Economic Sustainability
#6Key Findings
Norway performs well in international comparison (rank 6) in the category of economic sustainability.
A green transition strategy seeks to increase recycling and reduce use of materials in seven key value chains. The lack of a central ministry responsible for infrastructure has led to fragmented oversight and a lack of modernization plans. Electricity is nearly entirely produced by hydropower. Decarbonization efforts do not entail ending oil and gas production.
The welfare state labor market policies have led to high employment rates, low unemployment rates and high mobility rates. The state offers protection in cases of unemployment and reduced working capacity. Active labor market measures are an alternative to unemployment cash insurance.
Only about half of the state’s revenues come from taxes on income and consumption, with the other half coming from taxes on oil and gas extraction and rents on state investments. A fiscal rule limits spending from the sovereign wealth fund, thus maintaining budgetary discipline. The current state plan is to spend 4% of GDP on R&D by 2032.
A green transition strategy seeks to increase recycling and reduce use of materials in seven key value chains. The lack of a central ministry responsible for infrastructure has led to fragmented oversight and a lack of modernization plans. Electricity is nearly entirely produced by hydropower. Decarbonization efforts do not entail ending oil and gas production.
The welfare state labor market policies have led to high employment rates, low unemployment rates and high mobility rates. The state offers protection in cases of unemployment and reduced working capacity. Active labor market measures are an alternative to unemployment cash insurance.
Only about half of the state’s revenues come from taxes on income and consumption, with the other half coming from taxes on oil and gas extraction and rents on state investments. A fiscal rule limits spending from the sovereign wealth fund, thus maintaining budgetary discipline. The current state plan is to spend 4% of GDP on R&D by 2032.
Graph View
Graph View
How committed is the government to driving the transition toward a circular economy?
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9
9
The government is clearly committed to transitioning to a circular economy.
8
7
6
7
6
The government is largely committed to transitioning to a circular economy.
5
4
3
4
3
The government is somewhat committed to transitioning to a circular economy.
2
1
1
The government is not at all committed to transitioning to a circular economy.
The 2021 Norwegian Circular Economy Strategy identifies seven central value chains: electronics/ICT, batteries and vehicles, packaging, textiles, plastics, construction, and food, mirroring EU initiatives. The current government has signaled a new national strategy, but this has not materialized as of December 2023. Generally, the current government uses the term “the green transition” rather than the circular economy.
Several sectoral strategies have been developed by interest associations and various coordinating networks, sometimes involving representatives from public sector authorities, such as Statistics Norway and the Environmental Agency. The most important driver for regulatory change regarding the circular economy in Norway is the EEA agreement, which integrates Norway into the internal market. Most legislative changes related to the Commission’s Circular Economy Action Plan are likely relevant to the EEA, making all related regulations applicable to Norway. The formal Norwegian reactions to proposed policy changes have been mostly positive.
There are binding legislated targets for material recycling in household waste: for organic waste, 55% by 2025, increasing to 70% by 2035; and for plastics that can be materially recycled, 50% by 2028, increasing to 70% by 2035. The Tax Reform Commission (Skattelovutvalget) of 2022 mentioned tax reform for a circular economy, but as of December 2023, this has not produced any observable consequences.
The EU Court of Auditors Special Report 17/2023 concludes that achieving circularity targets in EU member states will be challenging given the current pace of transition. This is likely also true for Norway, which starts from a very low level of circularity in its economy.
Citations:
European Court of Auditors. 2023. “Special Report 17/2023: Circular Economy – Slow Transition by Member States Despite EU Action.” https://www.eca.europa.eu/ECAPublications/SR-2023-17/SR-2023-17_EN.pdf
Klima – og miljødepartementet et al. 2021. “Nasjonal strategi for ein grøn, sirkulær økonomi.” https://www.regjeringen.no/no/dokumenter/nasjonal-strategi-for-ein-gron-sirkular-okonomi/id2861253
Miljødirektoratet. 2023. “Sirkulær økonomi.” https://www.miljodirektoratet.no/ansvarsomrader/avfall/sirkular-okonomi/
Several sectoral strategies have been developed by interest associations and various coordinating networks, sometimes involving representatives from public sector authorities, such as Statistics Norway and the Environmental Agency. The most important driver for regulatory change regarding the circular economy in Norway is the EEA agreement, which integrates Norway into the internal market. Most legislative changes related to the Commission’s Circular Economy Action Plan are likely relevant to the EEA, making all related regulations applicable to Norway. The formal Norwegian reactions to proposed policy changes have been mostly positive.
There are binding legislated targets for material recycling in household waste: for organic waste, 55% by 2025, increasing to 70% by 2035; and for plastics that can be materially recycled, 50% by 2028, increasing to 70% by 2035. The Tax Reform Commission (Skattelovutvalget) of 2022 mentioned tax reform for a circular economy, but as of December 2023, this has not produced any observable consequences.
The EU Court of Auditors Special Report 17/2023 concludes that achieving circularity targets in EU member states will be challenging given the current pace of transition. This is likely also true for Norway, which starts from a very low level of circularity in its economy.
Citations:
European Court of Auditors. 2023. “Special Report 17/2023: Circular Economy – Slow Transition by Member States Despite EU Action.” https://www.eca.europa.eu/ECAPublications/SR-2023-17/SR-2023-17_EN.pdf
Klima – og miljødepartementet et al. 2021. “Nasjonal strategi for ein grøn, sirkulær økonomi.” https://www.regjeringen.no/no/dokumenter/nasjonal-strategi-for-ein-gron-sirkular-okonomi/id2861253
Miljødirektoratet. 2023. “Sirkulær økonomi.” https://www.miljodirektoratet.no/ansvarsomrader/avfall/sirkular-okonomi/
Graph View
How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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4
3
The government is somewhat committed to updating basic technical infrastructure.
