Ole Jacob Sending

Research director at NUPI

The European Green Deal – launched at the end of 2019 – is not just a climate strategy, but a strategy for economic growth and competitiveness: the so-called taxonomy will turn investment towards green energy, and the Carbon Border Adjustment Mechanism (CBAM) is a climate tariff to prevent countries with less ambitious climate measures from gaining competitive advantage.

One of President Biden’s first actions in office was to sign the United States back into the Paris Agreement. He has made former Secretary of State John Kerry his climate envoy and placed him on his National Security Council and has established a new White House office to coordinate a “whole-of-government” approach to climate change.

The consequences will be felt in all policy areas and will challenge how the Norwegian administration handles climate issues.

Ole Jacob Sending, research director at NUPI

Both the US’ and the EU’s climate policies represent something new, positioning climate as a defining goal for all policy. For Norway, the EU’s Green New Deal will have the greatest significance. The EU is now in the process of reviewing all rules, procurement and subsidy schemes with a view to revising them with a green focus.

Some of these will have an impact directly via the EEA agreement, while others will have consequences through Norway’s cooperation with the EU on energy and climate. The consequences will be felt in all policy areas and will challenge how the Norwegian administration handles climate issues, not least by making climate applicable in almost all policy areas.

This political shift is also reflected in how market participants have already changed their behaviour, with a distinct upswing in investments in green technology and adaptation to an emerging paradigm of circular economy and green energy.

In many countries, the distribution of burdens and adjustment costs between groups in the population will be the source of lingering political conflict. For example, in several EU countries where the energy mix still consists of large amounts of coal, this will characterize official policy, which may also delay elements of the EU’s New Green Deal.

EU vil på sikt ut av gass, og Norge mister da sitt viktigste marked for gasseksport.

Ole Jacob Sending, research director at NUPI

There is a geopolitical dimension in the climate policy of both the EU and the USA. Although the EU has recently concluded a trade agreement with China and is more cautious in its criticism than the United States, the emphasis on circular economy and green technology is also intended to reduce economic dependence on China.

A key question will therefore be whether climate can be an issue where the EU, USA and China can come together and agree on ambitious policies, or whether climate issues can also be politicized and read into an already ongoing rivalry (especially between China and the USA).

For Norway, this change of pace in climate policy in the EU and the US means increased economic and political risk. When climate becomes more important for other countries, the position of an oil and gas producer becomes more vulnerable. The EU will eventually replace gas with greener solutions, and Norway will then lose its most important market for gas exports.

In order to maintain good relations with close allies, and capture the attention of key EU countries, Norway will have to adapt to a world where green transition and technology are traded as hard currency.

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