2011 National Budget - Green light for green certificates
03.11.2010
On September 7th 2009 Norway and Sweden signed an agreement on the principles for a common market for electricity certificates. A proposal for a bill is expected in the spring of 2011 and the market start-up is planned for January 1st 2012. In the 2011 national budget the electricity certificate initiative has been allocated funds. The government is highly confident that the introduction of green certificates will increase the development of renewable energy production in Norway.
Green certificates – transferable securities
Precisely how the system for certificates will be set up will only become clear when the legal framework is in place. However, since Sweden already has a functioning system for electricity certificates it is expected that this system will be used as a starting point. The legislator has indicated that green certificates will function as securities that certify the production of a certain quantity of renewable energy. These certificates will be transferable and will therefore provide welcome additional income for producers of renewable energy.
The question of what is to be regarded as production of renewable energy will be determined by the authorities. Up until now it has been an express wish from the authorities to make the certificate system technology neutral, so that there are no distinctions based on the source the energy is derived from.
Allocation and demand
The certificates will be allocated to producers of renewable energy, corresponding to the amount they produce. Presumably the allocation of certificates will be based on the number of megawatt hours (MWh) produced from a renewable source.
How demand for the certificates will be created is not yet clear. An efficient solution would be to compel anyone who wishes to purchase electricity to buy certificates corresponding to a certain percentage of their total consumption of electricity. This would result in demand determining the price of the certificates. Purchase of certificates could also be voluntary and the price of the certificates would then depend upon individual preferences. However, a voluntary solution would, most probably, result in a low price for the certificates and accordingly much of the desired effect would disappear.
Increased development of sources of renewable energy
For producers of renewable energy entitled to certificates, total revenue will constitute the price of electricity plus the price of the certificates. Sale of certificates will, in other words, become an extra source of income for the individual producer. Should the system of certificates prove to work in practice, this could therefore stimulate further production of renewable energy, which is the goal for the authorities in introducing the system. In a functioning market, the most cost effective technologies will be developed first. The allocation of certificates will then function as a funding scheme for subsidised development of sources of renewable energy.
Increased taxes for certificates from hydroelectric power – non-technology neutral taxation
In the national budget it is suggested that revenue from issued electricity certificates will be included when determining the basis for tax on ground rent in accordance with Section 18-3 of the Tax Act. Consequently the tax rate on the sale of certificates from producers of renewable energy from hydroelectric power will increase from 28 % to 58 %. In principle this harmonises poorly with the previously mentioned goal of having a technology neutral certificate system, as only producers of renewable energy from hydroelectric power would be affected.