The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001-2005

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This new report commissioned by the Environment and Finance Group of the Nordic Council of Ministers continues the tradition of reviewing the use of economic instruments in environmental policy in the Nordic countries by providing a comprehensive overview. At the same time, this report extends the country coverage and content of the report. The application of economic instruments is not only discussed for the five Nordic countries, but also for the three Baltic countries. In addition, a discussion on the opportunities and shortcomings associated with the use of economic instruments in the field of environmental policy has been undertaken. The report is a follow-up of the previous five reviews – the last was published in 2002 (TemaNord 2002:581) – and discusses the latest development of the application of economic instruments covering the time period 2001-2005.




The situation concerning electricity consumption and air pollution in Norway differs from the other Nordic countries as almost all electricity is generated by hydropower. In the Nordic countries as a whole, the liberalisation process in the electricity market is at an advanced stage as the markets have been fully open here since 2003. In addition, the Nordic region is Europe’s largest electricity trading market meaning that the four countries, Denmark, Finland, Norway and Sweden, can be characterised as one market where electricity is traded and delivered between national borders. Despite the predominance of hydropower, Norway’s industry can be seen to be rather greenhouse gas-intensive considering that the petroleum sector is responsible for 30 percent of Norwegian CO2 emissions. However, Norway was one of the first countries implementing a CO2 tax already in 1991. Norway has only limited opportunities in relation to achieving domestic reductions in greenhouse gas emissions with regard to electricity generation and, therefore, other policy measures must be considered. Still, the Norwegian government has taken an active position on energy regulation and has introduced several economic regulatory instruments over the past two decades. Furthermore, the Norwegian government has been quite active in the field of greenhouse gas abatement and, early on in 2005, appointed a new Commission which should look into the question of how Norway can become a society with low greenhouse gas emissions within a 50 year period.


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