2
1
1
The government is not at all committed to updating basic technical infrastructure.
Key infrastructures in Norway include transport (roads, ferries, harbors and rail), energy (hydropower stations with dams, generators and grid), and protection against natural disasters (landslides, avalanches and flooding). In recent years, reliable digital infrastructure and cybersecurity have been added to the list.
Norway has no central ministry or administrative body with national responsibility for maintaining and developing infrastructure, and thus, no overarching national plan for infrastructure modernization. Responsibilities are sectoral, often split among national, regional, and local agencies. This fragmentation, along with a lack of investment and modernization in many areas, has been acknowledged as a challenge.
The Total Preparedness Commission’s comprehensive situation analysis from June 2023 proposed a radical change and centralization of all aspects of the security and safety of the population. The title of the report is telling: Now it is serious – Prepared for an insecure future.
To understand Norwegian politics regarding infrastructure investment, two factors are important: The first is the long tradition of Keynesian-inspired economic thinking that public expenditures in infrastructure are key instruments in countercyclical policies. When growth and employment are high and market-driven, public investments should be low and vice versa. The second factor is the tension between the economic interests and needs in urban and rural areas and between national regions. Any ruling government coalition needs the support of center and agrarian parties, whose bases are outside the central regions. The combined effect of these two factors is too low an investment in infrastructure in the central regions, where it is most needed, and often too high investments in remote areas. The low degree of maintenance of critical infrastructure over decades has resulted in a maintenance backlog that will cost substantial sums (estimates from 2021 are at NOK 3.2 trillion) to clear.
Several investment plans exist within different line ministries and sectors, but not all are binding. The most comprehensive and binding plan is the National Transport Plan (NTP). This plan covers a 12-year period and is reviewed by parliament every four years. The overriding objective for the National Transport Plan 2022 – 2033 is an efficient, environmentally friendly, and safe transport system by 2050. A new plan for increased investments in the electricity grid was launched in April 2023. Private businesses have voiced the need for a national plan for digital infrastructure, which the government is currently working on.
In this field, the coordinating agency is the Norwegian Directorate for Civil Protection (DSB). The agency seeks to maintain an overview of vulnerabilities in Norwegian society. Its job is to ensure good preparedness and crisis management capacity throughout the Norwegian government, and it is the de jure coordinator among ministries in crises. However, its de facto status has not really been tested.
Citations:
Justis – og beredskapsdepartementet. 2023. “Nå er det alvor – Rustet for en usikker fremtid.” https://www.regjeringen.no/no/dokumenter/nou-2023-17/id2982767/
Ministry of Transport. 2021. National Transport Plan 2022-2033. White Paper no. 20 (2020-2021) https://www.regjeringen.no/en/dokumenter/national-transport-plan-2022-2033/id2863430/
Rådgivende Ingeniørers Forening. 2021. “Vedlikeholdsetterslep på 3200 milliarder kroner.” https://rif.no/vedlikeholdsetterslep-pa-3200-milliarder-kroner/
Energidepartementet og Statsministerens Kontor. 2023. “Regjeringen legger fram handlingsplan for raskere nettutbygging og bedre utnyttelse av nettet.” https://www.regjeringen.no/globalassets/departementene/oed/ingrid/regjeringens-handlingsplan-for-raskere-nettutbygging-og-bedre-utnyttelse-av-nettet.pdf
Norwegian Directorate for Civil Protection. n.d. “About DSB.” https://www.dsb.no/menyartikler/om-dsb/about-dsb/
Norway has no central ministry or administrative body with national responsibility for maintaining and developing infrastructure, and thus, no overarching national plan for infrastructure modernization. Responsibilities are sectoral, often split among national, regional, and local agencies. This fragmentation, along with a lack of investment and modernization in many areas, has been acknowledged as a challenge.
The Total Preparedness Commission’s comprehensive situation analysis from June 2023 proposed a radical change and centralization of all aspects of the security and safety of the population. The title of the report is telling: Now it is serious – Prepared for an insecure future.
To understand Norwegian politics regarding infrastructure investment, two factors are important: The first is the long tradition of Keynesian-inspired economic thinking that public expenditures in infrastructure are key instruments in countercyclical policies. When growth and employment are high and market-driven, public investments should be low and vice versa. The second factor is the tension between the economic interests and needs in urban and rural areas and between national regions. Any ruling government coalition needs the support of center and agrarian parties, whose bases are outside the central regions. The combined effect of these two factors is too low an investment in infrastructure in the central regions, where it is most needed, and often too high investments in remote areas. The low degree of maintenance of critical infrastructure over decades has resulted in a maintenance backlog that will cost substantial sums (estimates from 2021 are at NOK 3.2 trillion) to clear.
Several investment plans exist within different line ministries and sectors, but not all are binding. The most comprehensive and binding plan is the National Transport Plan (NTP). This plan covers a 12-year period and is reviewed by parliament every four years. The overriding objective for the National Transport Plan 2022 – 2033 is an efficient, environmentally friendly, and safe transport system by 2050. A new plan for increased investments in the electricity grid was launched in April 2023. Private businesses have voiced the need for a national plan for digital infrastructure, which the government is currently working on.
In this field, the coordinating agency is the Norwegian Directorate for Civil Protection (DSB). The agency seeks to maintain an overview of vulnerabilities in Norwegian society. Its job is to ensure good preparedness and crisis management capacity throughout the Norwegian government, and it is the de jure coordinator among ministries in crises. However, its de facto status has not really been tested.
