As Europe and the rest of the world struggle with adopting strict guidelines on greenhouse gas emissions Norway is proving to be an interesting case study on both the success and the failure of carbon taxes or a cap-and-trade system.

Norway first started fighting this battle as far back as 1991 when the country imposed a carbon tax of $65 a ton on the oil and gas industry versus Europe’s current $35 per ton in it’s cap-and-trade system.

The result of this stiff tax was that the oil and gas industry has become the greenest in the world emitting just 39% of the industry average.  That sounds like great news except that due to the explosion in energy prices overall emissions have increased 15% instead of falling.  So the tax really hasn’t had it’s desired effect.

Other problems still plague the effort to reduce greenhouse emissions.  For example Norway’s Post Office uses heavy-pollutiing trucks to deliver 95% of the mail to residents.  The Post Office is trying to modify the fleet to a greener alternative but is finding that to be a difficult task with so many people living in rural areas. That leads to another potentially even larger problem. Despite gas prices that average $9-$10 a gallon the number of registered cars has increased 27% in the last decade.  That coupled with the two thirds of Norwegians living in the country who are mostly willing to pay just about any price it seems to maintain their current lifestyle it doesn’t look like that they will be making any big effort to reduce emissions on their own.

Norway has benefited from a rapid expansion in GDP which has far outstripped the rise in emissions so they haven’t suffered as a result of the carbon taxes that have been imposed.  But that is not the case for most of Europe where growth has been sluggish to say the least and the imposition of a cap-and-trade system threaten to choke off what growth is left.

The bottom line is that with economic growth which every country needs will result in the increased output of emissions, and if GDP rises at a faster clip than emissions the country actually benefits in the long run. Trying to create and artificial system to keep emissions in check will throw participating countries into economic turmoil at a time they can least afford it.

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