1 Norwegian baseline Bilthoven June 2009 Marte Sollie, Ministry of Finance

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

Finansdepartementet 3 Authorities involved Ministry of Finance is responsible for the production and publishing of the official emission projections, and the activity data fed into MSG (including energy data) The Norwegian Pollution Control Authorities is responsible for the production of emission projections of non-CO 2 GHG 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 Statistics Norway’s road model

Finansdepartementet 4 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  40 private production sectors  7 public sectors  17 private consumption sectors Detailed description of the markets for energy and transport Four energy carriers Long term projections are sensitive to assumptions on population growth, technological progress and the development of prices in international markets

Finansdepartementet 5 Key macroeconomic assumptions

Finansdepartementet 6 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 (without CCS) determine long term electricity prices in the reference scenario Assumptions on electricity demand, particularly from energy intensive industries, are important Import meets excess demand – electricity balance

Finansdepartementet 7 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 depend on emitting activities such as production and consumption, input of materials, energy inputs and landfill Micro information, used to adjust or overrule model results

Finansdepartementet 8 Net domestic energy use Petajoule

Finansdepartementet 9 Energy use in Norway Petajoule

Finansdepartementet 10 Emissions of green house gases Million tonnes of CO 2 -equivalents

Finansdepartementet 11 Emissions of NO X and NH tonnes

Finansdepartementet 12 Emissions of SO 2 and VOC 1000 tonnes

Finansdepartementet 13 Summing up Emissions projections consistent with overall macroeconomic projections Combination of a top down and a bottom up approach Macro approach to emissions mainly driven by energy use Micro approach:  non-CO 2 GHG emissions  processing industry  road traffic  petroleum sector  agriculture Micro level and micro information more relevant and available for medium term than long term