The Copenhagen conference will be a milestone in setting the world on the right track to a low- emission future. Global warming must be limited to no more than 2°C to avoid devastating consequences.
We need global co-operation on an unprecedented scale to transform our country and others to a low-emission economy. All enterprises and all consumers must have strong incentives to make climate-friendly decisions. One reliable way to make that happen is to put a price on carbon emissions.
By doing this, climate-friendly technologies and practices will gain an advantage at the expense of high-emission alternatives. A price on carbon can be introduced either through a tax or a system of cap-and-trade. Norway has long experience in pricing carbon – we introduced a CO2 tax in 1992. Now we have established a cap-and-trade system, which is linked to the European Union cap-and-trade system, with the most restrictive amount of allowances.
As one of the world’s biggest oil-and gas-exporting countries, Norway feels a special responsibility to combat climate change. After all, the use of fossil fuels is one of the major causes of human-made global warming. Norway is prepared to use some of its oil fortune to finance climate efforts throughout the world. The Norwegian Government Pension Fund has directed about one per cent of its funds, or $4bn, into “green shares” targeting investments in the developing world.
I would like to highlight the importance of such long-term investment strategies with respect to the transition to a low-carbon economy.
In addition to emissions reductions, the provision of predictable and sufficient financial resources to support climate action is a key global question.
The carbon market represents a significant source of financing. Norway has proposed the establishment of a new and innovative mechanism to finance climate needs; a mechanism that is predictable and independent of annual national budget decisions. Our proposal is that a certain percentage of the allowances in the global carbon market should be auctioned internationally. Revenues from this auction could potentially generate around $20bn per year, depending on the carbon price and the demand for allowances. A lot of this money should be earmarked to helping poor countries adapt.
Reducing emissions from deforestation and forest degradation – without which the goal of limiting global warming to 2°C above pre-industrial levels will be almost unachievable – will also require public finance. An effective regime for doing so should be results-based and incentive-driven. Co-ordinated global action and an early start is essential. Norway has committed to allocate up to NOK 3bn a year to stimulate early efforts to reduce greenhouse gas emissions from deforestation and forest degradation in developing countries. I hope that other developed countries will follow Norway’s example.
An important challenge in the climate change negotiations is to bridge the gap between the rich and the poor countries, and Norway’s policy regarding deforestation is one contribution to that.
Erik Solheim is Minister of the Environment and International Development, Norway.