2 Circular value creation

Norway’s strategy for developing a green, circular economy highlights the potential for value creation in a circular Norwegian business sector. There is huge potential in Norwegian industry for increased circularity and resource efficiency. The Green Industrial Initiative6 is the Government’s all-out effort for the industrial sector and will take us through the biggest transition the Norwegian economy has seen in modern times. This includes facilitating the use of renewable resources and the reuse of products and materials in comprehensive circular systems. The regulatory framework referred to in Chapter 3 will set new requirements for businesses and help promote sustainability at all stages of the value chain. In order to provide additional incentives for the transition, the regulatory framework should be supplemented with other instruments, including research and innovation, taxes and duties, requirements and guidelines for public procurement, competition policy, certification schemes, standardisation, digitalisation policy and ownership policy.

2.1 Research and innovation

The Government has presented Report No. 5 to the Norwegian parliament (Storting) (2022–2023) Long-term plan for research and higher education 2023- 2032.7 One of the three overall goals of the Government’s research efforts is to strengthen environmental, social and economic sustainability. The category climate, environment and energy is one of six thematic priorities and the circular economy is specifically highlighted under this priority. International cooperation is crucial for the transition. Value chains are global, and a circular economy requires cooperation across nations. Any national efforts in relation to knowledge and competence should be seen in the context of international efforts in the field, particularly EU initiatives. Research and innovation for the circular economy is a priority in the EU’s Horizon Europe (2021–2027) research and innovation programme, in which Norway takes part. The programme is part of the EU’s efforts to attain the targets set out in the European Green Deal.

It is also relevant to consider the work of the Intergovernmental Panel on Climate Change (IPCC), the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) and the International Resource Panel (IRP). What they all have in common is that they contribute to the development of knowledge of particular relevance to the circular economy. Each of the knowledge panels is important for developing national knowledge and policymaking.

As a rule, funding agencies for business and industry development contain general funding programmes that are available across the country. General funding programmes are open schemes without restrictions in terms of topic, technology or industry. In the 2023 national budget, the Government introduced the overriding principle that projects granted funding through funding agencies for business and industry development must be aligned with the green transition goal for 2030 and the goal that Norway will be a low-emission society by 2050. The principle covers both projects that have a neutral effect and projects that have a positive effect on the green transition, and does not preclude, for example, supporting good projects in the petroleum industry. Funding agencies also have targeted schemes limited to one topic or technology, for example, climate and environmental technology. These include schemes such as the Environmental Technology Scheme, Green Growth Loans and the Green Platform Initiative. The Green Platform is a joint competition arena led by Innovation Norway, the Research Council of Norway and Siva, in collaboration with Enova. A total of NOK 2.5 billion has been announced through the Green Platform for the period 2020–2023, and 23 projects in areas such as energy, industry, circular economy and bioeconomy have been awarded funding through calls for proposals in 2021 and 2022.

The funding agencies for business and industry development also have a number of cross-cutting initiatives that encompass circular economy. In 2022, the Research Council of Norway, Innovation Norway, Siva, Enova and Gassnova entered into a new cooperation agreement on green growth. The agreement deals with how cooperation on instruments, funding programmes, mobilisation, system development and digitalisation can best be structured. In the national budget for 2023, the Research Council, Innovation Norway and Siva were also given guidelines on strengthening investments in and coordination of cross-cutting work on the circular economy, based on the funding agencies’ green growth cooperation agreement. These guidelines were carried forward in the Government’s proposed national budget for 2024 and through the Storting’s budget decision. The guidelines are followed up in the formal governance dialogue with the funding agencies.

Bionova was established as a part of Innovation Norway as a tool to help Norway achieve its climate goals for 2030 and become a low-emission society in 2050. Bionova will also contribute to innovation and value creation in the bioeconomy relating to agriculture, forestry and aquaculture industries. Bionova’s funding schemes, including those targeting more sustainable feed, are intended to work alongside other programmes. Innovation Norway’s bioeconomy scheme is incorporated into Bionova’s funding programme portfolio. The scheme will lay the foundation for increased value creation in bio-based industries through market-based and sustainable use of bio-resources. This includes continued work on technology and green solutions in the fisheries and aquaculture industries and following up the bioeconomy action plan along with the Research Council and Siva.

Since 2020, the Research Council has focused on strengthening research and innovation within the circular economy. The Research Council’s total investment in the circular economy has more than quadrupled over the past three years, from about NOK 100 million in 2020 to NOK 440 million in 2023. The Research Council has also established a dedicated budget objective to highlight cross-cutting initiatives on the circular economy, and a number of the Research Council’s portfolios contribute funds to fulfil this objective.

2.2 Economic instruments

There is a need to assess how economic instruments can contribute to better resource utilisation, increase circular production and consumption patterns, and stimulate value creation and employment based on circular solutions.

