able to change their energy usage in a
cost-effective manner to reduce emissions have the ability to offset the costs
incurred by selling unused carbon allowances in the trading scheme.193

D. Progress of the EU ETS From Inception to Present

Currently, the emissions trading scheme in the European Union
encompasses approximately forty percent of all EU greenhouse gas
emissions.' 94 This surprisingly small percentage is due to the fact that the
EU ETS focuses on CO2 rather than attempting to encompass the entire
array of greenhouse gases.195 The EU directive is in sharp contrast to the
Kyoto Protocol, which called for controlling all greenhouse gases and
targeting emissions from all sources, rather than just carbon emissions. 96

The rationale behind limiting the EU ETS to carbon emissions was based
on the belief that

[i]nclusion of other greenhouse gases . . . is desirable but
would be dependent on resolving monitoring, reporting and
verification issues . . . . [T]he monitoring uncertainties are
still too great for greenhouse gases other than carbon
dioxide. For these reasons, emissions of greenhouse gases
other than carbon dioxide are not included in the first phase
of the scheme. 9 7

Within each Member State of the EU, industries in the included
sectors are required to obtain permits, with one permit equal to one ton of
CO2 emissions, representing the allowable amount of carbon emissions.198

192. Id.
193. Id.
194. COLE, supra note 6 (manuscript at 14).
195. Raymond Kopp, Senior Fellow at Resources for the Future, Cong. Testimony

Prepared for the U.S. Senate Comm. on Energy and Natural Res. Roundtable on the
European Emissions Trading Scheme: An Overview of the European Union Emissions
Trading Scheme 1 (Mar. 26, 2007), in An Overview of the European Union Emissions
Trading Scheme, RESOURCES FOR THE FUTURE, http://www.rff.org/RFF/Documents/RFF-
CTst_07-Kopp.pdf (last visited Apr. 14, 2011).

196. COLE, supra note 6 (manuscript at 15).
197. Id. (quoting Commission Proposal for a Directive of the European Parliament and

of the Council Establishing a Scheme for Greenhouse Gas Emission allowance Trading
within the Community and Amending Council Directive 96/61/EC, at 10, COM (2001) 581
final (Oct. 23, 2001)).

198. Id. (manuscript at 18). See also Council Directive 2003/87, art. 6(2)(e), 2003 O.J.
(L 275) 32 (EC).

[Vol. 21:2338



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 339

Detailed requirements were put forth for reporting and verifying actual
emissions, including independent verification of emission rates and
substantial penalties for non-compliance.'" With the current emphasis on
emissions trading, the EU had to focus on how to devise emissions
allocations efficiently.2" In theory,

there are two basic methodologies for initial allocation of
allowances. One option is some form of 'grandfathering',
whereby allowances are distributed to companies on the
basis of historical emissions or according to a certain
performance standard ('benchmarking'). The alternative is
that the government requires companies to buy allowances,
for instance at a fixed price or in an auction.20 1

The EU opted to use a grandfathering method for allocation, in part to
minimize objections of Member States against the alternative auction
method.20 2 The EU sets forth a clear system of compliance and reporting
along with considerable financial penalties in order to ensure across-the-
board compliance with the system.203 Given that the EU ETS is directed at
the point of combustion, it is expected that the companies covered by the
system will directly bear the cost of emissions reduction both by the cost of
allocation permits and by pursuing improved efficiency or alternative fuel
sources.204 Interestingly, however, during a trial phase of the system

electricity price changes have appeared to reflect not so
much the direct mitigation expenses but the changing
marginal cost of permits, even though they were distributed
for free. Given that the electricity markets are mostly
deregulated in Europe such a pass through of permit price
is, or should have been, expected.2 05

In the end, any actual or potential additional costs related to the reduction of
carbon emissions will ultimately be borne by the consumer.206

At the beginning of Phase I of the EU ETS, approved carbon
emissions allowances were in place equaling one and a half billion tons of

199. See COLE, supra note 6 (manuscript at 18). See also Council Directive 2003/87,
arts. 6-14, 2003 O.J. (L 275) 32 (EC).

200. See Christiansen & Wettestad, supra note 190, at 11.
201. Id.
202. Id
203. Id.
204. PALTSEV ET AL., supra note 40, at 4.
205. Id.
206. See id.



IND. INT'L & COMP. L. REV.

CO2 per year, which was nearly 100 million tons greater than actual current
emissions.207  This number can be explained by several possibilities,
including Member States not wanting to impose undue hardship on the
sectors involved, aggressive lobbying efforts by the industries, and the
possibility of individual Member States creating excess allowances in order
to benefit monetarily by trading them to other Member States. 20 8  The
trading of allowances between industries and Member States began with
Phase I on January 1, 2005, and "approximately 291 million allowances
were traded in the EU ETS in its first year of operation. By October of
2006, the number of traded allowances had grown to 787 million."20 9

While the volume of trading has steadily increased, the price of the
allowances has fluctuated wildly, starting below £10/ton, then rising to
£30/ton, and finally settling between £10/ton and C20/ton. 2 10  An
unfortunate byproduct of the trading scheme is the fact that many
consumers were essentially charged for the potential cost of emissions in
the form of higher rates for energy sources even though the allowances
were provided to the industry for free and the industry had the ability to sell
excess allowances for profit.2 1 1

