Emission targets and coalition options for a small, ambitious country: An analysis of welfare costs and distributional impacts for Norway

In spite of theoretical ambiguity, the findings suggest that the tighter the links with the EU, the lower the abatement costs for Norway. [...] Thus, the most expensive option, the national regime, is the most progressive, and the lower the mac- roeconomic cost, the less progressive the policies. [...] In general, the net impact is ambiguous, depending on the relative positions (given Inequations (a) to (d) above) and steepnesses of the MACs and how the ambitions are composed of the emissions and targets of the two domestic sectors. [...] As we expect, the share of government transfer is the highest for the households in the lowest-income decile (inc1) and decreases as the income of the households increases. [...] The linking to the EU ETS has removed the option of a national trading and, thus, increased the abatement challenge for the remaining part of the Norwegian economy.