The Tax Committee (NOU 2022: 20) noted that the circular economy is a relatively new field in economics and highlighted a significant need for more knowledge. The committee recommends a comprehensive study of measures to promote circular activities. Furthermore, it recommends that tax measures should be assessed against other measures, including direct regulation and information initiatives. The 2050 Climate Change Committee (NOU 2023: 25) highlights that all future policies must be based on the premise that all resources are limited, meaning that the economy must become more circular to ensure that economic activity stays within planetary boundaries. A number of EU regulations encourage nations to employ economic instruments to incentivise the transition. Economic instruments can complement the requirements set out in EU/EEA legislation to help reduce the environmental impact of our consumption and production patterns. Appropriately designed policy instruments can provide the incentives for behavioural change, reduce the environmental impact associated with production, use and waste management, and contribute to value creation through innovation and new, sustainable business models.

It is a challenge that the externalities of production largely arise in the major manufacturing economies of the world. In many cases, these are emerging economies with a limited ability or willingness to develop adequate environmental policies within a reasonable timeframe. This also makes it necessary to consider second-best solutions, including taxes or regulations that do not necessarily address the source of the externalities.

The Government has therefore decided to establish an expert group tasked with conducting a comprehensive assessment of which instruments (regulatory, economic and informational) are effective in promoting a more circular economy. The group will submit its report by April 2025.

2.3 Public procurement

Public procurement amounts to around NOK 740 billion annually and represents a strong market force. Public sector demand for circular solutions will therefore be a key factor in achieving the action plan’s objectives.

From 1 January 2024, the Government introduced regulatory amendments with the general rule that climate and environmental requirements must be stipulated in all public procurements, either through a 30 per cent weighting of criteria or through requirement specifications. If, in exceptional cases, no requirements are set because the environmental impact is deemed negligible, this will need to be justified in the procurement documents. The purpose of these changes is for public entities to maximise their positive climate and environmental effect through their procurements. Requirements and criteria aimed at promoting a circular economy can provide a resource-efficient way of achieving the goal of minimising climate and environmental impact, and the regulatory change is expected to increase focus in this area. New EU regulations set out in the Circular Economy Action Plan, as discussed in Part 3, also provide for standardised public procurement requirements for selected product groups that are important for a circular economy.

The procurement survey conducted in Norway every two years shows that there are a number of barriers to public entities successfully implementing green procurement and demanding circular solutions. A lack of time and expertise are two key aspects. In addition to that, a relatively small proportion of public enterprises state that they are systematically working on developing management parameters for the climate and environment. These findings are reflected in the Office of the Auditor General’s survey of green public procurement. The recommendation from this survey highlights the need to make guidance material more widely known and to further develop statistics and management information that can be used to promote green public procurement.

A national procurement committee was appointed by the King in Council on 4 November 2022. The committee was tasked with proposing changes to simplify and make the regulations more accessible, as well as strengthening climate and environmental considerations in the procurement regulations. The committee submitted its first interim report on 10 November 2023.8 The committee proposed a new structure for the public procurement regulations, including the consolidation and clarification of the rules for societal considerations, including the climate and environment. It also proposes emphasising the efficient and sustainable use of society’s resources in the purpose provision of a new act relating to public procurement. Among other things, this is defined as both transitioning to a low-emission society and reducing environmental impacts from public procurement. The committee points out that if Norway is to reduce emissions faster, it is crucial to switch to a more resource-efficient and circular economy.9 The committee has also proposed a provision for standardised EU public procurement requirements, so that they can be implemented into Norwegian law once adopted in the EU and incorporated into the EEA Agreement.

The Norwegian Agency for Public and Financial Management (DFØ) is a specialised agency for public procurement with responsibility for the Norwegian Division for Public Procurement. The aim of the DFØ is for the public sector to make efficient and innovative procurements that help to promote the green transition and sustainable development. This is also described in the 2021 Action plan to increase the proportion of green public procurements and green innovation, which highlights a circular economy as a priority focus area.10 DFØ will also work on guidelines in relation to the new regulation on 30 per cent weighting of environmental criteria, as described above.

2.4 Competition policy

Competition policy is important for the transition of the Norwegian economy towards sustainable development. Achieving this type of development will affect all areas of business and industry going forward, as market players will need to adapt. Well-functioning competition stimulates increased productivity, transition and innovation. Over time, the innovation driven by more effective competition can result in a wider range of affordable climate-friendly products and services. Effective competition as a tool for transitioning to a more circular economy is especially important in key industries that are essential to the green transition, in which the benefits of more sustainable product development and production are greatest. In order to unleash this potential, it is essential that companies understand the boundaries set by the Competition Act, including the limits set on cooperation.

2.5 Labelling schemes

The foundation Ecolabelling Norway manages the official environmental labels in Norway, which are the Nordic Swan and the EU environmental label EU Ecolabel. These labels provide standardised and quality-assured information about goods and services that are among the least environmentally harmful on the market.

