Cutting NOx emissions - the Norwegian way

Through an agreement between the Norwegian government and business organisations, a tax was transformed into a fund for investments - and emissions began to decrease rapidly.

In January 2007, Norway introduced a tax on the emissions of nitrogen oxides (NOx) amounting to NOK 15 per kg NOx (€ 1.8/kg) emitted from ships, fishing vessels, air traffic and diesel railways, as well as engines, boilers and turbines used in manufacturing industries.

The tax system applies to larger units, i.e. those with a capacity greater than 10 megawatts for boilers and 750 kilowatts for propulsion engines onboard ships.

The NOx tax is also imposed on offshore flaring and onshore oil and gas installations. At the time of introduction, the tax covered approximately 55 per cent of total Norwegian NOx emissions.

Regarding shipping, the tax applies to emissions from ships in Norwegian territorial waters irrespective of their nationality. Specifically for Norwegian registered vessels, the tax applies to emissions in “near waters”, which are defined as those within 250 nautical miles of the Norwegian coast. Ships in international traffic are generally exempt, including vessels operating in direct traffic between Norway and foreign ports.

Shortly after the introduction of the NOx tax, in May 2008, fourteen Norwegian business organizations entered into an agreement with the Ministry of the Environment. By committing to jointly achieve a 30,000 ton emission reduction over four years (2008–2011), the enterprises participating in the Business Sector’s NOx Fund are relieved from the fiscal NOx tax – instead they pay a charge of NOK 4 (€ 0.47) per kg NOx into the Fund. (The charge is set higher for the offshore sector, at NOK 11 (€ 1.29) per kg NOx.)

More than 95 per cent of the emissions (about 100,000 tons) that were initially subject to the tax are now instead covered by the agreement. As a result, the NOx Fund is expected to allocate some NOK 1,800 million to NOx reduction projects over the four-year period.

Participants in the NOx Fund can apply for grants to finance NOx abatement measures. With assistance from Det Norske Veritas (DNV), the board of the NOx Fund selects the most cost-effective NOx reduction projects, which may receive up to 75 per cent of the investment costs. The fund will also support operational costs, such as urea that is used in selective catalytic reduction (SCR) systems. It is estimated that approximately 80 per cent of the reduction will come from maritime projects onboard vessels.

According to the NOx Fund, the grants have boosted investment in NOx abatement techniques, such as SCR and engine modification onboard ships. They have also spurred more than 25 ships to run on gas instead of marine fuel oil – a measure that not only cuts NOx emissions by 90 per cent, but also lowers emissions of carbon dioxide by about one fifth.

A closer look at the abatement measures eligible for grants, based on the 530 applications in place by January 2010, demonstrates that the fitting of SCR to ships is expected to deliver approximately half of the total NOx reduction by 2011. Engine modifications will contribute 15–20 per cent, and propulsion by gas some 10 per cent. Other measures on ships include Humid Air Motor (HAM) and Exhaust Gas Recirculation (EGR).

Measures undertaken under the NOx Fund until the end of 2009 have been estimated to cut emissions by close to 12,000 tons. Projections for the following two years foresee additional reductions, and by the end of 2011 the programme is expected to have fulfilled its commitment – taking into account that the original commitment of a 30,000 ton reduction was lowered somewhat as a result of improvements in emission data for ships showing that earlier emission factors were somewhat exaggerated.

Introduction of the NOx tax was motivated by the need for Norway to quickly achieve additional NOx reductions in order to meet the 2010 national emission ceiling laid down in the 1999 Gothenburg Protocol under the Convention on Long-range Transboundary Air Pollution.

Work is now in progress under the Convention to revise that protocol, and to set new, stricter emission ceilings to be attained by 2020. The new agreement is expected to be finalised within the next two years or so.

In light of these developments, the Business Sector’s NOx Fund is now preparing for an extension of their agreement with the Norwegian state. The existing agreement includes such an option, and negotiations to this effect will take place this spring.

Christer Ågren

For more information: www.nho/nox/english

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