As the first phase of the trading scheme ended in 2007, the word
"failure" was often used to describe the outcome. 2 12 The combination of the
fact that no real progress was made toward actually reducing carbon
emissions along with the fact that consumers were paying higher costs
while several powerful industries raked in huge windfall profits from
trading "free" emissions allowances left many citizens of the EU fully
embracing the word "failure" to describe the EU ETS. 2 13 From the point of
view of the scheme's framers, however, it was considered a success because
a viable framework was put in place within each Member State from which
to begin working toward real and measureable progress in reducing carbon
emissions during the next phase.2 14

The major difference in Phase II of the EU ETS was the fact that
instead of basing emission allocations on pure estimates, the allocations
were now based on actual, measured emissions volume collected during
Phase 1.215 Therefore, industries that attempted to reduce their cost of

207. COLE, supra note 6 (manuscript at 23-24). See also Michael Grubb, Christian Azar
& U. Martin Persson, Commentary, Allowance Allocation in the European Emissions
Trading System, 5 CLIMATE POL'Y 129, 129-30 (2005).

208. COLE, supra note 6 (manuscript at 24).
209. Id. at 29. One allowance accounts for the equivalent of one ton of C02 emissions.

See id. at 18. See also Council Directive 2003/87, art. 6(2)(e), 2003 O.J. (L 275) 32 (EC).
210. COLE, supra note 6 (manuscript at 29-30).
211. Id. (manuscript at 31-32).
212. Id.
213. Id. (manuscript at 32).
214. Id.
215. Id. (manuscript at 33).

340 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 341

compliance by estimating a higher number of emissions in order to receive
adequate or surplus allocations now would be issued allocations based on
real numbers of the actual emissions created in the previous year.2 16 These
companies would then need to strive to reduce emissions from the actual
prior year number rather than the inflated estimate previously presented.2 17

Even though several Member States attempted to submit plans with inflated
allocations, the plans were rejected and the Member States were forced to
reduce the allocations drastically in order to pursue true progress toward
CO 2 reductions.2 18 With these more stringent requirements regarding the
number of allowable allocations, an estimated 6.8% reduction over actual
2005 emissions was anticipated. 2 19 Additional controls over emissions
allowances were put in place with a 2009 Directive to the EU ETS, which
stated that "starting in 2013, more than 50% of allowances will be
auctioned, rising to 100% by 2027.",220 Therefore, while the allowances
were initially offered for free, by 2013 only fifty percent of the allowances
will be free, fifty percent will have to be purchased, and by 2027 all
emissions allowances will have to be purchased. 221 This is what provides
the incentive for industries to reduce emissions in order to reduce the
expense of purchasing allowances.222 In addition, the directive carried a
requirement that

50 percent of all auction revenues be used for (among other
purposes) reducing GHG emissions, developing renewable
energy resources (pursuant to a related EU policy
mandating 20 percent of energy production from renewable
sources by 2020), carbon capture and storage, measures to
avoid deforestation or increase afforestation, and public

223
transportation.

Clearly, the EU recognizes the importance of a multi-pronged plan to make
actual headway in achieving measurable emissions reductions in addition to
the importance of more centralized control over the continued
implementation of the EU ETS.

Perhaps the most important addition made to the EU ETS by the 2009
Directive is the recognition of CCS as a necessary component for successful

216. Id.
217. Id.
218. Id.
219. Id.
220. Id. (manuscript at 40).
221. Id.
222. Id. (manuscript at 41).
223. Id. (manuscript at 40).



IND. INT'L & COMP. L. REv.

emissions reduction.22 4 Specifically,

on March 26, 2009, the European Parliament and Council
approved a Directive that expressly recognizes carbon
capture and storage (CCS) as a 'bridging technology that
will contribute to mitigating climate change.' The
Directive's Preamble (para. 5) predicts that carbon
emissions avoided by CCS could amount to 15 percent of
total required emissions reductions.2 25

The fact that the EU is now focused on including CCS technology as an
important component of its emissions reduction strategy brings Norway
directly into play, even though Norway is not a Member State.226 Norway's
leadership in the cutting edge CCS technology could play a vital role in the
new and improved EU ETS.

E. Compatibility ofEU ETS with Non-Member States

Although the Emissions Trading Scheme being utilized by the EU is
intended for compliance by Member States, the scheme is ultimately geared
toward compatibility with other nations in order to synergize a cohesive,
global attack on greenhouse gas emissions.2 27 This goal of a compatible
trading scheme is only partly due to lofty, "green" goals. 2 28 It is also due to
the fact that many states are already in the process of, or nearing the process
of, becoming Member States of the EU, and in several of these states the
abatement costs of changing fuel sources are significantly lower than in
many current Member States.22 9 Therefore, a trading scheme that would
integrate with many nations and incoming Member States would prove
beneficial, especially since new Member States are automatically required
to adopt all EU legislation.23 0 Additionally, greater participation in the
trading scheme by additional countries would infuse a larger volume of
allocation trading, leading to greater efficiencies in the trading system.23'
Finally, the ability to develop a successful trading scheme not only for
Member States but also across many nations would establish the EU as the

224. Id.
225. Id. (manuscript at 41).
226. Id.
227. See Christiansen & Wettestad, supra note 190, at 12.
228. See id.
229. See id.
230. See id
231. See id.

342 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 343

definitive leader in the fight to curb carbon emissions and global
232warming.

