The EU and Norway signed a deal April 24 bolstering their relations in the climate and clean energy sector, with a focus on developing carbon markets and boosting clean hydrogen output.
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The two parties said they formed the EU-Norway Green Alliance to "strengthen their joint climate action, environmental protection efforts, and cooperation on the clean energy and industrial transition."
EU reliance on Norwegian energy, particularly oil and gas, has grown sharply since Russia invaded Ukraine.
Norway is now Europe's biggest single gas supply source after Russian exports were sharply curtailed through 2022. But both sides have recently doubled down on their decarbonization efforts, as they look to reach their net zero goals.
"Norway is a long-standing and reliable partner to the EU, and we share a common vision for building a climate-neutral continent," European Commission President Ursula von der Leyen said at the signing ceremony.
"We want our societies and economies to prosper together while reducing emissions, protecting nature, decarbonizing our energy systems, and greening our industries. This Green Alliance makes our bond even stronger and allows us to design a better future together."
Combating climate change
One of the main priorities of the alliance will be to work together on climate adaptation, carbon pricing, carbon removals, and carbon capture, transport, utilization and storage, it said.
Northern Europe is investing significantly in carbon capture, utilization and storage and hydrogen infrastructure. And carbon pricing mechanisms such as the EU's Emissions Trading System, which are considered an effective and economic way to reduce greenhouse gas emissions, are becoming key tool in the fight against climate change.
The EU and Norway will cooperate on accelerating the clean energy transition with a focus on hydrogen and offshore renewable energy, saying they will commit to support developing countries and emerging economies in the process of implementation of their climate and environment policies by providing funds.
Other areas of focus include supporting the green industrial transition and further enhancing political and industrial cooperation through strategic partnerships, such as a future Strategic Partnership on Sustainable Raw Materials and Batteries Value Chains; decarbonizing the transport sector across all modes of transport, with special regard to zero GHG emission and zero pollution shipping; increasing regulatory and business cooperation to set global standards for the innovative environmental solutions required to accelerate the transition to circular and net-zero economies, the statement added.
Transition away from oil, gas
Russia's invasion of Ukraine has led to an acceleration of the transition away from fossil fuels in the EU despite a growing focus on energy security.
Many governments have passed a series of policies boosting the development of renewable and clean energy, paving the way for a growth in wind, solar, hydrogen and carbon markets.
The European Commission's efforts to unite the EU behind renewables took a significant step forward last year with the REPowerEU deal.
Increasing the uptake of renewables, energy efficiency and energy storage capacity are amongst the key objectives of REPowerEU to increase the resilience, security and sustainability of the EU energy system, by reducing the region's dependence on Russian fossils fuels.
The European Parliament has also approved a raft of climate reforms in recent months, part of its Fit for 55 package and the REPowerEU deal.
On April 18, the European Parliament formally approved reform of the EU's Emissions Trading System and the introduction of a carbon border tax, both of which will revamp the bloc's carbon market, and impact global trade.
The main purpose of the ETS is to reduce GHG emissions and carbon intensity to meet their net-zero targets, which includes a commitment to reduce net emissions by 55% by 2030.
The EU's ETS cap and trade system places a limit on the amount of emissions covered by different sectors, and it currently includes around 45% of the bloc's total greenhouse gas emissions. Companies can buy and sell carbon permits known as EU Allowances, which can be traded for each mt of CO2 they emit.
EU Allowances, carbon permits under the EU ETS, recently hit record highs above Eur100/mtCO2e ($105/mtCO2e) in February, attributed to technical signals and strong financial investor interest, along with the tightening of rules of the bloc's key climate policies, especially under its ETS.
Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2023 at Eur89.72/mtCO2e on April 21.