The Nordic Energy Markets and Environment

image of The Nordic Energy Markets and Environment

Natural resources and political priorities have formed the energy sector through the last century. Especially the development of grid-dependent energies such as electricity, district heat, and natural gas has been driven by central planning and heavily influenced by political priorities and the endowment of domestic energy resources. Large natural resources of geothermal energy and hydropower made it natural to include these resources in the fuel mix in some of the Nordic countries. The widespread use of fossil fuels in power generation in Denmark and Finland implies that the environmental effects in terms of green house gas emissions from electricity supply are much larger in these countries than in the other Nordic countries. The Nordic countries have applied energy-related taxes and subsidies to renewable energy sources for decades in order to impact the use of energy and hence the CO2 emissions as well. Energy taxes and emission trading schemes imply increased prices and a reduction in demand depending on price elasticities, technology improvements, and the availability of cost-efficient emission reductions options. Demand for electricity in the Nordic countries is not very price elastic in the short-run, but the emission level can nevertheless be affected by energy taxes due to an overall long-run increase in energy prices and prices of energy-intensive goods via higher production costs.



Electricity Generation in the Nordic Countries

Norway is a major producer of oil and natural gas and the third largest net exporter of oil & gas worldwide (accounting for 25% of EU natural gas imports). In spite of the large natural gas resources, only 1% of the final Norwegian energy consumption onshore is based on natural gas. However, natural gas is used in the oil industry at the drilling rigs. Onshore, only one natural-gas based electricity plant is under construction and four more has received licenses. The Norwegian power supply system is based on hydropower.


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