F. Norway's Participation as a Non-Member State

A primary goal of the EU strategy is to create an overall cap on
emissions levels of various industries in order to preserve the
competitiveness of those industries across Europe.233 According to this
strategy,

it is recognized that, at least initially, not all Member States
may be able to join the system and that the sectors included
may differ from one country to another. The expansion of
the system to allow opt-ins from non-included sectors and
closely allied non-EU members (Norway) is also
anticipated.234

Although Norway is not a Member State of the EU, since 1994 it "has been
part of the European Union's internal market through the Agreement on the
European Economic Area (EEA Agreement)." 23 5 "Most EU legislation in
the environmental field is also EEA-relevant, which means that Norway to
a large degree has the same obligation to implement EU environmental
legislation as the Member States."236

In order to pursue greater levels of greenhouse gas reductions,
Norway put together a "Quota Commission" made up of participants from
government, industry, and academia.237 The purpose was to develop a
useable cap-and-trade system to utilize in addition to the existing carbon
taxation in an effort to further reduce carbon emissions.238 Norway's
proposed trading scheme is significantly more expansive than the EU
Emissions Trading Scheme in that it would include more than eighty-
eight percent of the country's greenhouse gas emissions, rather than

232. See id.
233. A. DENNY ELLERMAN, MIT JOINT PROGRAM ON THE Sc. & POLICY OF GLOBAL

CHANGE, TRADE PERMITS FOR GREENHOUSE GAS EMISSIONS: A PRIMER WITH PARTICULAR

REFERENCE TO EUROPE 13 (2000), available at http://web.mit.edu/globalchange/www/

MITJPSPGC Rpt69.pdf.
234. Id.
235. STINE AAKRE & ASBJORN TORVANGER, CTR. FOR INT'L CLIMATE & ENVTL.

RESEARCH, CASE STUDIES ON CLIMATE CHANGE RESPONSE POLICIES AND STRATEGIES OF

SELECTED ANNEX I COUNTRIES: NORWAY AND SWEDEN 11 (2007), available at

http://www.cicero.uio.no/media/ 5960.pdf.
236. Id.
237. ELLERMAN, supra note 233, at 13-14.
238. Id



IND. INT'L & COMP. L. REv.

focusing solely on CO2.239 As expected, the greatest area of contention
within the Quota Commission surrounds the method of allocation.240

Regarding the options presented for allocation,

[a] bare majority of six (out of eleven) recommends that the
government auction the permits and that the proceeds
accrue to the government to reduce other taxes and to earn
a "'double dividend."' The sole industry representative and
an environmental NGO recommended grandfathering of
permits, and the other minority group consisting of civil
servants from several ministries argued that allocation is a
political issue and outside of the Commission's mandate.24'

The vast discrepancies in opinion regarding the proper way to allocate
emissions allowances is a crucial sticking point facing all countries
currently contemplating a cap-and-trade system.

IV. WHAT DIRECTION IS NORWAY'S CARBON FOOTPRINT LEADING?

A. The Debate Over Taxes and Exemptions

Nearly two decades after its inception, a major topic currently being
debated in Norway is the existing emissions tax structure and its inclusion
of allowances and exemptions for certain industries.242 A theory of "pure"
economics would call for equal taxes for all emissions from all sources.243

The tax scheme imposed in Norway, however, is not a "pure" tax; rather, it
is influenced by politics and world markets. 244 For instance,

in Norway, tax rates for greenhouse gas emissions vary
from zero to NOK 872 per tonne CO2 equivalent.
Compared with the current carbon price in the EU
emissions trading scheme, Norwegian households pay
about NOK 0.5 billion more than they should for their CO 2

emissions, and the oil and gas extraction sector pays about
NOK 1.5 billion too much. In contrast, the other polluters

239. Id. at 14.
240. Id.
241. Id.
242. See WILLIAMS ET AL., supra note 5, at 20.
243. See FINN ROAR AUNE & KNUT EINAR ROSENDAHL, ANALYSIS OF SELECTED

RESOURCE AND ENVIRONMENTAL ISSUES, in SELECTED RESOURCE AND ENVIRONMENTAL

ISSUES: NATURAL RESOURCES AND THE ENVIRONMENT 229, 232 (2008), available at

http://www.ssb.no/ english/subjects/01/sa-nrm/nrm2008/kapl5-resources.pdf.
244. Id. at 231.

344 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 345

in the process industry, together with the transport sector,
gas terminals, oil refineries, and the fisheries sector, pay
NOK 2.8 billion less than they should in a cost-efficient
system. 245

The industries that are creating carbon emissions, yet paying reduced taxes,
are benefiting from a system of exemptions and lower tax rates intended to
protect the worldwide competitiveness of certain sectors.246 This system of
favoritism is a topic for serious debate within Norway.

