With very little coal and limited natural gas use in the power sector, most fossil fuel use in Norway comes from natural gas burnt in oil and gas extraction and oil demand in the transport sector. The remaining thermal power plants are mostly at industrial installations and are subjected to both the CO₂ tax and the EU ETS.
World-leading electric vehicle (EV) policies have been implemented in Norway leading to the world’s highest EV share of passenger vehicle sales, reaching 54% and 16% of the total vehicle stock in 2020., As a result, oil demand in the transport sector has fallen in recent years and is likely to continue this downward trajectory. In its recent climate action plan, the government has unveiled plans to reduce emissions from other, but not all, forms of transport, including ferries and buses.
The Climate Action Plan includes a tripling of its carbon tax to USD 220/MtCO₂, placing further financial pressure on oil and gas extraction and the remaining fossil fuel combustion in the power sector. However, there is currently no plan to phase out these polluting sectors of the economy.