Norway minister: ‘Petrol and diesel engines in cars are a thing of the past’

Vidar Helgesen (centre) at the Transition to the Green Economy conference in Bratislava, 6 September 2016 [T2gE]

This article is part of our special report Transition to green economy.

Politicians should be less concerned with protecting the polluting industries of the past and invest instead in the future, said Vidar Helgesen, calling on policymakers to speed up the transition to a green economy with environmental taxation schemes.

Vidar Helgesen is Minister of Climate and Environment in Norway.

Helgesen spoke to Radovan Geist, co-founder and publisher of EURACTIV Slovakia, at the Transition to the Green Economy conference in Bratislava.

The UN climate summit in Paris last December was hailed as a landmark in global climate policy. But immediately after its closing ceremony, voices were heard saying it fell short. What is your view? Do you believe the Paris Agreement was ambitious enough?

You need to distinguish between ambition and commitment. The ambitions in Paris were indeed high. Not only in confirming the 2-degree target, but also in setting forth the 1.5-degree indicative limit.

But if you look at the ambitions in the national programmes, they’re not enough even for a 2-degree target. So what we need now after Paris is more countries to step up. We will have a global review in 2018, then a stocktaking in 2023, which will require countries to announce higher targets. And that will be the real test.

But that said, I think what we saw in Paris was extremely encouraging, not only because of the political commitment, but also business commitment. And now with the Americans and Chinese enacting the Paris Agreement nationally, this is really a landmark. We saw nothing of that after Kyoto, for example.

Large developing economies like China have become the biggest emitters of greenhouse gases. Some of them are reluctant to accept strict limits, fearing the effects on their economic development. What can developed countries do to change this attitude? Should rich countries help more to finance clean technologies or alternative development paths?

It’s too simplistic to say that governments of developing countries are reluctant to accept strict emission limits. China is the biggest investor in solar energy, moving in five years from none, to being the world leader.

Of course, there are developing countries that are less ambitious, there are some that have coal investment plans on the table, which would be really detrimental to achieving the Paris goals.

So yes, there’s something that the developed countries could do – and that’s to mobilise climate finance. Indeed, the Paris Agreement was made possible partly thanks to the fact that climate financing was put on the table. We need more climate finance, both as public finance and private investment.

The EU positions itself as a strong advocate of effective global climate policy. However, this position is undermined not only by some member countries, but sometimes also other policies – for example its support for biofuels. How can environmental goals be streamlined into other policy areas?

We are at a crossroads. There’s been a tendency in the past to look at the environmental issues as an impediment to economic growth. Now some of the largest international companies are making very clear that sustainability is good for their business, and they want governments to put in place tax regimes that would stimulate green investments, they want regulations that would require sustainable behaviour.

What governments have to realise, and to some extent already are realising, is that in order to be winners in the future, they need to have policies for building the green economy. A very good example is the European car industry, which hasn’t really played a progressive role in the European climate policies and they have had probably an outsized influence on the European Commission.

Now, because they’re fearing a competition from the US and China on electric vehicles, they change strategy, launching new electric vehicles, and calling on the EU and member states to put in place incentive schemes for consumers to go green.

We’re seeing similar changes in the financial and energy sectors. If you couple that with digitalisation and automatisation, you’ll see the potential for a major shift towards the green economy.

Politicians have to realise that if you stick to the solutions of the past, you will be a future loser. We should be less concerned with protecting the polluting industries of the past, and more concerned with building for the future.

You mentioned that private investment plays an important role in the development of a green economy. However, investment in green tech is sometimes hindered by low, or long return rates. What could be the role of public authorities? 

Each country will have to find its own way, and European policies will have to be shaped by countries coming together. What we can do as governments is put in place tax regimes that stimulate the right behaviour and penalises the wrong one, based on the “polluter pays” principle.

Tax incentives, such as the Norwegian electric cars policies, can really work. There, we can regulate. Tightening environmental regulations will benefit the companies that are greener. And we need incentives – support for R&D, innovation–where a lot is needed to bring solutions from the drawing boards, to the market.

All these things are needed, but when it comes to mobilising private investment, the way tax systems are designed is essential.

Electric cars already have a strong market penetration in Norway. Starting in 2025, your country has the goal of not selling any new fossil fuel cars anymore. Which previous measures allowed you to adopt such ambitious targets?

By now, 28% of new cars in Norway are electric or hybrid, and this is going to increase.

As a starting point, we have high taxes on cars – registration taxes, VAT. Lowering those taxes for electric cars is a huge advantage. Then there’s free parking, free road-tolls, reduced tariffs on ferries, and other advantages.

If you couple those kinds of tax incentives with the fact that the prices of electric vehicles are decreasing, the rate of electric vehicles is going up.

We have indications that by 2023, electric vehicles might be outcompeting combustion engine vehicles by price. I think that target of 2025 is achievable.

To put it simply: petrol and diesel engines in cars are a thing of the past. Whoever has driven an electric vehicle would realise that it’s so much of a nicer driving experience than driving a combustion engine vehicle.

So the Norway example was about incentives, price, and the trend.  Then, for those countries that have lower taxes on cars, they would have to put in place incentive systems, and adapt taxes on cars to fit the “polluter pays” principle.

We spoke about prices, taxes, etc. But the adoption of green technologies is also a matter of behavioural change on behalf of consumers…

We should facilitate initiatives that lead to conscious consumerism. The sharing economy, car-pooling – all this goes in that direction.

I have limited belief in what governments could to educate people, but we need to facilitate and support trends that are under way.

What has proven to be important in terms of public education, is the focus on children. School curriculums and actions taking in schools are important. In Norway, recycling and waste management have made great progress not less because kids were educating their parents.

Is a greener way of life, green technology, a matter of affluence for Norway?

If you look at the climate change challenge, the more we wait, the more expensive it gets. Floods are exceptionally costly, lost harvest are very costly and socially disruptive.

So making investments now, including changing tax systems to make polluting more expensive, and going green less expensive, does not necessarily have to be such financially demanding.

But it would require political courage, political leadership, and some upfront investment costs that might be higher as the usual ones, but the return on them, including reduction in climate risk, are definitely worth it.

Also, when we talk about investment, we do not need to think about massive changes from one year to the other. But the direction must be set, because that is what is giving the investors and households predictability. You know what will pay off in the future.

When we say in Norway that in 2025 we want no fossil fuel cars, everybody knows that maybe it might not be very smart to buy a diesel car tomorrow. These are the signals that change behavioural patterns.