Currently, the Research Council of Norway is studying the disparity
between the current policy regarding carbon taxes and a tax scheme
recommended by pure economic theory.247 The assumption is that the
current system of varying levels of taxes and subsidies prevents true cost
efficiency.248 The current carbon tax structure ranges from a nearly zero tax
for sectors included in the tax exemption to a substantial tax of nearly NOK
300 per ton of CO2 for the average household, whose primary emissions
include petrol, diesel, fuel oil, and kerosene, all of which are levied with a
hefty carbon tax.249 Still, the highest tax rate is imposed on the actual
extraction and production of oil and gas. 2 50 Regarding Norway's differing
tax rates for various sectors,

[t]he CO2 tax contains exemptions for coal and coke used
in production of cement and lightweight expanded clay
aggregate in the processing industry and has a reduced rate
for the paper and pulp industry and the production of
fishmeal. A tax on heating oil (mineral oil) is applicable
for the paper and pulp industry and the production of
fishmeal. The tax on consumption of electricity is
applicable for all manufacturing industries and greenhouse
industries.251

Although these exemptions and disparities in tax rates do not comply with
pure economic theory, they were set in place presumably to protect the
included sectors from being priced out of world competitiveness due to

245. Id. at 232.
246. Id.
247. Id. at 250.
248. Id.
249. Id.
250. Id.
251. LYNN PRICE ET AL., LAWRENCE BERKELEY NATIONAL LABORATORY, TAX AND FISCAL

POLICIES FOR PROMOTION OF INDUSTRIAL ENERGY EFFICIENCY: A SURVEY OF INTERNATIONAL
EXPERIENCE 7 (2005), http://www.efchina.org/csepupfiles/workshop/2006102695218825.
1165929103267.pdf/IntlExpFTpolicies_IndustrialEE EN.pdf.



IND. INT'L & COMP. L. REV.

taxes aimed at an overall reduction of carbon emissions. 252While

economists looking to create the most cost efficient and effective measures
to reduce carbon emissions would not allow such exemptions, real world
implementation requires the tax structure to be enacted through politics and

policy. 253 It is difficult to enact legislation imposing emissions taxes on
domestic industries that are so burdensome as to make the industry non-
competitive in the world market.254 Therefore, the inadequacies and

255
disparities of the emissions tax scheme are likely to continue.

B. Incorporating European Union Policies

Beginning in 2006, Norway expanded its policies to encompass the
policies set forth in the EU ETS.25 6 With this change, the cost-effectiveness
of greenhouse gas reductions improved for several market sectors.257 Even
with the cost improvement, the combined sectors with little or no
exemptions still pay nearly NOK 2.1 billion more in carbon taxes than they
would in a totally pure economic system that did not include any
subsidies.2 58 It would seem that the goal of Norway's carbon emissions
strategy is not only to reduce carbon emissions, but also to generate tax
revenue from sectors and industries that can "afford" it.259  Many
economists still believe that all greenhouse gas emissions should be taxed
equally, without any form of subsidy for any sector.2 60 These purists look
to the possibility that future rules of competition within the European
Economic Area (EEA), of which Norway is a party, will help to move
Norway's climate strategy more toward a pure economic strategy and away
from policies driven by politics. 26 1

Norway not only provides critical energy resources for other nations,
but it also provides energy in the most responsible manner possible for the
environment.262 The oil and gas exported from Norway may possibly be the
"cleanest" fuel sources in terms of carbon emissions due to the
extraordinary efforts of Norway to utilize CCS and other strategies to
minimize greenhouse gas emissions during the extraction and production of
fuel.263 Additionally, Norway is committed not only to expanding its

252. AUNE & ROSENDAHL, supra note 243, at 249.
253. Id.
254. Id.
255. Id.
256. Id. at 251.
257. Id.
258. Id.
259. See id.
260. Id. at 251.
261. Id.
262. Walther, supra note 123.
263. Id.

[Vol. 21:2346



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 347

utilization of CCS domestically in order to produce cleaner fuel, but also it
intends to partner with other countries such as China to develop CCS
technology for new coal plants in an effort to reduce global carbon
emissions. 2 64 Given the predicted increase in world population and the
corresponding increase in energy demand, Norway envisions its CCS
technology as playing a key role in helping mitigate the expected increase
in greenhouse gas emissions. 265 Furthermore, Norway is dedicating twenty
percent of its EEA contributions for the next five years to fund CCS
projects in various EU Member States, in addition to lending substantial
technological support.266 Along with the UK, Norway is funding a study of
the viability of using the North Sea as a potential site for CCS
installations. 2 67 The obvious benefit of CCS is the fact that the technology
provides a responsible manner for the world to continue the widespread
production and use of fossil fuels for energy while simultaneously reducing
the harmful emissions that cause environmental damage.268 Norway's foray
into, and perfection of, CCS technology is likely the greatest contribution
that will be made by this small country to the reduction of global emissions.

C. The Successes and Failures of Norway's Strategy

Over the past fifteen years, there have been some additional, specific
areas of progress in Norway's fight to curb domestic greenhouse gas
emissions. 2 69 During this time, recycling of household waste has increased
from nearly zero percent to over forty percent, greatly helping moderate the
harmful effects of landfill gases.270 This would be considered a victory in
itself; however, the progress is mitigated by the fact that within that same
time period, the amount of household waste created per person has
increased over fifty percent, thereby totally eliminating the positive benefit

271of the recycling program. If one chooses to view this in a positive light,
however, the beneficial results of the recycling program did mitigate the
harmful effects of the fifty percent increase per person of household

272waste. Continued progress in recycling efforts, in addition to efforts to
decrease overall household waste bound for landfills, will further the
positive abatement of harmful emissions from Norway's landfills.

264. Id.
265. Id.
266. EU, Norway Join Forces on C02 Capture and Storage, EuRAcniv (May 29, 2009),

http://www.euractiv.com/en/climate-change/eu-norway-join-forces-co2-capture-storage/
article-182753.

267. Id.
268. See Herzog, supra note 147, at 2.
269. Bugge, supra note 28, at xviii.
270. Id.
271. Id.
272. Id.



IND. INT'L & COMP. L. REv.