Citations:
Justis – og beredskapsdepartementet. 2023. “Nå er det alvor – Rustet for en usikker fremtid.” https://www.regjeringen.no/no/dokumenter/nou-2023-17/id2982767/
Ministry of Transport. 2021. National Transport Plan 2022-2033. White Paper no. 20 (2020-2021) https://www.regjeringen.no/en/dokumenter/national-transport-plan-2022-2033/id2863430/
Rådgivende Ingeniørers Forening. 2021. “Vedlikeholdsetterslep på 3200 milliarder kroner.” https://rif.no/vedlikeholdsetterslep-pa-3200-milliarder-kroner/
Energidepartementet og Statsministerens Kontor. 2023. “Regjeringen legger fram handlingsplan for raskere nettutbygging og bedre utnyttelse av nettet.” https://www.regjeringen.no/globalassets/departementene/oed/ingrid/regjeringens-handlingsplan-for-raskere-nettutbygging-og-bedre-utnyttelse-av-nettet.pdf
Norwegian Directorate for Civil Protection. n.d. “About DSB.” https://www.dsb.no/menyartikler/om-dsb/about-dsb/
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
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9
The government is clearly committed to transitioning to a decarbonized energy system.
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7
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The government is largely committed to transitioning to a decarbonized energy system.
5
4
3
4
3
The government is somewhat committed to transitioning to a decarbonized energy system.
2
1
1
The government is not at all committed to transitioning to a decarbonized energy system.
Norway’s per capita electricity consumption is the highest in the world. Households overwhelmingly use electricity, including for cooking and heating, as there is no public residential gas infrastructure. Electricity consumption accounts for approximately half of total energy consumption, a figure that has remained relatively constant since 2010. Total final energy consumption has increased by 17.9% since 1990.
Electricity production in Norway is almost entirely (99%) hydro-based. Electricity dominates energy use in manufacturing, the household sector, and service industries, while petroleum products account for a large proportion of energy use in sectors that make heavy use of transport and machinery. District heating and natural gas account for only a small share of energy use, but this has been increasing in recent years. Consumption of district heating has risen, particularly in service industries and households, while there has been an increase in the use of gas in manufacturing industries and the transport sector. These energy carriers have been replacing fuel oil for heating and coal, coke, and heavier petroleum products in industrial processes.
The transport sector causes approximately one-third of Norwegian emissions to air. Other large emitters are the petroleum industry and other energy-intensive industries (approximately 25% each). While most of the petroleum industry and the energy-intensive industries (chemicals, steel, paper, mining) are covered by the EU ETS, most of the transport sector is not (the exceptions being aviation and marine transport, which will be included from 2024). The government makes a clear distinction between support and intervention in the non-ETS and the ETS sectors.
Norway has worked to reduce emissions in the transport system for 15 years. The first cross-party Climate Agreement from 2008 stipulated that increased transport needs from urbanization should be met through improved public transport, walking, and cycling. Zero-emission vehicles have been targeted by economic incentives, including zero toll, lower taxes, free parking, and the building of charging infrastructure in urban areas. As a result, more than 80% of newly registered personal cars were EVs as of 2023, and EVs constitute just under 25% of the total number of personal cars in 2023.
Despite this increase in zero-emission vehicles, emissions have not been reduced accordingly due to an increase in population and transport activity. The government’s Green Book (Climate Status and Plan) from 2023 stipulates that emissions from road traffic will decrease by the required 40% (from 8.7 MtCO2e in 2022 to 5.4 MtCO2e in 2030) because of the continued increase in zero-emission vehicles, technological developments that will make zero-emission possible for heavier vehicles, and increased use of biofuel.
Discussion about reducing emissions from the petroleum sector primarily centers on using electricity for offshore installations. Currently, about half of these installations use electricity from the national grid. There are plans to extend this to another 10 projects by 2030, indicating a significant increase in electricity consumption by the petroleum sector.
Norwegian energy-intensive industry has been relatively successful in reducing emissions, achieving a 40% reduction in 2022 compared to 1990 levels. Future emission reductions, therefore, will require significant technical developments. Hydrogen is frequently mentioned as one possible solution to hard-to-abate sectors, but the technology is still underdeveloped.
Significant capital is allocated to support industry in their decarbonization efforts. Enova and Innovation Norway support projects for the development of new technology and production processes. One important part of the Norwegian decarbonization efforts is the decade-long support for CCS technology. This was touted as “Norway’s moon landing” by then-Prime Minister Stoltenberg in 2009. Currently, there is one major project close to launch for carbon capture at Heidelberg Norcem’s plant in Brevik and one at Celsio in Oslo. Moreover, Equinor is involved in the Longship project, providing a storage solution for captured CO2 in geological formations on the Norwegian continental shelf. Contracts have been signed with several countries for storage.
It is justified to conclude that Norwegian authorities are committed to decarbonizing the energy system, provided that this can happen without ending Norwegian oil and gas production, significantly reducing the competitiveness of Norwegian industry, or inflicting too stringent restrictions on the population’s need for mobility, which carries a very high political risk of popular revolt.
The preferred policy instruments are primarily economic: the EU cap-and-trade system, support for technology development and innovation, and reform of taxes, duties, and levies to encourage consumption of low-emission alternatives where they exist.
