Professor Ross Garnaut recently compared Australia and Norway in the context of climate change policy and a carbon tax. It is both curious that he should choose this comparison and that no journalist, as far as I am aware, has thought to question it.
In his report, Prof Garnaut states that Norway is the “only other developed country with endowments of fossil fuels that are in any way comparable to Australia’s” (The Garnaut Review 2011, p. 52).
He also set the stage during his speech in Perth at the John Curtin Institute of Public Policy breakfast meeting, 2 June 2011, by stating that Norway has a larger endowment of hydrocarbons per capita than does Australia, and yet exhibits lower per capita emission.
The argument then led to the fact that Norway has had a carbon tax since 1991, with the clear implication being that the lower emissions were due to the tax.
Is this point of comparison relevant to the debate? Should we make a comparison with a country that Australia may actually emulate? If so, Norway definitely is not the country of choice.
While Norway may be comparable in terms of fossil fuel endowment, it uses virtually none of this endowment to generate its electricity. It primarily exports its produced hydrocarbons.
By contrast, the electricity generation sector of Australia is heavily fossil fuel reliant. Perhaps more importantly for the thrust of Prof Garnaut’s argument, Norway has not used its fossil fuel endowment to produce electricity since well before it introduced a carbon tax.
This is relevant for policy comparisons because the thrust (at least implicitly) of Prof Garnaut’s argument is that Norway’s introduction of a carbon tax has led it to be a relatively lower emitter than Australia.
Norway produces nearly all of its electricity from hydroelectricity projects. In 2008, 98.5% of Norway’s electricity production came from hydro, and less than 0.05% came from fossil fuels of any form.
Just over 0.75% percent of Norway’s electricity production came from geothermal, solar, and wind renewable sources, whereas these sources represented 1.6% of Australia’s production. Neither country registered any geothermal, solar, or wind capacity in 1990. These numbers are readily available in the International Energy Agency publication Electricity Information 2010.
In terms of installed capacity by generation type, in 1990 (the year before the introduction of a carbon tax) hydro accounted for 99.1% of capacity in Norway. In 2008, the share was 96.6% of total installed capacity.
Given the relative status between installed generation capacity and actual production, the non-hydro installed capacity was relatively underutilized; 98.5% of production coming from 96.6% of the capacity.
Both coal and natural gas generation capacity increased over this period with the carbon tax in place.
It is also useful to note that Australia’s population is about 4.5 times larger than Norway’s. Australia consumes about 9.9 TWh of electricity per million population, while Norway consumes about 23.5 TWh per million population.
Finally, an article published in the peer-reviewed journal Energy Policy in 2004 (Greenhouse gas emissions in Norway: do carbon taxes work?“, A. Bruvoll and B.M. Larsen) shows that total CO2 emissions in Norway continued to increase after the imposition of the tax. While CO2 emissions intensity declined by 14%, the carbon tax could only be credited for 2%.
According to this study, there were a range of carbon taxes, differing according to the type of fuel. In 1999, the highest tax was US$51 per tonne of CO2, which led to the carbon tax constituting 13% of the purchaser price. Coal was assessed at US$24 per tonne and US$22 per tonne for auto diesel.
Hence, with higher carbon taxes than those contemplated by the Australian Government emissions continued to rise and only a small fraction of the reduction in CO2 emissions intensity are be attributed to the tax.
The Norwegian carbon tax failed to produce a reduction in CO2 emissions even in a country with almost no hydrocarbon-based electricity generation.
There is no way for Australia to replicate the electricity generation mix found in Norway. Australia already has increased the share of geothermal, solar and wind in its generation mix by more than Norway without a price on carbon.
The populations between the two countries are radically different, as are the levels of electricity use.
So, how is Norway or its policies a relevant basis for a comparison with Australian climate policy? And is the lack of significant emissions-reduction effect attributable to a carbon tax really a selling point for a similar tax here?