While increased energy efficiency and alternative energy sources
have been encouraged within the country, Norway's total energy
consumption has increased substantially in the period between 1989 and
2001.273 Notably, the number of vehicles on the road increased by more
than one-third during that time, perhaps directly related to the fact that
during the same period Norway's funding for public transportation was
slashed in half.2 74 While the vehicles on the road in Norway are more fuel
efficient than ever, once again the benefits of this positive initiative are
outweighed by the overwhelming trend of "more"-more people, more

271
trash, more cars, more consumption, and more greenhouse gas emissions.

The lofty goals Norway set for itself in 1987 regarding climate
change strategy were partially derailed by the nation's growing
unemployment rates and economic downturn in the 1990s. 27 6 The nation
began to focus its attention on possible membership within the EU and the
issues surrounding the EEA agreement.277 Attention turned from creating a
sustainable economy centered on clean fuel processes to merely minimizing
negative environmental effects within the current economic structure.278

Norway's goal of creating "an economy for the Earth-an economy for the
common good" 279 seems to have taken a back seat in the wake of economic
downturn, perhaps due to the fact that Norway's primary source of income
is related to the sale of fossil fuels.28 o

Because imports of fossil fuels are expected to grow to encompass
eighty-five percent of the overall energy requirements in Europe as well as
the United States by the year 2030, it is understandable that Norway would
continue to rely upon its vast natural resources to provide economic
viability for the country.281 Currently, Norway provides nearly fifteen
percent of fossil fuels imported into the EU.282 Therefore, Norway is likely
to continue its current oil and gas production and eventually to expand to
new fields, perhaps in cooperation with Russia in the far north regions and
the Barents Sea.283 The current political climate suggests that the
importance of creating wealth for the nation through the sale of oil and gas

273. Id.
274. Id.
275. Id.
276. Id. at xix.
277. Id.
278. Id.
279. Id.
280. Id.
281. HEINRICH KREFT, AMERICAN INSTITUTE FOR CONTEMPORARY GERMAN STUDIES,

GEOPOLITICS OF ENERGY: A GERMAN AND EUROPEAN ViEw 2, available at

http://www.aicgs.org/documents/kreftenergy.pdf (last visited Apr. 14, 2011).

282. Id.
283. Id.

348 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 349

outweighs the importance of developing a sustainable alternative energy
plan for the future.28

D. Norway's Next Steps

Norway faces difficult choices as to the next steps in the fight against
climate change, with struggles emerging between the current economic
conditions of citizens such as laborers in the oil and gas industry or
commercial fishermen and the need aggressively to pursue other,
sustainable energy sources for the future benefit of the country and the
climate.2 85 If Norway does not pursue changes, a degradation of its land,
natural resources, and climate will certainly occur, especially given the
natural increase in population and corresponding increase in gross national
product expected over the next thirty years.286 However, Norway has a
history of making difficult choices that are in the country's best interest,
and the nation is proud to have been one of the first to implement serious
agendas in order to counteract the harmful effects of carbon emissions.28 7

Norway needs once again to focus on the issue and move forward on a
cohesive plan to create cooperation between political policy and scientific
and technological possibilities regarding development of sustainable, clean
energy.288 International cooperation with the current and future agendas of
the EU will be vital in successfully moving both Norway and the world
closer to the goal of minimizing carbon emissions and creating long term,
sustainable alternatives for fossil fuels.289

While the production of fossil fuels certainly provides economic
stimulus to Norway, given that it currently ranks as the world's third largest
exporter of oil and natural gas, it is time to consider not only the benefits of
fossil fuels but also the previously underestimated costs.2 90 A country that
is heavily reliant upon the production of fossil fuels to sustain its economy
is at the mercy of the continued "acceptability" of consumption of fossil
fuels by the rest of the world.2 91 This "acceptability" is determined not only
by the cost of acquiring the fuel, but also by the long term cost to the planet
due to climate change.292 If and when the world as a whole begins to take
the effects of global warming seriously, the demand for fossil fuels will

284. Bugge, supra note 28, at xix.
285. Id.
286. Id. at xix-xx.
287. Id. at xx.
288. Id.
289. Id.
290. Geir Westgaard, The Extended Concept of Energy Security, in EMERGING FROM THE

FROST: SECURITY IN THE 21ST CENTURY ARCTIC 74 (Kjetil Skogrand ed., 2008).
291. Id.
292. Id.



IND. INT'L & COMP. L. REv.

293
begin to wane as countries seek clean energy alternatives. Any nation,
including Norway, whose national economy is linked to production of fossil
fuels should begin to prepare for an eventuality that could include weaker
demand for oil and gas.294

Norway plays a pivotal role in combating climate change not only
because it has taken a leading role in enacting policies and practices to
combat greenhouse gas emissions, but also because of its unique position in
the world as a major exporter of both oil and natural gas.295 Oil currently
"accounts for a quarter of Norway's gross domestic product, half of [the]
total exports, a third of total government income and a quarter of total
investments."29 6 Furthermore, natural gas is expected to surpass oil as
Norway's leading energy export in the near future.29 7 While Norway
produces tremendous amounts of fuel in the form of oil and gas, the country
itself relies primarily on hydropower domestically, leaving even greater
amounts of oil and natural gas for export and economic benefit to the
country.298 Additionally, Norway is investigating other renewable energy
sources for domestic use, especially in the area of wind power.299