Citations:
Energy Facts Norway. 2023. “Energy use by sector.” https://energifaktanorge.no/en/norsk-energibruk/energibruken-i-ulike-sektorer/
Klima – og miljødepartementet. 2023. “Regjeringas klimastatus og -plan.”
https://www.regjeringen.no/no/dokumenter/regjeringas-klimastatus-og-plan/id2997247/
Opplysningsrådet for veitrafikken (OFV). 2023. “Nybilregistreringer i 2023: Et spesielt halvår.” https://ofv.no/aktuelt/2023/et-spesielt-halv%C3%A5r
Statistics Norway. 2023. “Production and Consumption of Energy, Energy Balance and Energy Account.” https://www.ssb.no/en/statbank/table/06514/
https://www.ssb.no/en/energi-og-industri/energi/statistikk/produksjon-og-forbruk-av-energi-energibalanse-og-energiregnskap
Øystese, K.Å. 2023. “Disse feltene får kraft fra land innen 2030.” Energi og Klima. https://www.energiogklima.no/nyhet/disse-feltene-far-kraft-fra-land-innen-2030
Miljøstatus. 2023. “Klimagassutslipp fra industri i Norge.” https://miljostatus.miljodirektoratet.no/tema/klima/norske-utslipp-av-klimagasser/klimagassutslipp-fra-industri/
Electricity production in Norway is almost entirely (99%) hydro-based. Electricity dominates energy use in manufacturing, the household sector, and service industries, while petroleum products account for a large proportion of energy use in sectors that make heavy use of transport and machinery. District heating and natural gas account for only a small share of energy use, but this has been increasing in recent years. Consumption of district heating has risen, particularly in service industries and households, while there has been an increase in the use of gas in manufacturing industries and the transport sector. These energy carriers have been replacing fuel oil for heating and coal, coke, and heavier petroleum products in industrial processes.
The transport sector causes approximately one-third of Norwegian emissions to air. Other large emitters are the petroleum industry and other energy-intensive industries (approximately 25% each). While most of the petroleum industry and the energy-intensive industries (chemicals, steel, paper, mining) are covered by the EU ETS, most of the transport sector is not (the exceptions being aviation and marine transport, which will be included from 2024). The government makes a clear distinction between support and intervention in the non-ETS and the ETS sectors.
Norway has worked to reduce emissions in the transport system for 15 years. The first cross-party Climate Agreement from 2008 stipulated that increased transport needs from urbanization should be met through improved public transport, walking, and cycling. Zero-emission vehicles have been targeted by economic incentives, including zero toll, lower taxes, free parking, and the building of charging infrastructure in urban areas. As a result, more than 80% of newly registered personal cars were EVs as of 2023, and EVs constitute just under 25% of the total number of personal cars in 2023.
Despite this increase in zero-emission vehicles, emissions have not been reduced accordingly due to an increase in population and transport activity. The government’s Green Book (Climate Status and Plan) from 2023 stipulates that emissions from road traffic will decrease by the required 40% (from 8.7 MtCO2e in 2022 to 5.4 MtCO2e in 2030) because of the continued increase in zero-emission vehicles, technological developments that will make zero-emission possible for heavier vehicles, and increased use of biofuel.
Discussion about reducing emissions from the petroleum sector primarily centers on using electricity for offshore installations. Currently, about half of these installations use electricity from the national grid. There are plans to extend this to another 10 projects by 2030, indicating a significant increase in electricity consumption by the petroleum sector.
Norwegian energy-intensive industry has been relatively successful in reducing emissions, achieving a 40% reduction in 2022 compared to 1990 levels. Future emission reductions, therefore, will require significant technical developments. Hydrogen is frequently mentioned as one possible solution to hard-to-abate sectors, but the technology is still underdeveloped.
Significant capital is allocated to support industry in their decarbonization efforts. Enova and Innovation Norway support projects for the development of new technology and production processes. One important part of the Norwegian decarbonization efforts is the decade-long support for CCS technology. This was touted as “Norway’s moon landing” by then-Prime Minister Stoltenberg in 2009. Currently, there is one major project close to launch for carbon capture at Heidelberg Norcem’s plant in Brevik and one at Celsio in Oslo. Moreover, Equinor is involved in the Longship project, providing a storage solution for captured CO2 in geological formations on the Norwegian continental shelf. Contracts have been signed with several countries for storage.
It is justified to conclude that Norwegian authorities are committed to decarbonizing the energy system, provided that this can happen without ending Norwegian oil and gas production, significantly reducing the competitiveness of Norwegian industry, or inflicting too stringent restrictions on the population’s need for mobility, which carries a very high political risk of popular revolt.
The preferred policy instruments are primarily economic: the EU cap-and-trade system, support for technology development and innovation, and reform of taxes, duties, and levies to encourage consumption of low-emission alternatives where they exist.
Citations:
Energy Facts Norway. 2023. “Energy use by sector.” https://energifaktanorge.no/en/norsk-energibruk/energibruken-i-ulike-sektorer/
Klima – og miljødepartementet. 2023. “Regjeringas klimastatus og -plan.”
https://www.regjeringen.no/no/dokumenter/regjeringas-klimastatus-og-plan/id2997247/
Opplysningsrådet for veitrafikken (OFV). 2023. “Nybilregistreringer i 2023: Et spesielt halvår.” https://ofv.no/aktuelt/2023/et-spesielt-halv%C3%A5r
Statistics Norway. 2023. “Production and Consumption of Energy, Energy Balance and Energy Account.” https://www.ssb.no/en/statbank/table/06514/
https://www.ssb.no/en/energi-og-industri/energi/statistikk/produksjon-og-forbruk-av-energi-energibalanse-og-energiregnskap
Øystese, K.Å. 2023. “Disse feltene får kraft fra land innen 2030.” Energi og Klima. https://www.energiogklima.no/nyhet/disse-feltene-far-kraft-fra-land-innen-2030
Miljøstatus. 2023. “Klimagassutslipp fra industri i Norge.” https://miljostatus.miljodirektoratet.no/tema/klima/norske-utslipp-av-klimagasser/klimagassutslipp-fra-industri/
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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9
9
Labor market institutions are fully aligned with the goal of an adaptable labor market.
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7
6
Labor market institutions are largely aligned with the goal of an adaptable labor market.
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3
4
3
Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
Responsibility for full employment for all individuals with a willingness and capacity to work lies within the Norwegian Labor and Welfare Administration (NAV), which operates employment offices in all local authorities (Ministry of Labour and Social Inclusion, 2008). NAV also administers social security rights for the population and is responsible for all active labor market measures. Employment policies are guided by three objectives: full employment, high levels of job mobility and efficient assistance for individuals facing difficulties in obtaining or maintaining employment due to skill or health challenges.
