As emissions from Norwegian shipping are increasing, a negative CO2 tax on green fuels could be the answer to bridge the price gap. In this opinion piece, our Policy & Project Manager Reber Iversen describes how a negative CO2 tax can accelerate the transition from fossil to renewable fuels for shipping.
The pace of transition in shipping lags far behind what is needed to ensure future competitiveness and meet climate goals, as shown by DNV’s transition barometer. Emissions from shipping are on the rise.
One solution that could be both cheaper and simpler than other proposals in the debate is to use the tax system to introduce a negative CO₂ tax tied to fuel.
Dramatically Increasing Emission Costs
The costs of emitting greenhouse gases from Norwegian ships will rise dramatically over the next decade. If we fail to implement low- and zero-emission solutions in shipping now, we risk not only missing our climate targets but also undermining the competitiveness of one of Norway’s most critical industries as the global sector transitions in response to climate change.
- Today, Norwegian ships pay approximately NOK 750/ton in national CO₂ tax.
- From 2024, Norwegian shipping is included in the EU Emissions Trading System (ETS), with an expected average quota price of NOK 1,500/ton by 2030.
- The government plans for the total carbon price (tax + quota) to reach NOK 2,400/ton by 2030.
- From 2025, the EU’s FuelEU Maritime directive will also apply to Norway, requiring reduced carbon intensity, potentially adding NOK 1,000/ton by 2030.
In total, emission costs could exceed NOK 3,400/ton by 2030, representing a significant cost increase over a few years.These costs will continue to rise throughout the 2030s as quotas are phased out and run out completely by 2039.
Not Economically Rational Today
Norway has made significant progress in electrifying shipping through the deployment of maritime battery-electric technology. However, large portions of the Norwegian offshore-going fleet operate in ways unsuitable for purely battery-electric propulsion.
For these ships to achieve zero emissions, they must adopt zero-emission fuels, such as hydrogen-based fuels (liquid or compressed hydrogen, ammonia, or methanol).
The problem is that the current carbon price is too low to make investing in zero-emission technology economically rational. Planning, investing in, and building a new ship takes many years, and the lack of ability to investment now will result in the absence of zero-emission solutions for many years into the future.
The Recipe: A Negative CO₂ Tax
Today, technology is available on the market that can run on green fuels at an acceptable investment cost, but the price of green fuels remains too high. According to Maritime CleanTech members, green fuels like hydrogen and ammonia would become economically viable with a carbon price of NOK 2,400/ton—but we cannot wait until 2030.
For this reason, temporary economic incentives are needed to offset the price difference with fossil fuels until the carbon price rises sufficiently.
A widely proposed interim solution involves contracts for difference on green fuels. However, this has proven politically challenging in Norway due to cost, legal complexities, and administrative inefficiencies.
An alternative, potentially cheaper and simpler solution, is to introduce a negative CO₂ tax linked to fuel. This means users of green fuels would receive a deduction or refund equal to the gap between the current carbon price—approximately NOK 1,400/ton (tax + quota)—and the 2030 level of NOK 2,400/ton.
As this gap narrows over time, the cost to the government would also decrease. Yet, the incentive effect for investors would remain intact. In practice, this approach would bring the 2030 carbon price forward to stimulate investments in green fuels now.
A Shift in Zero-Emission Technology Investments
The Norwegian Tax Administration has already introduced exemptions and refunds for CO₂ taxes in quota-based domestic shipping, providing a foundation for managing a negative CO₂ tax.
Such a scheme would not only make climate goals more achievable but also drive a significant shift in investments toward zero-emission technology. This, in turn, would secure competitive opportunities for Norwegian supplier industries in the coming years and create a substantial market for green fuels from Norwegian hydrogen and ammonia producers.
This opinion piece was first posted by Energi og Klima.