Norway's efforts to be the world's "most responsible citizen"
regarding carbon emissions also extend to the areas of forestry and
shipping.30 0 Unfortunately, carbon emissions also occur from both natural
degradation of forests and intentional deforestation in developing countries.
Harmful emissions from these sources alone total nearly seventeen percent
of total greenhouse gas emissions annually.30' Norway is playing an
integral part in a program known as REDD, or Reductions in Emissions
from Deforestation and forest Degradation. 30 2 In 2007 Norway pledged the
equivalent of $500 million to this program to "promote sustainable forest
management, contribute to the protection of biodiversity and secure the
rights, involvement and livelihood of local communities and indigenous
peoples. Besides reduced greenhouse gas emissions, REDD should also
promote sustainable development and poverty reduction."3 0 3

In a 2007 report to Parliament, Norwegian officials outlined an
updated climate policy with emphasis not only on renewed efforts to reduce
domestic emissions, but also on facilitating a cohesive international climate

293. Id.
294. Id.
295. Walther, supra note 123.
296. Id.
297. Id.
298. Id.
299. Id.
300. Id.
301. Id.
302. Id.
303. Id.

350 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 351

agreement by working with developing countries to reduce carbon
emissions.3 04 Regarding additional emissions reductions within Norway,
the proposed plan calls for a realistic reduction of an additional
thirteen million to sixteen million tons of CO2 by the year 2020.30s It is
understood that this level of emissions reduction is unlikely to be achieved
solely by existing measures, such as the carbon tax.306 Additional measures
proposed to meet the emissions reduction goals include banning oil burners
in new buildings, providing subsidies to convert old oil burners to
alternative heat sources, developing sea windmill technology, increasing
bio-energy development, improving public transportation, and creating a
quota system for industries not currently covered by taxation or emissions
trading.307

The measures pursued by Norway to reduce domestic greenhouse gas
emissions are aggressive and not easily attained.30 s However, Norway
contributes only two percent to overall global emissions; therefore, even
drastic domestic reductions make a relatively small impact on overall world
climate improvement. 309  Unfortunately, no matter how many
improvements and sacrifices Norway makes, the true global polluters of the
world greatly overshadow the benefits created by Norway's strides in
emissions reduction .3 10 However, Norway is committed to being a shining
example in the world, partly due to the fact that it has become one of the
richest nations through the export of oil and natural gas.31'

V. PROPOSED GLOBAL IMPLEMENTATION AND INTERNATIONAL
COOPERATION

A. Implementation and Adoption of Carbon Capture and Sequestration

Norway is just one small nation on the planet, and even with a
successful carbon management strategy, the effect on the global
environment will be minimal.312 In order for progress to be made against
climate change, countries around the world must study the lessons provided
by both Norway and the European Union to determine what strategies to
implement efficiently in the fight against global warming. One strategy,

304. THE NORWEGIAN CONFEDERATION OF TRADE UNIONS (LO), CLIMATE STRATEGY 5,
available at http://www.lo.no/Documents/english/climate_strategy.pdf (last visited
Apr. 14, 2011).

305. Id.
306. Id.
307. Id. at 5-6.
308. Id. at 6.
309. Id.
310. Id.
311. Id.
312. AUNE & ROSENDAHL, supra note 243, at 248.



IND. INT'L & COMP. L. REv.

recognized as crucial by the EU ETS,'13 is CCS technology.314 Carbon
capture and storage will allow the world to continue to use fossil fuels for
the foreseeable future, while at the same time mitigating the harmful effects
on the environment."' With the ability to use fossil fuels more responsibly,
the world will have time to gradually develop an infrastructure that can be
run on clean, alternative fuel sources.

Norway's experimentation and perfection of CCS technology should
be recognized and mimicked by countries throughout the world in order to
combat global emissions. Because the world remains highly dependent
upon fossil fuels and, until viable alternative fuels can be effectively
integrated, 3 17 CCS technology can play a vital role in combating carbon
emissions.318 The oil and gas exported from Norway is possibly the
"cleanest" fuel -source in terms of carbon emissions, due to the
extraordinary efforts of Norway to utilize CCS to minimize greenhouse gas
emissions during the extraction and production of fuel.319 Countries around
the world need to follow Norway's example and incorporate this
technology in order to create additional "clean" fuel sources.

B. Adoption ofa Subsidy-Free Taxation Scheme

A key variable that participating countries must address is the choice
of emission allowances or taxation. If taxation is used, participating
countries must determine how to apply the tax structure. Currently,
Norway's carbon emission strategy primarily taxes industries that can
afford taxation and subsidizes or excludes industries that cannot afford

320
taxation. Many economists who believe that all greenhouse gas
emissions should be taxed equally without any form of subsidy frown upon
such a taxation scheme. 3 2 1  A subsidy-free taxation scheme is further
preferred as various studies assert that, although Norway's taxes led to a
substantial increase in the price of several types of fuel, the attributable
decrease in carbon emissions equated to only 2.3% over the ten year time
period from 1990 to 1999.322 The assertion is that "[t]his surprisingly small
effect relates to the extensive tax exemptions and relatively inelastic

313. "On March 26, 2009, the European Parliament and Council approved a Directive
that expressly recognizes carbon capture and storage (CCS) as a 'bridging technology that
will contribute to mitigating climate change."' COLE, supra note 6 (manuscript at 41).