For the past decade, welfare state employment policies have been quite successful. Total employment rates are high, the level of unemployment is low, and mobility rates are also high. On average, 15% of the workforce changes jobs every year. However, the number of vacant jobs has remained higher than the number of unemployed, indicating a structural skills gap. To help companies and workers manage short-term losses in demand for their products, there is a lay-off scheme that is partly employer-funded and partly state-funded, providing income security for employees. This program was extensively used during the pandemic in the 2020 – 2021 period.
Generally, responsibility for providing a workforce with the necessary skills for the economy lies within the state education system. However, a widespread shortage of key personnel in many occupations incentivizes companies to invest in lifelong learning programs and the skills upgrading of their employees. Furthermore, there are state incentives for the education system and universities to offer more programs and courses for older segments of the workforce.
Citations:
Ministry of Labour and Social Inclusion. 2008. “Areas of Responsibility and Policy Instruments.”
https://www.regjeringen.no/en/topics/labour/labour-market-and-employment/innsikt/den-norske-arbeidsmarknaden/institusjoner-og-organisering/areas-of-responsibility-and-policy-instr/id86901/
Statistics Norway. 2024. “Labour force survey.” https://www.ssb.no/en/arbeid-og-lonn/sysselsetting/statistikk/arbeidskraftundersokelsen
Norwegian Labour Inspection Authority. n.d. “Temporary lay-off.” https://www.arbeidstilsynet.no/en/working-conditions/temporary-lay-off/
For the past decade, welfare state employment policies have been quite successful. Total employment rates are high, the level of unemployment is low, and mobility rates are also high. On average, 15% of the workforce changes jobs every year. However, the number of vacant jobs has remained higher than the number of unemployed, indicating a structural skills gap. To help companies and workers manage short-term losses in demand for their products, there is a lay-off scheme that is partly employer-funded and partly state-funded, providing income security for employees. This program was extensively used during the pandemic in the 2020 – 2021 period.
Generally, responsibility for providing a workforce with the necessary skills for the economy lies within the state education system. However, a widespread shortage of key personnel in many occupations incentivizes companies to invest in lifelong learning programs and the skills upgrading of their employees. Furthermore, there are state incentives for the education system and universities to offer more programs and courses for older segments of the workforce.
Citations:
Ministry of Labour and Social Inclusion. 2008. “Areas of Responsibility and Policy Instruments.”
https://www.regjeringen.no/en/topics/labour/labour-market-and-employment/innsikt/den-norske-arbeidsmarknaden/institusjoner-og-organisering/areas-of-responsibility-and-policy-instr/id86901/
Statistics Norway. 2024. “Labour force survey.” https://www.ssb.no/en/arbeid-og-lonn/sysselsetting/statistikk/arbeidskraftundersokelsen
Norwegian Labour Inspection Authority. n.d. “Temporary lay-off.” https://www.arbeidstilsynet.no/en/working-conditions/temporary-lay-off/
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
10
9
9
Labor market institutions are fully aligned with the goal of an inclusive labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an inclusive labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Since 2001, Norway’s social partners and public sector employers have maintained an Agreement on an Inclusive Labor Market, which is updated every three years. All parties have committed to reducing sickness absenteeism, increasing the participation of individuals with disabilities and/or low skills, and raising the average retirement age. The overall objective is to bolster the economic base for the welfare state by increasing labor force participation from all population segments and reducing dependencies on social security cash transfers.
Efforts to reduce temporary work absences have been largely successful in the private sector but not in the public sector. The average retirement age has increased from 64 to 66 years, while attempts to include more individuals with health or skills challenges have been less successful. The volume of active labor market measures, as an alternative to unemployment cash insurance, has remained relatively constant, providing training and supported employment to 70,000 – 80,000 people annually over the past decade.
In July 2023, a national program was introduced targeting individuals aged 16 – 30 who are not in education or work. These individuals are given the right to counseling and effective assistance to complete their education and secure a stable position in the labor market.
Citations:
Arbeids – og inkluderingsdepartementet. 2023. “Ny ungdomsgaranti i NAV fra 1. juli.” https://www.regjeringen.no/no/aktuelt/ny-ungdomsgaranti-i-nav-fra-1.-juli/id2988480
Minister of Labour and Social Affairs. 2019. “The IA Agreement 2019–2024.” https://www.regjeringen.no/en/topics/labour/the-working-environment-and-safety/inkluderende_arbeidsliv/ia-avtalen-20192022/the-ia-agreement-20192022/id2623741
NAV. 2024. “Alderspensjon.” https://www.nav.no/no/nav-og-samfunn/statistikk/pensjon-statistikk/alderspensjon
Efforts to reduce temporary work absences have been largely successful in the private sector but not in the public sector. The average retirement age has increased from 64 to 66 years, while attempts to include more individuals with health or skills challenges have been less successful. The volume of active labor market measures, as an alternative to unemployment cash insurance, has remained relatively constant, providing training and supported employment to 70,000 – 80,000 people annually over the past decade.
In July 2023, a national program was introduced targeting individuals aged 16 – 30 who are not in education or work. These individuals are given the right to counseling and effective assistance to complete their education and secure a stable position in the labor market.
Citations:
Arbeids – og inkluderingsdepartementet. 2023. “Ny ungdomsgaranti i NAV fra 1. juli.” https://www.regjeringen.no/no/aktuelt/ny-ungdomsgaranti-i-nav-fra-1.-juli/id2988480
Minister of Labour and Social Affairs. 2019. “The IA Agreement 2019–2024.” https://www.regjeringen.no/en/topics/labour/the-working-environment-and-safety/inkluderende_arbeidsliv/ia-avtalen-20192022/the-ia-agreement-20192022/id2623741
NAV. 2024. “Alderspensjon.” https://www.nav.no/no/nav-og-samfunn/statistikk/pensjon-statistikk/alderspensjon
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
10
9
9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
The Norwegian welfare state protects individuals from four categories of labor market risks:
Unemployment: When one loses their job, a universal state-funded cash unemployment insurance system pays 60% of the former wage for up to 52 weeks for low-income groups and 104 weeks for higher-income groups.
