ESA greenlights amendments to Norwegian CO2 compensation scheme

The EFTA Surveillance Authority (ESA) has approved amendments to the Norwegian CO2 compensation scheme. The amendments introduce an annual compensation cap and requirements to invest in climate mitigation and energy efficiency measures.

The CO2 compensation scheme compensates undertakings in certain energy-intensive industries, for increases in electricity prices resulting from the European Emissions Trading System (ETS) for the 2021-2030 period. The scheme is aimed at reducing the risk of "carbon leakage", which may follow from either a relocation of production to countries outside the EEA with less stringent climate policies or from products being replaced by more carbon-intensive imports produced outside the EEA.

ESA initially approved the scheme in September 2022 and approved amendments to the scheme in March 2023, which introduced a European Union Allowance (EUA) price floor at NOK 200 per ton. This price floor was amended to NOK 375 in April 2024. The EUA are allowances that permit the emission of one metric ton of CO2 for participants under the ETS.

Today's approval concerns two amendments to the CO2 compensation scheme:

• The first amendment concerns the removal of the price floor in its entirety, and the introduction of an annual compensation cap of NOK 7 billion per year. When the scheme's total compensation in a single year exceeds the annual payment cap, individual compensation will be proportionally reduced among the beneficiaries.
• The second amendment introduces a requirement for beneficiaries to invest at least 40% of the total aid received between 2024 and 2030 in measures aimed at climate mitigation or achieving energy efficiency.

ESA found that the amendments to the scheme do not affect its compatibility and has consequently approved the amendments.

Read ESA's decision here.

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