314. See discussion supra Part II.B.
315. See discussion supra Part II.B.
316. See discussion supra Part II.B.
317. See Greenhouse Gas Emissions, supra note 7.
318. See discussion supra Part II.B.
319. AUNE & ROSENDAHL, supra note 243, at 251.

320. See id.
321. Id.
322. BRUVOLL & LARsEN, supra note 29, at 1.

352 [Vol. 21:2



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 353

demand in the sectors in which the tax is actually implemented. The tax
does not work on the levied sources, and is exempted in sectors where it
could have worked."3 2 3

Norway is unique in that the majority of its energy is derived from
clean electricity produced from hydropower.3 24 Given the fact that
emission-free electricity is a readily available power source, Norway's high
carbon taxes have served to move industries away from fossil fuel energy
sources and toward substituting electricity as an energy source whenever
possible.32 5 This has occurred because the cost to re-tool for electricity is
often lower in the long run than paying the high carbon taxes for the
continued use of oil or natural gas.326 Unfortunately, many of the industries
that create the highest emissions from fossil fuel use are the same industries
that are exempted from the carbon taxes, thereby drastically reducing the
positive environmental effects of the tax, as these industries have no
economic incentive to re-tool from fossil fuel energy sources to clean
electricity. 3 27 Overall, studies have determined that

Norwegian carbon taxes are high, but the emissions effect is low.
This implies a high cost of reducing emissions from sources on which the
tax is levied. For countries that consider implementing a carbon tax and in
future Norwegian carbon tax policy, . . . a more broad based, cost efficient
tax, which is uniform for all sources and greenhouse gases [is
recommended]. With a more uniform distribution of the tax burden, it is
possible to accomplish larger reductions in the greenhouse gas emissions at
lower costs. 328

For countries looking to implement carbon taxes as part of an
emissions reduction strategy, Norway's taxation system should be carefully
analyzed as to its structure and measureable results.329 Norway's carbon tax
scheme is more influenced by politics than by pure economics; therefore,
the results of Norway's carbon tax scheme are compromised. 3 30 After
studying the multitude of exemptions contained within Norway's carbon
taxes, 3 ' a subsidy-free plan that taxes all emissions from all sources equally
is likely to provide the most effective environmental benefits. 33 2 A subsidy-
free plan would encourage the minimization of fossil fuel use where
possible and the investment into clean, alternative fuel sources where

323. Id.
324. Id. at 8.
325. Id. at 16.
326. Id.
327. Id. at 22.
328. Id. at 23.
329. See discussion supra Parts II, IA, IV.C.
330. See discussion supra Part IV.A.
331. See discussion supra Part IV.A.
332. See AUNE & ROSENDAHL, supra note 243, at 250.



IND. INT'L & COMP. L. REV.

economically feasible.3 When all sources and industries are taxed equally,
the greatest reduction in emissions will likely be realized.

C. Necessary Global Cooperation and Implementation

The goal of minimizing global carbon emissions and creating long
term, sustainable alternatives for fossil fuels is only possible through
international cooperation. Such cooperation and implementation has
proven difficult for many countries, including the United States. While the
United States recognizes the importance of reducing carbon emissions, it
has been impossible to enact legislation on a national level.334 To date,
national legislative proposals regarding climate change have failed, and
only a nonbinding resolution has passed.' On May 23, 2006, the U.S.
Senate Foreign Relations Committee passed Senate Resolution 312, a non-
binding resolution on climate change.3 The Sense of the Senate
Resolution on Climate Change3

acknowledges the growing scientific consensus that human
activity is causing an accumulation of greenhouse gases in
the atmosphere. It also asserts that Congress should enact a
mandatory national program that slows, stops and reverses
the growth of greenhouse gas emissions using a market-
based structure. It notes that such a program would not be
likely to significantly harm the U.S. economy and should
encourage major U.S. trading partners to adopt similar
programs.338

The nonbinding resolution, which acknowledges both the problem of
greenhouse gas emissions and the need for the United States to implement a
national program to counter the problem, stops well short of providing any
possible solutions. 3 39 The United States is a major contributor to the global
problem of climate change, and it is time for the United States seriously to

333. See BRUVOLL & LARSEN, supra note 29, at 1.
334. See id. at 46.
335. Congressional Proposals regarding climate change including the Climate

Stewardship Act of 2003, the Clean Air Planning Act of 2003, the Clean Power Act of 2003,
the Clean Smokestacks Act of 2003, the Climate Stewardship and Innovation Act of 2005,
and the Climate and Economy Insurance Act of 2005 have all failed to date. Id.

336. The Lugar-Biden Climate Change Resolution, S. Res. 312, 109th Cong. (2006).
337. See WILLIAMS ET AL., supra note 5, at 43. See also Energy Policy Act of 2005,

H.R. 6, 109th Cong. (2005) and Energy Policy Act of 2005, H.R. 6, 109th Cong. (2005)
(S.Amdt.866) (detailing the Energy Policy Act of 2005 and the amendment by Senator

Bingaman).
338. WILLIAMS ET AL., supra note 5, at 43.
339. See id.

[Vol. 21:2354



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 355

consider the examples provided by Norway and the EU and create a viable
plan to reduce carbon emissions.

