What Visits By Musk And Von Der Leyen Say About Energy Policy

Norwegians have bought so many Tesla’sTSLA
that Elon Musk flew to the country in August to “thank the leaders and the people of Norway for their long-standing support”. For a country of only five million people, Norway has played an out-sized role in the electric vehicle market thanks to generous tax breaks. Approximately two thirds of new cars sold in Norway are fully electric and Tesla’s Model 3 was highest selling vehicle in 2021, although the roads are quickly filling up with competing brands.

The electrification of transport is an important aspect of the energy transition as it reduces the reliance on fossil fuels and boosts energy efficiency. Looking at Norway as an example, energy demand from road vehicles will halve by the middle of the century. We forecast that 96% of all vehicles – light and heavy – in Norway in 2050 will be electric, yet they will only account for two-thirds of energy demand from road transport – an illustration of the energy efficiency of EVs over combustion engines. The policy can be regarded as a success in terms of reducing emissions.

The shiny new cars are very visible manifestation of a political decision to prioritize the decarbonization of road transport in Norway. The rest of Norway’s energy transition is less cutting edge; we forecast that the country will fall short of its climate targets, a domestic power supply shortage may require Norway – a country which historically produces a surplus from its hydro power – to import electricity for several years between 2025 and 2035. This latter fact has implications beyond its borders as many of its neighbors import electricity from Norway (as well as its oil and gas).

Across the sea, the day after Musk’s visit to Stavanger, European Commission chief Ursula von der Leyen was hosting Baltic leaders in Denmark. Faced with a new energy reality, the European Union is moving forward with an ambitious energy policy to wean the continent off fossil fuels – first Russian and then all other fossil fuel as well. Denmark was the ideal location for the summit given its progressive approach to wind power, which includes the building of the world’s first energy islands.

At the summit, the seven EU countries signed the Marienborg Declaration which vows to increase offshore wind output by 7-fold. By 2030 it is hoped the new capacity will supply six million homes with electricity.

These two visits on consecutive days highlight two different approaches to energy policy. Norway has huge potential to expand its offshore wind capacity, but was not part of the Marienborg declaration and has only recently started to lift its offshore wind ambitions.

Whilst creating offshore wind capacity brings jobs and increases power supply, it is arguable that Norway gets limited long term economic benefit from purchasing EVs built in other countries. While both policies are important for the global transition, Denmark’s approach targets the production of energy and, the country’s approach to renewable energy truly puts it at the vanguard of the energy transition, albeit with fewer Tesla’s parked in their driveways