Why is the Norwegian government against an energy price cap?
On several occasions, ministers, and even the Prime Minister, have warned against a maximum price for electricity in Norway this winter. So why is the government against an energy price cap?
Soaring energy costs this summer and gloomy predictions for the winter ahead have put mounting pressure on the government to do something to address rising electricity costs.
So far, the government's only action is to bring forward a change to the energy subsidy scheme, which sees the maximum compensation for energy bills increased from 80 percent to 90 percent when the energy price rises above a certain amount by a month.
In September, Norway's parliament will interrupt its summer recess to hold an extraordinary meeting on the energy crisis.
Prices have been consistently high in parts of the country since last Autumn. In Norway, electricity production is dependent on hydropower. However, the level of filling of Norway's hydropower reservoirs in parts of the country remains at a record low, which adds to concerns. In east and south-west Norway, the filling rate hasn't been lower in the last 27 years.
READ ALSO: What would energy rationing in Norway look like?
This is compounded by an uncertain energy situation across the continent due to the war in Ukraine, as Norway is connected to the European market via power transportation cables.
Many in Norway have called on the government to introduce a maximum price that can be paid for energy, with the government absorbing the excess.
Over three-quarters of people recently surveyed by left-leaning newspaper Klassekampen earlier this week were in favour of the government putting a maximum price on energy this year.
Additionally, three of Norway's political parties, the Red Party, the Progress Party and the Christian Democratic Party, have all called for an energy price cap.
Despite this, the government has on several occasions said that an energy price cap is unlikely to be implemented.
On Thursday evening, both the Prime Minister, Jonas Gahr Støre, and Minister of Finance, Trygve Slagsvold Vedum, ruled out a potential price cap during a televised leaders' debate in Arendal.
"We must get stability and predictability. If the maximum price had been the solution, we would have gone for it on the day. But when I don't do it, it's because I think it's wrong, and it can even be counterproductive," Støre said.
Meanwhile, Vedum warned that a maximum price could threaten the security of Norway's electricity supply.
"This is not the time to experiment," Vedum said during the debate.
Støre previously told Norwegian newswire NTB that the government was sceptical about the prospect of a price cap as it could have a number of adverse effects.
"(A) max price sounds simple and straightforward, and I understand that many people think it sounds enticing. But there are many weighty reasons against it," he said.
The PM added that there were three reasons why a maximum price may not be the ideal solution, it seems at first glance.
Firstly, he said that a price cap could lead to power rationing as a maximum cost would lead to water reservoirs being depleted sooner. He added that the cap would also need to be high enough to allow Norway to import energy from abroad and could lead to power firms being bankrupted.
As part of a debate at Arendalsuka (a political festival held in Arendal), Støre added that a price cap would cost much more than the current scheme. The government is expecting to spend around 41 billion kroner this year on the current subsidy scheme, according to figures released on Friday.
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Soaring energy costs this summer and gloomy predictions for the winter ahead have put mounting pressure on the government to do something to address rising electricity costs.
So far, the government's only action is to bring forward a change to the energy subsidy scheme, which sees the maximum compensation for energy bills increased from 80 percent to 90 percent when the energy price rises above a certain amount by a month.
In September, Norway's parliament will interrupt its summer recess to hold an extraordinary meeting on the energy crisis.
Prices have been consistently high in parts of the country since last Autumn. In Norway, electricity production is dependent on hydropower. However, the level of filling of Norway's hydropower reservoirs in parts of the country remains at a record low, which adds to concerns. In east and south-west Norway, the filling rate hasn't been lower in the last 27 years.
READ ALSO: What would energy rationing in Norway look like?
This is compounded by an uncertain energy situation across the continent due to the war in Ukraine, as Norway is connected to the European market via power transportation cables.
Many in Norway have called on the government to introduce a maximum price that can be paid for energy, with the government absorbing the excess.
Over three-quarters of people recently surveyed by left-leaning newspaper Klassekampen earlier this week were in favour of the government putting a maximum price on energy this year.
Additionally, three of Norway's political parties, the Red Party, the Progress Party and the Christian Democratic Party, have all called for an energy price cap.
Despite this, the government has on several occasions said that an energy price cap is unlikely to be implemented.
On Thursday evening, both the Prime Minister, Jonas Gahr Støre, and Minister of Finance, Trygve Slagsvold Vedum, ruled out a potential price cap during a televised leaders' debate in Arendal.
"We must get stability and predictability. If the maximum price had been the solution, we would have gone for it on the day. But when I don't do it, it's because I think it's wrong, and it can even be counterproductive," Støre said.
Meanwhile, Vedum warned that a maximum price could threaten the security of Norway's electricity supply.
"This is not the time to experiment," Vedum said during the debate.
Støre previously told Norwegian newswire NTB that the government was sceptical about the prospect of a price cap as it could have a number of adverse effects.
"(A) max price sounds simple and straightforward, and I understand that many people think it sounds enticing. But there are many weighty reasons against it," he said.
The PM added that there were three reasons why a maximum price may not be the ideal solution, it seems at first glance.
Firstly, he said that a price cap could lead to power rationing as a maximum cost would lead to water reservoirs being depleted sooner. He added that the cap would also need to be high enough to allow Norway to import energy from abroad and could lead to power firms being bankrupted.
As part of a debate at Arendalsuka (a political festival held in Arendal), Støre added that a price cap would cost much more than the current scheme. The government is expecting to spend around 41 billion kroner this year on the current subsidy scheme, according to figures released on Friday.
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