Agricultural Policy Monitoring and Evaluation 2023

22. Norway

Support to agriculture

Norway provides the highest relative levels of support to agriculture among the 54 countries covered in this report. Total support in 2020-22 equalled 83% of the value of production at farmgate prices. While this is down significantly from the 125% average in 2000-02, it remains much higher than the OECD average of 25%. Transfers to producers made up 51% of gross farm receipts in 2020-22, also the highest in the OECD. The value of support received by farmers was slightly higher than the value of farm production when valued at world market prices.

Much of Norway’s support is in forms considered most market distorting, accounting for just over half of all support to producers. This is slowly changing as the share of potentially most-distorting transfers has declined since the mid-1980s, from 78% in 1986-88, to 61% in 2000-02, to 52% in 2020-22. Domestic market prices are supported through border protection and market regulations. This Market Price Support (MPS) remains the largest component of support to producers (37% in 2020-22) and affects most major commodities except sheep meat and wool. Payments based on current production factors such as area and animal numbers also account for a large share of support to producers (33%).

Support for general services (General Service Support Estimate, GSSE) accounts for a relatively small share of overall support. In 2020-22, GSSE accounted for 4.9% of total support to the sector, equivalent to 4% of the value of agriculture production. Almost two-thirds of this is for agricultural education services through the Norwegian University of Life Sciences, with most of the remainder for agricultural product-safety and inspection services through the Norwegian Food Safety Authority.

Recent policy changes

The annual agricultural agreement between the government and the two farmers’ organisations included significant increases in support to producers. These large increases were partly an effort to compensate for rising input costs stemming from the war in Ukraine. The agreement included an increase in target prices, additional budgetary support, an increase in agricultural tax deductions, and increased funding for regional environmental programmes.

A temporary electricity subsidy was introduced in response to rising power prices in late 2021 and was continued following the outbreak of the war in Ukraine. Agricultural enterprises were given special treatment in the form of higher consumption limits than households and other businesses, and no consumption limits on greenhouse and irrigation operations. The scheme compensates a given percentage of electricity consumption above NOK 0.7/kWh (USD 0.07/kWh) – currently 100% for greenhouses and 80% for all other agricultural enterprises.

Changes to the milk quota system took effect in 2022. Farmers wishing to sell their milk quotas must now sell a minimum of 40% of the quota to the government at a fixed price of NOK 4 per litre (USD 0.4 per litre). This is an increase from the 20% minimum which existed since 2017. There are no price controls on the sale of the remaining 60% of the quota, which can be sold privately to other producers within the seller’s production region.

Assessment and recommendations

• Norway has taken some positive steps to adapt and prepare for a changing climate, including investments in flood preparedness, research and innovation into climate-adapted production processes and genetics, soil management, and contingency storage. These could be complemented with activities that boost forecasting and recovery. Early-warning systems for extreme events such as droughts, floods or pest incursions could help affected communities prepare for and minimise these risks as much as possible. Consideration could also be given to enhancing farmers’ role in managing their business risk from changing climate. This could be achieved by introducing voluntary risk-management programmes such as mutual funds, or tax-beneficial contingency savings accounts that allow farmers to smooth out income in the face of rising business risks, as such measures have proven effective in other countries.

• Norway’s producer support structure runs the risk of leading to climate maladaptation in the medium-to-long term. Production subsidies and market price supports insulate producers from external signals and lock them into production patterns that might become less tenable as climate patterns shift. Agricultural policy should help producers prepare for change, guiding them towards more sustainable and competitive production. Norway could consider reducing border protection and commodity-specific support in a gradual and predictable way to let markets play their role in allocating production resources. This would help producers respond more efficiently to climate pressures.

• The climate-mitigation strategy for the agricultural sector as laid out in Norway’s Climate Action Plan for 2021-2030 largely relies on changing consumer dietary preferences away from high-emitting commodities. Reducing the share of ruminant meat and dairy products in consumers’ diets can reduce greenhouse-gas (GHG) emissions related to food. However, relatively high payments coupled to the production of high-emitting commodities such as beef and other livestock means focus will likely remain on producing these outputs and might not respond to changing consumer preferences. Making support less commodity-specific can allow more flexibility in production planning and provide income support to farmers without compromising the government’s goal of land retention in the agricultural sector.

• Re-orienting support towards general services – especially for the agricultural knowledge and innovation system – could increase productivity growth while maintaining environmental protection and sustainable natural-resource management. Much of Norway’s productivity growth in recent years came from labour-saving initiatives, but did little to reduce environmental pressures. Research and outreach programmes should target sustainable agricultural practices to reduce the use of harmful inputs and emissions. Support for pest and disease control will also increase in importance as climate change could drive new incursions into Norway.

