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  • Service: Tax
  • Type: Regulatory update
  • Date: 9/24/2014

Norway 

Taxes and Incentives
Norway Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

Investment and other subsidies


Energy Fund


The state-owned corporation Enova is the driving force for an environmentally friendly energy conversion by private and public enterprises. Enova’s main commission is through the Energy Fund that supports environmental change in the use and production of energy. The management of the Energy Fund is governed by an agreement between the Ministry of Oil and Energy and Enova. Enova manages the EU program (Intelligent Energy Europe) and the International Energy Agency (IEA) program. In addition Enova, inter alia, represents the IEA activity Energy Technology Data Exchange (ETDE) in Norway.


Enova offers financial support based on defined programs for various renewable energy and environmentally friendly projects based on an application principle. In 2013 the Energy Fund supported 1 350 new projects within energy effectiveness, conversion and increased utilization of renewable energy amounting to approximately 1.8 billion Norwegian krone (NOK).

Other allowances


The General Tax Act includes regulations regarding tax allowances known as SkatteFUNN to support R&D project costs. Under the SkatteFUNN scheme, any type of business enterprise engaged in R&D activities may apply to the Research Council for support for R&D projects. Support is granted in the form of a tax deduction, and in certain cases direct funding to the company. R&D projects under the SkatteFUNN scheme are aimed at obtaining new knowledge or technical skills that can benefit the company in connection with the development of new or improved goods, services or means of production. The total tax allowance may not exceed NOK22million per company per year.

Operating subsidies

Feed-in tariff


There are no national-based feed-in tariffs in Norway. However, there is a green certificate scheme.


Premium


Electricity certificatescertificates


The issuance of electricity certificates is an economic subsidy scheme that will make it more remunerative to invest in power production based on renewable energy sources such as hydro, wind, solar and bio energy. The scheme is regulated by the Green Certificates Act.


The Norwegian government has entered into an agreement with the Swedish government establishing a common electricity certificate market for electricity that will contribute to increased production of renewable energy. Moving toward 2020, Sweden and Norway will increase their power production from renewable energy sources with 26.4 TWh. Power plants that are included in the scheme receive electricity certificates that can be sold in the Norwegian-Swedish electricity certificates market. Power suppliers and certain power users are required to purchase electricity certificates for a share of the electricity they sell or use.


The following power producers may apply, subject to certain requirements, for electricity certificate approval for whole or parts of its production based on its total production:


  • power plants based on renewable energy sources and built after 7 September 2009
  • hydro plants generating 1 MW and built after 1 January 2004
  • existing renewable power plants that permanently increase their electricity production with new construction beginning on or after 7 September 2009.

Any entity that delivers power to end consumers is obliged to purchase electricity certificates, and it is the end consumer who finances the scheme through increased costs when invoiced for usage. The electricity certificate scheme is managed by the Norwegian Water Resources and Energy Directorate.


Figure 1


Quota obligation


Starting in 2008, the Norwegian emissions trading system for greenhouse gas (GHG) emissions expanded to include nearly 40 percent of the emissions related to Norway. It is also affiliated with the European system for quotas. The Norwegian system for quota obligation applies to GHG emissions in Norway and to emissions from activities on the Norwegian part of the continental shelf.


The quota system applies to emissions in connection with:


  • energy production
  • refining of mineral oil
  • coke production
  • production and processing of iron and steel including roasting and sintering of iron ore
  • production of cement, lime, glass, glass fibre and ceramic products, as well as the production of paper, board and pulp from timber or other fibrous materials
  • aviation activities.

Any person engaged in any of the activities mentioned above is required to surrender allowances corresponding to any emissions to which the duty to surrender allowances applies. The Norwegian Emissions Trading Registry shall contain information on the allocation, issue, holding, transfer, surrender and cancellation of allowances. An operator will by 30 April each year transfer a number of allowances corresponding to the volume of emissions for which reporting is mandatory, generated by the installation in the previous calendar year to a specified settlement account in the registry.


Additional information

Indirect taxes: Indirect taxes are used as a policy instrument to reduce the consumption of products that are detrimental to the environment.


CO2 tax: Gasoline, mineral oil, gas for inland usage and petroleum activities are subject to a CO2 tax. A CO2 tax related to petroleum activities shall be paid per liter of oil and natural gas liquids and per standard cubic meter of gas burnt off or emitted directly to air on platforms, installations or facilities used in connection with the extraction or transportation of petroleum on the Norwegian continental shelf. The tax is classified as a deductible operating cost associated with petroleum activities, which contributes to reducing the ordinary tax and special tax actually paid by the oil companies.


The CO2 tax was reduced according to the estimated emissions trading price when the Norwegian emissions trading system was introduced.


Nitrous Oxide (NOx) tax: The NOx tax is calculated per kg for NOx emissions generated during the production of energy from the following energy sources:


  • propulsion machinery with a total installed capacity of over 750 kW
  • motors, boilers and turbines with a total installed capacity of more than 10 MW
  • flares on offshore installations and on facilities on land.

Enterprises that join the Environmental Agreement on NOx are entitled to a tax exemption from the date when they joined. From the same date, the enterprise will have a payment obligation vis-a-vis the business sector’s NOx Fund. According to the Participant Agreement, affiliated enterprises will develop a measure plan identifying possible NOx reducing measures within 2 years after affiliation.


The purpose of the plan is to identify profitable measures the enterprise can implement on its own accord, and to identify cost-effective NOx reducing measures whose implementation are dependent on support from the NOx Fund. As of 23 May 2014, a total of 787 enterprises, ships and rigs had joined the Environmental Agreement on NOx 2011- 2017.

 

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