Norway and the EU on a collision course on climate change

The government will supply electricity from land to Norwegian oil platforms. The EU will counter that.

The EU is in the process of implementing new financial rules. The goal is to manage large amounts of private capital for sustainable investments.

The background is the Paris Agreement and the EU’s goal of net zero climate emissions by 2050.

But for Norway, the rules can spell trouble.

As it stands now, the EU will try to divert the European willingness to invest away from one of the most important Norwegian climate measures: replacing gas-fired power plants on Norwegian oil rigs with land-based electricity.

This measure, according to Climate Minister Sveinung Rotevatn (V) and Oil and Energy Minister Tina Bru (H), is absolutely necessary for Norway to achieve its climate goals.

– If we do not reduce emissions from our largest source of emissions, it will not be easy to achieve any Norwegian climate goal, says Rotevatn.

The oil industry is for itself

It is expensive to stretch power cables from land to far out into the North Sea.

However, the oil industry has presented comprehensive electrification plans. This is after an increase in the price of CO₂ quota in the EU quota trading system and an increase in the CO₂ tax in Norway.

This results in lower emissions in Norway. The overall effect is more uncertain. The released gas will be sold and burned elsewhere, but a mechanism in the EU’s quota system can guarantee a global effect.

The two ministers believe that the measure, in any case, translates into lower emissions, because emission points are eliminated, in this case gas power plants.

– The goal is to move the dirtiest fossil power first. And gas also replaces a lot of dirty energy in Europe, p. Eg coal power plant. It happens, that is one of the reasons why they have managed to reduce their emissions. The more renewable you build, the more you shift to the other extreme, says Bru.

The EU agrees with the MDGs

But the EU so far is not convinced.

Now we come to the new financial rules. The European Commission recently sent around 500 pages of new financial rules for your consultation.

They are expected to be adopted by the European Commission in early 2021 and are scheduled to come into force on January 1, 2022.

The EU plan is to establish a common European classification system that specifies which economic activities will be considered sustainable. The system has been called the EU taxonomy.

What is not included in this will be considered unsustainable.

Aftenposten has asked the EU delegation in Oslo how the electrification of Norwegian oil production will be categorized.

After consulting with colleagues in Brussels, Thomas Berntsen responds in delegation:

“The taxonomy will generally not include activities that will extend the life of fossil fuels, although they provide relative improvements.”

This means that the electrification of oil is out of the question.

Previously, various sustainability experts had reached the same conclusion with NRK and Teknisk Ukeblad.

The Minister of Climate: – We will see

The government is not concerned, Rotevatn says.

– Regardless of the taxonomy and the guidelines you envisage for private investment, in any case we will focus on low-emission technology, also towards the sea. It is important to reduce Norwegian national emissions and for Norwegian subcontractors and jobs.

He stresses that the EU rules have not been finally adopted. Much will be landed in the coming months.

The Minister of Climate Affairs admits that there is “a discussion” in the EU about whether it is problematic to reduce emissions in the production of fossil energy.

– We will see how that debate ends in the EU, it is not a fact that it is there where it ends.

– Are Norwegian diplomats working with this at full speed in Brussels now?

– We always work flat out in Brussels with all matters involving Norwegian interests. But above all, we are very supportive of the taxonomy mentality.

It can have major consequences for Norway

Andreas Lowzow is a partner and head of the sustainability department at the law firm Schjødt.

It confirms that the electrification of Norwegian oil production is not likely to be classified as “green” under new EU regulations.

Regulations stipulate, for example, that ships designed to transport oil and gas should not be considered green, even with zero emissions.

– The same can be said for the production of energy that is only intended for the operation of oil platforms. It hardly contributes significantly to the transition to a global zero emissions society and will be able to extend the time that oil and gas are produced on the Norwegian shelf.

Lowzow believes that the consequences for Norway could be great. In the first instance, the rules will apply to financiers and listed companies. They must publicly report how much they sell or finance in “green” businesses.

At the same time, the EU will generate new large bond debt to stimulate the economy after the corona pandemic. The EU now proposes that one third of this should be used according to the ecological criteria of the taxonomy.

But this is only the beginning. Lowzow describes the taxonomy as a roadmap for activities and industries that the EU wants and does not want in the coming decades.

• It can be more expensive and more difficult for different industries to obtain a loan.
• The depreciation rules can be changed for green investments.
• Interest rates can be activated.
• Funding for research may be more difficult.
• Public procurement rules are subject to change.
• It can be more difficult to get support for projects that are not green.

And so. The central bank and the EU banking supervisor are already considering relaxing the capital requirements for bank financing of green activities.

– We have not yet seen the effects of this on the capital markets, but the EU’s ambition is to advance approx. 260 billion euros a year for the next few years for green investments.

But he’s pretty sure the “brown companies” stocks will go down in value.

Equinor does not have an overview

Equinor invests heavily in electrification to meet its climate commitments. So far, the company does not have an overview of how EU rules will affect them.

– We are now examining the draft EU taxonomy that is being consulted. It’s a lengthy job, and it’s too early to conclude how this will affect Equinor, says press contact Rikke Høistad Sjøberg.

He adds that companies have ambitions for climate-neutral operations by 2030.

– Our electrification projects are an important part of the work to reduce emissions.