DEVNET – Zero Carbon emissions-Norway’s efforts

Masahiro Tauchi – Advisor of DEVNET JAPAN – Former Ambassador of Japan to Norway

  1. Ammonia fuel

Yara International of Norway will use renewable energy to produce ammonia in Australia in 2023, cultivating fuel demand of the Japanese thermal power plants according to the Nikkei Shinbun on 8 July 2021. Yara is one of the world’s leading ammonia manufacturers headquartered in Oslo, Norway. It produces about 8.5 million tons of ammonia annually. Yara employs a fleet of 11 ammonia carriers, including 5 fully owned ships.

Ammonia does not emit carbon dioxide (CO2) when burned, so it is expected to be used as an alternative fuel. Yara has also recently set up a clean ammonia department to use ammonia as a clean energy source with zero emissions in shipping, power generation, fertilizers and other industries.

According to the JERA release on 24 May 2021, JERA, in which TEPCO Holdings and Chubu Electric Power have a 50-50 stake, plans to convert 20% of coal, which is fuel, to ammonia at the Hekinan Thermal Power Station (Aichi Prefecture, Japan) from 2024. It is considered that Yara expects to supply ammonia to JERA. The technology of Ammonia production and transportation has been established and its production and transportation can be done using the existing infrastructure including power plants. Therefore, ammonia is easier to handle than hydrogen, and needs a lower total power generation cost. Compared to the current situation, power generation costs will increase by 20%, but carbon dioxide (CO2) emissions will also be reduced by 20%.

It was also announced by the Yara corporate release on May 11, 2021, Yara International signed a memorandum of understanding with JERA. They announced that they have agreed to cooperate in the development of production, transportation and supply chains of blue ammonia and green ammonia in order to realize zero-emission thermal power generation in Japan. Yara produces ammonia at a plant in Pilbara, northwestern Australia, but blue ammonia produced from fossil fuels such as natural gas is used as clean energy by separating and sequestering carbon dioxide generated during production. In addition, at the Pilbara plant, from 2023, hydrogen will be produced through electrolysis of water using the electricity generated by solar power plant, which is a renewable energy, and they produce green ammonia through the reaction of hydrogen with nitrogen.

  1. Norwegian EV policy

Norway is not a member of the EU, but has been in step with the EU to reduce greenhouse gases. Norway has participated in the EU Emissions Trading System (EU-ETS) since 2008, and on October 25, 2019, Norway and Iceland agreed to cooperate with the EU on climate change countermeasures to meet EU reduction targets. They became the same position as the EU member states and this has also strengthened cooperation with the EU on emission reductions in sectors not covered by the EU-ETS (agriculture, transportation, waste, construction).

Reduction measures from the transport sector are targeted in the National Transport Plan 2018-2029 to reduce emissions from the transport sector by 50% by 2030. In particular, all passenger cars registered as new cars after 2025 will have zero emissions, and there is a tax incentive system for electric vehicles and a mechanism to subsidize the purchase of electric vehicles. As a mechanism of assistance, preferential treatment such as free parking at public parking facilities, toll road toll exemption, ferry toll exemption leading to national roads, and bus lane passage permission have been adopted. The cost of the countries and local governments that take these incentives is also very high (NOK 19.2 billion or USD2.15 billion), so the incentives for electric vehicles are gradually being reduced, but the national standard in which the burden on electric vehicles is provided to be less than half that of gasoline vehicles is still maintained.

Charging stations for electric vehicles have also been developed, and 17,100 locations are available nationwide. Due to these incentives, electric vehicles have become the mainstream in Norway, so 54% of newly registered vehicles in 2020 was electric vehicles.

The Norwegian government has further set the following goals.
-All passenger cars and light vans sold will have zero emissions by 2025.
-Bus in all cities will have zero emissions or use biogas by 2025.
-By 2030, zero emissions for all heavy vans, 75% of new coaches, and 50% of new trucks.
-The distribution of freight in the largest urban centers shall have almost zero emissions by 2030

  1. Norwegian positions to the CBAM (Carbon Border Adjustment Mechanism)

Carbon Border Adjustment Mechanism (CBAM) is planned to be provisionally introduced to EU countries in 2023. The dues will be imposed on imported products subject to CBAM from outside the EU. The amount of such dues corresponds to the carbon price based on the EU Emissions Trading System (EU-ETS) when a business operator in the EU manufactures the same product in the region. Behind this, there are concerns about so-called carbon leakage, such as the relocation of production bases outside the EU and the increase in imports from outside the EU, as the EU tightens greenhouse gas reduction regulations.

The targets of this measure are cement, iron / steel, aluminum, fertilizer, and electricity, which have particularly high risk of carbon leakage.

However, Norwegian industries are major providers of such materials and these energy-intensive industries are already subject to the EU Emissions Trading System (EU-ETS). In order to mitigate the difference in international competitiveness with the countries outside EU, Norway has adopted a scheme such as free allocation of EU emission quota or compensation for the increased electricity price due to the EU Emissions Trading System (EU-ETS).

Therefore, the Norwegian government (although Germany is in a similar position) will not abolish such compensation schemes at the same time of the introduction of the Carbon Border Adjustment Mechanism (CBAM), but will take into consideration its international competitiveness and extend the compensation scheme in an appropriate range. In addition, Norwegian companies should not be targeted by CBAM because there is no risk of carbon leakage between the EU and Norway. It is imperative, Norway says, that the new regulations be designed to comply with WTO regulations and other international rules, while the new system itself should be effective and transparent. It states that a verifiable method for calculating the quantity of carbon contained in the products directly and indirectly should be adopted.