1 Emission projections Norwegian approach Projection Expert Panel Dublin, Oct 25th 2007 Anne Kristin Fosli, Ministry of Finance Senior Adviser

Finansdepartementet 2 Outline Methodologies and models Authorities involved Main characteristics Challenges

Finansdepartementet 3 Demand for projections increases.. Emission projections are carried out minimum every fourth year in conjunction with the preparation of the White Paper to the Parliament: ”Long Term Economic Prospective” Projections and analysis regularly published as a part of the White paper ”Long Term Prospective” Projections are carried out and coordinated by Ministry of Finance in close cooperation with The State Pollution Control Authorities The need for updates and partially updates have increased for policy purposes, as Kyoto- and Gothenburg commitment years approaches Updates are published in National Budgets and Revised National Budgets Lately, huge focus on ”without measure scenarios” to document action and effects of policies

Finansdepartementet 4 Methodology Projections both for GHG gases and LRTAP (nmVOC, SO 2 and NO X ) are based on a macroeconomic model called MSG (Multi Sectoral Growth) An emission calculation model and electricity demand model are included in MSG Supplemented by micro-information and branch studies Projections for non- CO 2 GHG- gases emissions are based on information from concerned sectors and consistent with macroeconomic projections NH 3 projections based on projections on animal stock and agriculture policies

Finansdepartementet 5 Authorities involved Ministry of Finance is responsible for the production and publishing of the official emission projections, and activity data fed into the MSG (including energy data) The Norwegian State Pollution control is responsible for the production of emission projections of non- CO 2 GHG gases Ministry of Oil and Energy is responsible for the annual projections of the emissions from the Petroleum sector Ministry of Agriculture and The Norwegian State Pollution are responsible for projections of NH 3

Finansdepartementet 6 Characteristics of the MSG model A general equilibrium model All resources fully utilized Producer behaviour is characterized by monopolistic competition in the domestic market. Pricetakers on the world market Highly disaggregated Detailed description of the markets for energy and transport 40 private production sectors 7 public sectors 17 private consumption sectors Four energy carriers Long term projections are sensitive to assumptions on population growth, technological progress and the development of prices in international markets

Finansdepartementet 7 Assumptions – supply and use of electricity 99% of Norwegian mainland electricity production based on hydropower The production of renewables (water and wind power) is exogenously determined Marginal long term cost of electricity produced by natural gas decides long term electricity prices in the reference scenario Requirements of CO 2 capture and storage on natural gas fired power plants in Norway make natural gas fired power plants not profitable in Norway Assumptions on electricity demand, particularly from energy intensive, are important Imports covers up electricity balance

Finansdepartementet 8 Assumptions – price of crude oil

Finansdepartementet 9 Emission calculation model 12 pollutants Emissions are a function of activity and emission coefficients Emissions coefficients are exogenous Relationship between activity and emissions based on historic observation Coefficients are related to emitting activities as production and consumption activities, input of materials, energy inputs and landfill Microinformation, used to adjust or overrule model results

Finansdepartementet 10 Emission model..cont. Statistics Norway develop and update the Emission calculation model in collaboration with The Norwegian State Pollution Control Emission calculation model are updated on the basis of historical emission data and takes into account the effects of adopted environmental policies, technological change etc. Update of model is done every fourth or fifth year

Finansdepartementet 11 Net domestic energy use Petajoule

Finansdepartementet 12 Energy use in Norway Petajoule

Finansdepartementet 13 NOx- emissions and national projections Effect of NO X tax/negotiaton with Government on NOx reduction not included in projections

Finansdepartementet 14 Challenges Conflict of interest: Economic projections versus emission projections (level of aggregation) Intersection between macro and micro level in the medium term Scenario analyses – definition of BAU ? How to deal with ”voluntary agreements” in projections and scenarios when measures and emission reductions would be achieved anyway? Reporting issues-  Compiling energy projections from emission projections for various formats  Level of details

Finansdepartementet 15 Summing up Emissions projections consistent with overall macroeconomic projections Combination of a top down and a buttom up approach Macroapproach to emissions mainly driven by energy use Microaproach:  non- CO2, GHG- emissions  processing industry  road traffic  petroleum sector Micro level and micro information more relevant and available for medium term than long term