• The framework of negotiations between farmers’ associations and the government provides stability and a platform for regular evaluation and gradual adjustment. Recent inclusions of agri-environmental programmes are welcome. However, the agreements focus overwhelmingly on annual farm incomes, and the gradual nature of the negotiations makes it difficult to make more transformational change. This can be a barrier to needed reforms, such as responsiveness to markets and concerns around climate, agri-environmental outcomes, and the provision of ecosystem services. Norway could consider limiting the scope of negotiations, such as by exempting programmes that provide public goods.

Figure 22.1. Norway: Development of support to agriculture

 

 

 

 

 

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 22.2. Norway: Drivers of the change in PSE, 2021 to 2022

Note: % change of nominal Producer Support Estimate expressed in national currency. The producer price change and the border price change are not calculated when both negative and positive market price support (MPS) occur at the commodity level for the previous year. Note that negative MPS estimates for livestock products may arise in cases of aligned product prices if there is positive MPS for feed commodities.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 22.3. Norway: Commodity-specific transfers as a percentage of commodity gross farm receipts, 2020-22

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 22.1. Norway: Estimates of support to agriculture

Million USD

	1986-88	2000-02	2020-22	2020	2021	2022p
Total value of production (at farm gate)	2 533	2 052	3 859	3 490	4 140	3 947
of which: share of MPS commodities (%)	73.28	80.83	73.29	75.39	71.64	72.84
Total value of consumption (at farm gate)	2 687	2 085	4 076	3 653	4 457	4 118
Producer Support Estimate (PSE)	2 844	2 339	2 896	2 808	3 016	2 865
Support based on commodity output	2 070	1 348	1 384	1 398	1 465	1 287
Market Price Support1	1 397	1 011	1 080	1 103	1 142	994
Positive Market Price Support	1 397	1 011	1 082	1 110	1 143	994
Negative Market Price Support	0	0	-3	-7	-1	0
Payments based on output	673	337	304	295	323	293
Payments based on input use	250	117	199	184	179	232
Based on variable input use	149	71	107	85	88	147
with input constraints	0	0	0	0	0	0
Based on fixed capital formation	91	38	82	90	80	76
with input constraints	0	0	0	0	0	0
Based on on-farm services	11	8	10	10	11	10
with input constraints	0	0	0	0	0	0
Payments based on current A/An/R/I, production required	524	871	962	890	1 008	988
Based on Receipts / Income	0	49	77	72	80	80
Based on Area planted / Animal numbers	524	822	885	818	928	908
with input constraints	371	644	728	666	761	757
Payments based on non-current A/An/R/I, production required	0	0	346	330	357	351
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0	0
With variable payment rates	0	0	0	0	0	0
with commodity exceptions	0	0	0	0	0	0
With fixed payment rates	0	0	0	0	0	0
with commodity exceptions	0	0	0	0	0	0
Payments based on non-commodity criteria	0	3	6	5	7	6
Based on long-term resource retirement	0	0	0	0	0	0
Based on a specific non-commodity output	0	3	6	5	7	6
Based on other non-commodity criteria	0	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0	0
Percentage PSE (%)	71.44	69.03	51.04	54.05	50.15	49.24
Producer NPC (coeff.)	4.11	2.56	1.49	1.64	1.48	1.39
Producer NAC (coeff.)	3.50	3.23	2.04	2.18	2.01	1.97
General Services Support Estimate (GSSE)	129	158	156	151	168	150
Agricultural knowledge and innovation system	74	62	100	99	107	95
Inspection and control	5	25	33	29	37	33
Development and maintenance of infrastructure	29	54	14	15	15	13
Marketing and promotion	21	15	9	9	10	9
Cost of public stockholding	0	2	0	0	0	0
Miscellaneous	0	0	0	0	0	0
Percentage GSSE (% of TSE)	4.04	6.16	4.87	4.88	5.00	4.73
Consumer Support Estimate (CSE)	-1 388	-1 036	-1 050	-1 144	-1 130	-876
Transfers to producers from consumers	-1 675	-1 101	-1 076	-1 200	-1 150	-877
Other transfers from consumers	-178	-75	-95	-103	-122	-59
Transfers to consumers from taxpayers	220	71	152	133	172	150
Excess feed cost	244	70	-31	26	-30	-89
Percentage CSE (%)	-56.34	-51.15	-26.73	-32.49	-26.38	-22.06
Consumer NPC (coeff.)	3.23	2.28	1.40	1.55	1.40	1.29
Consumer NAC (coeff.)	2.29	2.05	1.36	1.48	1.36	1.28
Total Support Estimate (TSE)	3 193	2 568	3 204	3 092	3 356	3 164
Transfers from consumers	1 853	1 176	1 171	1 303	1 272	937
Transfers from taxpayers	1 518	1 467	2 128	1 892	2 206	2 286
Budget revenues	-178	-75	-95	-103	-122	-59
Percentage TSE (% of GDP)	3.49	1.42	0.70	0.85	0.70	0.59
Total Budgetary Support Estimate (TBSE)	1 796	1 557	2 124	1 989	2 214	2 170
Percentage TBSE (% of GDP)	1.96	0.86	0.46	0.55	0.46	0.41
GDP deflator (1986-88=100)	100	163	328	275	322	388
Exchange rate (national currency per USD)	6.88	8.59	9.21	9.41	8.59	9.61

