Norway has announced plans to establish a commission to explore transitioning its economy away from oil and gas, following a commitment made by the government to the Greens Party in exchange for their support of the 2026 budget bill. As the largest producer of oil and natural gas in Europe, excluding Russia, Norway’s prosperity is heavily reliant on its vast reserves, which are also a significant contributor to climate change.

The commission’s primary objective will be to examine various scenarios and measures aimed at improving the adaptability of the Norwegian economy, particularly in terms of workforce and natural resource utilization, as the country’s oil and gas production enters a new phase marked by decline. This move is seen as a crucial step towards reducing the country’s dependence on fossil fuels and mitigating the impacts of climate change.

The agreement to establish the commission was reached after intense negotiations between the minority Labour government and the Greens Party, which had been pushing for a plan to phase out hydrocarbons by 2040. In addition to the commission, the Greens also secured an extension of the phase-out of the value-added tax (VAT) exemption on the purchase of electric cars. The original proposal had suggested lowering the threshold for VAT exemption from 500,000 kroner ($50,000) to 300,000 kroner, starting next year, with the exemption set to be removed entirely in 2027. However, under the new agreement, the removal of the VAT exemption will be pushed back until 2028, subject to approval from European authorities.

Norway has been at the forefront of electric car adoption, with nearly 100 percent of all new car registrations being electric vehicles. The extension of the VAT exemption is expected to continue to incentivize the adoption of electric vehicles, supporting the country’s transition to a more sustainable transportation sector.

The establishment of the commission and the extension of the VAT exemption on electric cars mark significant steps towards Norway’s transition to a more sustainable economy. As the country moves forward, it is likely to face challenges in balancing its economic needs with its environmental goals. However, with the commission’s findings and recommendations, Norway is poised to make progress towards reducing its dependence on oil and gas and mitigating the impacts of climate change.