The Nordic Swan Ecolabel is a comprehensive environmental certification, meaning that the entire life cycle of a product is taken into account. All decisive factors are considered simultaneously. The environmental impact of all relevant factors is assessed and weighed against each other. The requirements are then formulated so that the environmental impact is reduced where it matters most.

Through the environmental requirements of the Nordic Swan label, producers receive a concrete guide on how to:

• produce more resource-efficiently
• use fewer harmful chemicals
• meet requirements for quality, durability and repairability, etc.

The Nordic Swan Ecolabel makes it easier for manufacturers, procurers and consumers to make choices that support a circular economy, without needing to be an expert in the field themselves.

2.6 Standardisation

The development and use of standards plays a key role in fostering a more circular economy. In 2024, the Storting allocated Standard Norway a grant of NOK 4 million to strengthen its work on standardisation. Standard Norway (SN), the Norwegian Electrotechnical Committee (NEK) and the Norwegian Communications Authority (Nkom) have the status of national standardisation organisations in Norway.

These organisations are working on developing standards for the circular economy at the national, European (CEN, CENELEC and ETSI) and global levels (ISO). By actively participating in standardisation efforts, Norwegian stakeholders can help influence the development and strengthen their position as suppliers of circular solutions and products. This requires the efforts of experts from industry, research and other actors. Standard Norway, as one of Norway’s representatives in the international and European standardisation efforts, facilitates and assists Norwegian stakeholders in their work.

International standards can reduce trade barriers as products and materials are increasingly reused and recycled. Standards are an important tool in the implementation of the European Green Deal and in regulatory oversight and control to ensure regulatory compliance. Under some of the proposed and adopted regulations related to the circular economy, the European Commission has requested the development of standards from the European standardisation organisations. Among other things, standards provide details and specifications that manufacturers must follow when designing a product.

The EU Plastics Strategy and the Regulation on Packaging and Packaging Waste are examples of legislation that has resulted in extensive standardisation work. Standards are a prerequisite for building a value chain for plastic products and plastic-containing packaging suitable for material recycling and the use of recycled plastic in new products. The first international standards (ISO) for the circular economy will arrive in 2024. These are cross-sectoral standards for, among other things, terminology and indicators, and are a prerequisite for further work on specific standards in different sectors, value chains and/or products. Norway has actively participated in the international work on standardisation.

2.7 Digitalisation

Digital information about the climate and environmental footprint, reparability and recyclability of products must be integrated into all types of products, making it easier to enforce rules and provide consumers with a basis for choosing the most sustainable products.

The new EU regulatory framework for products contains requirements for digital information, often in the form of a Digital Product Passport. A Digital Product Passport will improve the traceability of a product throughout its life cycle and provide information about a product’s characteristics. The information included in the passport will vary from product to product but may include information about the product’s environmental footprint, the recycled materials it contains, or useful information relating to repairing, reusing or recycling the product. There will be differentiated access to information for different target groups, such as consumers, reuse stakeholders, etc. Norway is participating in the Digital Europe Programme (DIGITAL) 2021-2027, the EU’s new major investment and capacity-building programme for digital transformation and the use of innovative digital technologies in society, business and industry. The digital programme will implement full-scale pilots using Digital Product Passports in at least two key value chains. The projects will also identify the need to further develop standards for increased interoperability and security.

The coordination council for digitalisation in the construction industry (2021–2023) (Samordningsrådet for digitalisering i bygg- og anleggsnæringen) carried out several pilot projects to coordinate digitalisation work in the industry and to stimulate an improved digital information flow, especially for construction materials with a high potential for reuse. These initiatives will, among other things, support the establishment of digital material banks. A pilot project on digital waste management has also been carried out, as well as employing tools for digital trade on construction sites. The Government will continue to support work on digitalisation in the construction industry.

2.8 The Government’s ownership policy

In Report No. 6 to the Storting (2022–2023) Greener and more active state ownership, the Government expressed more and clearer expectations of state-owned companies in their climate and nature efforts. The state, as an owner, is particularly interested in companies identifying and capitalising on opportunities that arise from a shift towards more nature-positive and circular business models, which may lead to cost savings for the companies or create new competitive advantages and business opportunities.

Action points

• Appoint an expert group to conduct a comprehensive assessment of which policy instruments (regulatory, economic and informational) are most effective in promoting a more circular economy
• Consider following up the public procurement committee’s proposals for a new regulatory procurement framework. Proposals from the committee will be addressed through consultation processes and considered in further regulatory work
• Communicate the guidelines on the new requirement for 30 per cent weighting of environmental criteria
• Disseminate information about project cooperation guidelines in light of the competition rules
• Support the work on eco-labelling and standardisation
• Present a comprehensive national strategy for digitalisation in the course of 2024
• Continue to support the work on digitalisation in the building and construction industry
• Continue to provide clear guidelines to Innovation Norway, the Research Council of Norway and Siva on strengthening their efforts and coordinating cross-cutting work on the circular economy