Reduced working capacity: If one is unable to work due to health challenges, the National Social Insurance system provides sickness pay for up to 52 weeks if the health problems are temporary. If the health issues are permanent, a state-funded disability pension pays 66% of the former wage.
Work-family life squeeze: This occurs when one needs to balance work with caring for their own children or elderly, disabled parents. The system offers generous paid leave and job protection for parents. However, the rights to leave work to care for parents are limited.
Difficulty entering the job market: This risk affects individuals after education or immigration to Norway. There is no general scheme for economic support, only a needs-tested social assistance system at the local level. Various active labor market programs exist for different target groups, and some of these programs provide an attendance allowance.
The qualifying condition for benefits is based on employment, measured by income or time. Thus, rights and benefits are portable, not contingent on the employment contract with a particular employer or linked to union membership.
Citations:
Arbeids – og inkluderingsdepartementet. (n.d.) “Arbeidsmarked og sysselsetting.” https://www.regjeringen.no/no/tema/arbeidsliv/arbeidsmarked-og-sysselsetting/id935
Unemployment: When one loses their job, a universal state-funded cash unemployment insurance system pays 60% of the former wage for up to 52 weeks for low-income groups and 104 weeks for higher-income groups.
Reduced working capacity: If one is unable to work due to health challenges, the National Social Insurance system provides sickness pay for up to 52 weeks if the health problems are temporary. If the health issues are permanent, a state-funded disability pension pays 66% of the former wage.
Work-family life squeeze: This occurs when one needs to balance work with caring for their own children or elderly, disabled parents. The system offers generous paid leave and job protection for parents. However, the rights to leave work to care for parents are limited.
Difficulty entering the job market: This risk affects individuals after education or immigration to Norway. There is no general scheme for economic support, only a needs-tested social assistance system at the local level. Various active labor market programs exist for different target groups, and some of these programs provide an attendance allowance.
The qualifying condition for benefits is based on employment, measured by income or time. Thus, rights and benefits are portable, not contingent on the employment contract with a particular employer or linked to union membership.
Citations:
Arbeids – og inkluderingsdepartementet. (n.d.) “Arbeidsmarked og sysselsetting.” https://www.regjeringen.no/no/tema/arbeidsliv/arbeidsmarked-og-sysselsetting/id935
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
10
9
9
The tax system is fully aligned with the goals of ensuring adequate tax revenues.
8
7
6
7
6
The tax system is largely aligned with the goals of ensuring adequate tax revenues.
5
4
3
4
3
The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
2
1
1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
Taxes on income from work, payroll, and consumption (VAT) are generally high in Norway but are relatively similar to the OECD average. However, taxes on properties, financial assets, and company profits are modest.
A distinguishing trait of the Norwegian economy is that taxes on income and consumption constitute only half of the total public sector revenue. The other half comes from taxes on the extraction of natural resources (oil, gas) and from rent on global financial investments through the Government Pension Fund Global. Consequently, the traditional primary objective of a tax system – funding public expenditures – is relatively less important in Norway. Regarding macroeconomic policy governance, the state can vary its incomes and expenditures independently of domestic taxation levels. Therefore, issues related to incentive structures, economic behavior, and the rational use of resources are relatively more important in the design of the taxation system.
The collection of taxes is highly automated, as are tax declarations for employees. Tax evasion is considered a minor problem, and in general, the population accepts a high level of taxes. However, tax avoidance receives increasing attention both in the media and in national administration. The OAG reported in 2023 that the reporting of and control over wealth abroad, taxable in Norway, is suboptimal, resulting in substantial lost tax income.
Citations:
Norges Bank Investment Management. n.d. “About the Fund.” https://www.nbim.no/en/the-fund/about-the-fund/
OECD. 2024. Taxing Wages 2024: Tax and Gender through the Lens of the Second Earner. Paris: OECD Publishing. https://doi.org/10.1787/dbcbac85-en
Office of the Auditor General of Norway. 2023. Skatteetatens arbeid med å avdekke norske skattepliktiges inntekter og formuer i utlandet samt kryptovaluta. Dokument 3:3 (2023−2024). https://www.riksrevisjonen.no/rapporter-mappe/no-2023-2024/skatteetatens-arbeid-med-a-avdekke-norske-skattepliktiges-inntekter-og-formuer-i-utlandet-samt-kryptovaluta
A distinguishing trait of the Norwegian economy is that taxes on income and consumption constitute only half of the total public sector revenue. The other half comes from taxes on the extraction of natural resources (oil, gas) and from rent on global financial investments through the Government Pension Fund Global. Consequently, the traditional primary objective of a tax system – funding public expenditures – is relatively less important in Norway. Regarding macroeconomic policy governance, the state can vary its incomes and expenditures independently of domestic taxation levels. Therefore, issues related to incentive structures, economic behavior, and the rational use of resources are relatively more important in the design of the taxation system.
The collection of taxes is highly automated, as are tax declarations for employees. Tax evasion is considered a minor problem, and in general, the population accepts a high level of taxes. However, tax avoidance receives increasing attention both in the media and in national administration. The OAG reported in 2023 that the reporting of and control over wealth abroad, taxable in Norway, is suboptimal, resulting in substantial lost tax income.
