Greening of Nordic Electricity Industry: Policy Convergence and Diversity

Abstract

With a comparative focus on policy similarity and diversity, this article1 gives an overview of the main elements of electricity-related environmental policy in the Nordic countries, following the launching of a common electricity market in the 1990s. The article points out that the electricity related environmental policy positions of the Nordic countries showed a noticeable lack of coordination in the 1990s. Nordic divergence is observed both in terms of general policy orientations and at the instrument and incentive levels, in spite of the pioneering development of a common integrated electricity market and ambitious environmental policy goals. The article then highlights how the recent Swedish “green” certificate market model has created a new momentum for market-based “greening” with a potential for stronger convergence in Nordic renewable energy policy. In spite of signs of convergence, the article shows how the development of Nordic electricity-related environmental policy still contains considerable ambiguity: Unequal resource endowments, subject to simple resource-based interest formation, should indicate that there is little room for convergence in Nordic renewable energy policy. Shifting the environmental policy focus from existing technologies and resources to potential innovations, however provides a more open arena where the Nordic countries may see themselves served by the dynamic scope of a broader Nordic market based on a common policy approach, such as a green certificate market. In explaining why the Nordic arena may be an interesting locus for common renewable energy policy, the article points out that small countries may need an “intermediary” arena to aggregate size and scope in order to generate a European momentum in regulatory competition with larger European states. Similarly, Nordic companies may consider the opportunity to gain first mover advantages by partnering with government as local experimentation may be seen as useful pilot experience. Together with the precedence of a common Nordic electricity market and the development of common market institutions, the aspiration to be in a stronger position to shape European policy provides arguments for collective Nordic solutions even under increased Europeanization of both market and policy making.