Although national legislation within the United States has failed at
every turn, there has been successful legislation put in place at the state
level. The California Global Warming Solutions Act of 2006340 was signed
into law on August 31, 2006, making California the first state to place a
mandatory limit on greenhouse gas emissions.3 4 1 The law calls for a one-
quarter reduction in emissions by the year 2020 through the use of a cap-
and-trade system that will cover all electricity utilized within the state.342

The success of this legislation could lead to further legislation in other
states and on a national level; however, failure to achieve the goals or
implement the legislation in an economically feasible manner could spell
doom for future legislation at the national level.343

Given the complex bureaucracy and current political chasm within the
United States, it may prove difficult to enact sweeping federal regulations
for either carbon taxes or cap-and-trade policies.3" Instead, a more feasible
recommendation may be to continue the agenda at the state or regional level
where policies are enacted that will work effectively within that state or
region.345  Then, once mechanisms are in place regionally, cooperation
across state lines or within regions can be integrated and the agenda to
reduce carbon emissions can be expanded.346 This is akin to considering
Norway as a "state" which implemented its own agenda to reduce harmful
emissions, and that "state" is now working in cooperation with the EU to
expand and improve its agenda. 347 Additionally, the United States and other
concerned countries need to study the feasibility of applying the CCS
technology implemented in Norway in order to continue the use of fossil
fuels while simultaneously reducing emissions.3 48  The technology is
available and successful, and the cost to implement it should be considered
an extremely important and beneficial investment for both industries and
state and national governments. 34 9  The United States should look to
Norway and the EU as an existing paradigm rather than attempting to
reinvent the emissions reduction wheel.350

340. CAL. Gov'T. CODE § 12890 (West 2010).
341. See Samantha Young, Schwarzenegger Signs Global Warming Bill, WASHINGTON

POST, Sept. 27, 2006, http://www.washingtonpost.com/wp-dyn/content/article/2006/09/27/
AR2006092700174_pf.html.

342. Id.
343. WILLIAMS ET AL., supra note 5, at 45.
344. See id. at 30.
345. Id. at 46.
346. Id.
347. Id.
348. Id.
349. Id.
350. Id.



356 IND. INT'L & COmP. L. REV. [Vol. 21:2

CONCLUSION

Two decades ago, the small country of Norway made an important
decision to enact policies aimed at reducing the amount of carbon emissions
created within its borders. 35 ' Aggressive carbon taxes were enacted
affecting many industries, and several positive results occurred.352 First, a
concerted effort was made to switch to alternative, cleaner sources of
energy whenever the substitution was economically feasible.353 Second, a
portion of the taxes collected was set aside and invested by the government
to provide for the future stability of Norway.354 This investment fund has
become the third largest sovereign fund in the world and is aimed at
providing revenue for future Norwegian generations in the event that
revenue can no longer be created by the production and export of fossil
fuels.355 Third, and perhaps most importantly, CCS technology was
developed as a primary method of avoiding excessive carbon taxation.356

This technology may prove to be beneficial to both the economy and the
environment of not only Norway, but also of concerned nations around the
world.357

While Norway has taken great strides in the fight against greenhouse
gas emissions, the rest of the world has taken action as well.35 8  The
European Union has taken a leading role and has created a large, verifiable
marketplace to trade emissions allowances across the EU and incoming
Member States. 3 9 The EU ETS has been painstakingly developed and
refined and is currently mandated for all Member States.360 The EU ETS
strategy to reduce emissions in the EU is working within the Member States
and is producing cooperation in many areas with non-Member States,
including Norway.3 61

After two decades of aggressively pursuing a strict emissions
reduction strategy, the results of Norway's efforts remain mixed.362 Several
positive benefits have occurred, but the actual emissions reductions are less
than hoped for, given the aggressive policies.6 Once the EU began
actively pursuing an emissions reduction strategy that was based on a

351. See discussion supra Part II.
352. See supra notes 129-141 and accompanying text; discussion supra Part II.A.
353. See supra notes 131-134 and accompanying text.
354. See supra notes 135-141 and accompanying text.
355. See supra notes 135-141 and accompanying text.
356. See discussion supra Part II.B.
357. See discussion supra Part II.B.
358. See discussion supra Part III.
359. See discussion supra Part III.B.
360. See EU Emissions Trading System (EU ETS), supra note 189.
361. See discussion supra Part Ill.E.
362. See discussion supra Part IV.
363. See discussion supra Part IV.A.



2011] TRACING THE STEPS OF NORWAY'S CARBON FOOTPRINT 357

system of allocation rather than a direct tax, questions emerged as to
whether Norway would abandon its current path.36 However, the result has
been that the EU's efforts have spurred Norway to forge ahead, combining
its own strategies with many of those included in the EU plan.365 Norway
has rededicated itself to the pursuit of meaningful change by continuing,
and likely expanding, its current carbon taxation along with incorporating
cooperation with the EU ETS strategies.

Norway is a prime example of what can be accomplished by a small
country that is dedicated to making a difference. Although Norway's
economy is heavily reliant on energy production, Norway still took a
difficult and dedicated stance to reduce the harmful environmental effects
of fossil fuel production and use. 6 While there have been bumps in the
road, and not all of Norway's goals have been met as far as emissions
reductions are concerned, many positive benefits have been realized.3 68 If
true progress is to be made in the fight against global warming, the
countries of the world must seriously evaluate and utilize the information
that can be gained from Norway's two-decade long fight to reduce carbon
emissions and improve the future of the planet.

364. See discussion supra Part IV.B.
365. See discussion supra Part IV.B.
366. See discussion supra Part IV.B.
367. See discussion supra Part II.
368. See discussion supra Part IV.C.
369. See discussion supra Parts II, IV.