Citations:
Norges Bank Investment Management. n.d. “About the Fund.” https://www.nbim.no/en/the-fund/about-the-fund/
OECD. 2024. Taxing Wages 2024: Tax and Gender through the Lens of the Second Earner. Paris: OECD Publishing. https://doi.org/10.1787/dbcbac85-en
Office of the Auditor General of Norway. 2023. Skatteetatens arbeid med å avdekke norske skattepliktiges inntekter og formuer i utlandet samt kryptovaluta. Dokument 3:3 (2023−2024). https://www.riksrevisjonen.no/rapporter-mappe/no-2023-2024/skatteetatens-arbeid-med-a-avdekke-norske-skattepliktiges-inntekter-og-formuer-i-utlandet-samt-kryptovaluta
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
Taxes on income from work are generally higher than taxes on financial assets, property, and profits. Since non-work income is the main source of wealth for the richest segments of the population, a separate wealth tax is implemented to ensure a just taxation system and collect taxes from the very wealthy. Unlike other taxes, the wealth tax is politically controversial. Critics argue that the strong growth in house prices extends the impact of the wealth tax to groups not originally targeted, as the value of homes is included in the tax calculation. In 2023, significant media attention focused on super-rich individuals who moved to countries with more favorable tax systems to protest the Norwegian wealth tax.
Distributional considerations (vertical equity) and a higher tax level for high-income earners (a progressive tax rate) have been central elements in the design of the work income tax system. Additionally, for low-income earners, the tax system is designed to avoid levying taxes on income below the poverty line, defined as 60% of the median income.
Citations:
Ausheim, S., and Strøm-Andresen, J. 2023. “Utvikling i formuesskatten siste 10 år – noen utvalgte perspektiver.” Regnskap Norge https://www.regnskapnorge.no/faget/artikler/skatt/utvikling-i-formuesskatten-siste-10-ar/
Distributional considerations (vertical equity) and a higher tax level for high-income earners (a progressive tax rate) have been central elements in the design of the work income tax system. Additionally, for low-income earners, the tax system is designed to avoid levying taxes on income below the poverty line, defined as 60% of the median income.
Citations:
Ausheim, S., and Strøm-Andresen, J. 2023. “Utvikling i formuesskatten siste 10 år – noen utvalgte perspektiver.” Regnskap Norge https://www.regnskapnorge.no/faget/artikler/skatt/utvikling-i-formuesskatten-siste-10-ar/
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
The collection of taxes is fully automated and integrated with the collection of social security contributions. For most wage earners and the self-employed, the tax rules are perceived as relatively simple and easy to comply with. However, even though compliance is easy because of the high degree of automation, the rules themselves are complex, and the burden of proof largely falls on the taxpayer when automated reporting requires adjustment. This process remains very transparent, and it is easy to communicate with the Tax Administration in such cases.
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
Norway has a long tradition of using taxes and subsidies to influence the consumption of certain harmful commodities. Taxes on alcohol and tobacco are high, while a historical system of taxing luxury goods has been dismantled. As a policy instrument in the green transition, carbon taxes are being introduced for more product groups – particularly in sectors not covered by the EU ETS, such as waste incineration – and the government has signaled a gradual increase to NOK 2,000/tCO2e by 2030. A compensation system for industries at risk of carbon leakage continues to coexist. Incentivization of specific activities (for example, research and development) is generally done through direct support rather than through the tax system. However, the tax system has been actively used in combination with other economic incentives to introduce zero-emission vehicles, yielding effective impacts.
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
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9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
The unique, solid finances of the state imply that the most important effort in the budgetary process is to keep expenditure pressures at bay. Two institutional mechanisms are important: The first is a rule of thumb labeled “the fiscal rule” (Handlingsregelen) that no more than 3% of the Government Pension Fund Global’s value can be taken into the annual budget. This amount is roughly equal to the total welfare state health expenditures. The other mechanism is a rule that parliament, after the government has put forward its budget proposal in October, shall decide on the absolute total level of public expenditures for the following year before the bargaining over specific expenditures for different purposes begins.
Concrete proposals may be substantiated by reference to long-term plans as well as to the UN sustainability goals. The budget sets next year’s priorities and does not, unless explicitly (and rarely) stated, allocate resources over several years. Since 2023, the national budget comprises a “Green Book” – an annual report on progress and future plans in relation to climate emissions reductions. The Green Book establishes emission targets for different sectors and outlines the government’s action plans for individual sectors as well as for the economy as a whole.
The budget process is relatively transparent. The positions of the different parties are communicated to the general public, often through concrete alternative budgets. The budget must be approved by a parliamentary majority before the end of the calendar year.
Citations:
Ministry of Finance. 2022. “The Norwegian Fiscal Policy Framework.” https://www.regjeringen.no/en/topics/the-economy/economic-policy/economic-policy/id418083/
Finansdepartementet. 2024. “Handlingsregelen.” https://www.regjeringen.no/no/tema/okonomi-og-budsjett/norsk_okonomi/bruk-av-oljepenger-/handlingsregelen/id444338/
Klima – og miljødepartementet. 2023. “Regjeringas klimastatus og -plan.” https://www.regjeringen.no/no/dokumenter/regjeringas-klimastatus-og-plan/id2997247
Concrete proposals may be substantiated by reference to long-term plans as well as to the UN sustainability goals. The budget sets next year’s priorities and does not, unless explicitly (and rarely) stated, allocate resources over several years. Since 2023, the national budget comprises a “Green Book” – an annual report on progress and future plans in relation to climate emissions reductions. The Green Book establishes emission targets for different sectors and outlines the government’s action plans for individual sectors as well as for the economy as a whole.
The budget process is relatively transparent. The positions of the different parties are communicated to the general public, often through concrete alternative budgets. The budget must be approved by a parliamentary majority before the end of the calendar year.
Citations:
Ministry of Finance. 2022. “The Norwegian Fiscal Policy Framework.” https://www.regjeringen.no/en/topics/the-economy/economic-policy/economic-policy/id418083/
Finansdepartementet. 2024. “Handlingsregelen.” https://www.regjeringen.no/no/tema/okonomi-og-budsjett/norsk_okonomi/bruk-av-oljepenger-/handlingsregelen/id444338/
Klima – og miljødepartementet. 2023. “Regjeringas klimastatus og -plan.” https://www.regjeringen.no/no/dokumenter/regjeringas-klimastatus-og-plan/id2997247
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
8
7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
A long-term plan for research and higher education was adopted by parliament in 2019 and has since been updated twice. The current plan covers the period 2023 – 2032 (Kunnskapsdepartementet, 2022). It sets a goal of allocating 4% of GDP to research and development and defines three overarching objectives: improve national competitiveness and innovative capacity, ensure environmental, social and economic sustainability, and maintain high quality of and good accessibility to research and higher education.
Within these objectives, there are six thematic priorities for increased financing: relationships between oceans, marine environments, and food production; health and quality of life; climate and energy production; new technologies for a sustainable future; security issues and societal preparedness for crises; and interpersonal trust and social cohesion.
The plan and its priorities are clearly inspired by the European Union concept of “mission-driven” research and development. The message from the government toward research institutions and universities is clear: Within the academic freedoms granted by law, institutions are expected to direct their scientific and educational activities to enhance Norway’s capacity to transform itself into an ecologically sustainable and still generous welfare society.
Citations:
Kunnskapsdepartementet. 2022. “Langtidsplanen for forskning og høyere utdanning 2023 – 2032.” https://www.regjeringen.no/no/tema/forskning/innsiktsartikler/langtidsplanen-for-forskning-og-hoyere-utdanning-2023-2032/id2929453/
Within these objectives, there are six thematic priorities for increased financing: relationships between oceans, marine environments, and food production; health and quality of life; climate and energy production; new technologies for a sustainable future; security issues and societal preparedness for crises; and interpersonal trust and social cohesion.
The plan and its priorities are clearly inspired by the European Union concept of “mission-driven” research and development. The message from the government toward research institutions and universities is clear: Within the academic freedoms granted by law, institutions are expected to direct their scientific and educational activities to enhance Norway’s capacity to transform itself into an ecologically sustainable and still generous welfare society.
Citations:
Kunnskapsdepartementet. 2022. “Langtidsplanen for forskning og høyere utdanning 2023 – 2032.” https://www.regjeringen.no/no/tema/forskning/innsiktsartikler/langtidsplanen-for-forskning-og-hoyere-utdanning-2023-2032/id2929453/
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
As a small country, Norway is not a major actor in international financial regulation. However, it is a notable player in financial markets because of its rapidly growing and large sovereign wealth fund – the Government Pension Fund Global (GPFG). In the field of institutional investors, it has contributed to setting standards for good financial and corporate governance. The GPFG itself has been a voice in international financial discussions and leads by demonstrating good practices. The Santiago principles have established procedures for increasing transparency related to sovereign wealth funds, which has undoubtedly constrained government action in similar areas. Norway is not formally a member of the International Forum of Sovereign Wealth Funds but fully supports its principles.
Norway is supportive of international efforts to combat corruption, tax evasion, and tax havens. The country has recently promoted initiatives such as the disclosure of financial risks related to carbon emissions and supported efforts to compel companies to report on the impact of their activities on the SDGs, ocean health, and secure and sound water management.
In its financial regulatory policies, Norway is part of the European Union’s internal market and complies with EU rules and regulations. Although the financial sector is heavily exposed to the petroleum and shipping industries, both of which have had to navigate difficult economic times, the sector remains robust and stable. This stability is partly due to the regulatory reforms introduced by the government.
Additionally, the fund has supported the G-20-based initiative of carbon risk financial disclosure and joined a working group to explore how sovereign wealth funds can contribute to achieving the Paris Agreement targets.
Citations:
Ministry of Finance. 2023a. “Government Pension Fund and the Santiago Principles.” https://www.regjeringen.no/en/topics/the-economy/the-government-pension-fund/government-pension-fund-and-the-santiago-principles/id2961256
Ministry of Finance. 2023b. “Norway will implement new rules for taxation of large multinational enterprises.” https://www.regjeringen.no/en/aktuelt/norway-will-implement-new-rules-for-taxation-of-large-multinational-enterprises/id3015877/
Norges Bank Investment Management. n.d. “Responsible Investment.” https://www.nbim.no/en/responsible-investment/
Norway is supportive of international efforts to combat corruption, tax evasion, and tax havens. The country has recently promoted initiatives such as the disclosure of financial risks related to carbon emissions and supported efforts to compel companies to report on the impact of their activities on the SDGs, ocean health, and secure and sound water management.
In its financial regulatory policies, Norway is part of the European Union’s internal market and complies with EU rules and regulations. Although the financial sector is heavily exposed to the petroleum and shipping industries, both of which have had to navigate difficult economic times, the sector remains robust and stable. This stability is partly due to the regulatory reforms introduced by the government.
Additionally, the fund has supported the G-20-based initiative of carbon risk financial disclosure and joined a working group to explore how sovereign wealth funds can contribute to achieving the Paris Agreement targets.
Citations:
Ministry of Finance. 2023a. “Government Pension Fund and the Santiago Principles.” https://www.regjeringen.no/en/topics/the-economy/the-government-pension-fund/government-pension-fund-and-the-santiago-principles/id2961256
Ministry of Finance. 2023b. “Norway will implement new rules for taxation of large multinational enterprises.” https://www.regjeringen.no/en/aktuelt/norway-will-implement-new-rules-for-taxation-of-large-multinational-enterprises/id3015877/
Norges Bank Investment Management. n.d. “Responsible Investment.” https://www.nbim.no/en/responsible-investment/