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Norway are: wheat, barley, oats, milk, beef and veal, sheep meat, wool, pig meat, poultry and eggs.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database). http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Historically, Norway’s agricultural policies relate to food security and ensuring farm incomes, employment opportunities and regional distribution of production. Today, these objectives are complemented by consumer and societal concerns such as sustainability and environmental issues, climate, food safety and animal welfare, cultural landscape, innovation, agri-tourism, and the small-scale food industry. Norway adopts a four-pillar approach to implement these objectives: i) border protection; ii) legal frameworks to secure family-owned farms; iii) annual negotiations between the state and farmers’ organisations to determine producer prices, budget transfers and allocation of funds; and iv) domestic regulations to balance the market through producer co-operatives.

Since the mid-1980s there has been modest policy reform towards market orientation, and modest reductions in the level of support. Farmers in Norway remain heavily supported through border measures, domestic market regulations, budgetary payments and tax breaks.

Environmental cross-compliance was introduced in 1991 with the Acreage and Cultural Landscape Programme which grants payments on the condition that farmers meet cultural landscape requirements. Norwegian agri-environmental policies are underpinned by the premise that certain environmental public goods are most cost-effectively provided through positive externalities of agricultural commodity production.

Prompted by the WTO Uruguay Agreement on Agriculture, in force since 1995, a number of changes were introduced to agricultural policies, to improve cost efficiency and market orientation, including increased flexibility in milk quotas, removal of administered prices for eggs, poultry, pork, beef and sheep, and phasing out of export subsidies. But high levels of protection remain against imports of the most important and sensitive agricultural products, such as meat, dairy, eggs and grains. Moreover, the primary agricultural sector is exempt from standard competition law.

Most of Norway’s tariff rate quotas (TRQs) were eliminated in 2000 when the WTO bound tariff rates became equal to the in-tariff quota rates. Tariffs for some products, particularly livestock products are set between 100% and 400%. However, there is a system of “open periods” allowing imports at reduced tariff rates in the event that domestic prices rise above threshold levels due to a deficit in domestic production. Since 1 January 2015, Norway unilaterally eliminated import duties on 114 agricultural tariff lines. While these duties were low (and not important for protecting Norwegian agricultural production), their elimination resulted in reduced customs procedures and administrative costs. Export subsidies were abolished at the end of 2020.

Table 22.2. Norway: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1985	Closed economy	High agricultural import tariffs and non-tariff measures Administered prices of agricultural products Production quotas of certain products
1985-1994	Modest domestic reforms	Modest reduction in agricultural import tariffs Removal of several administered prices Increased flexibility in the milk quota system
1995-2000	Implementation of the WTO Uruguay Agreement on Agriculture; more emphasis on environmental sustainability issues	Modest import tariff reduction; tariffication of non-tariff measures Introduction of environmental cross-compliance
2000-present	Continuation of trade reforms	Lower border protection Abolition of export subsidies Removal of several administered prices Introduction of environmental programmes

Source: (OECD, 2021[1]).

Today, agriculture in Norway remains among the most highly protected in the OECD. Market price support is provided through border protection and domestic market regulation and forms the main component of support to producers (Figure 22.4). The share of MPS in the PSE has been slowly declining over time, but still represents about 34.8% of support. Payments based on output are now around one-third of 1986-88 levels largely as a result of declines in deficiency payments to milk producers throughout the 1990s. Payments based on current production factors have increased with the introduction of new environmental programmes in the 2000s and rising subsidies for livestock and grazing animals (represented in the series payments based on current A/An/R/I in Figure 22.4).

Figure 22.4. Norway: Level and PSE composition by support categories, 1986 to 2022

Notes: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

The strategic objectives of Norway’s agricultural and food policies are set out in the 2016 White Paper “Change and development – A future oriented agricultural production”. They include: food security, agriculture throughout the country, increasing value creation; and sustainable agriculture with lower greenhouse gas emissions.

The principal policy instruments supporting agriculture include border measures, budgetary payments differentiated by commodity and region, and domestic market regulation based on the Marketing Act. The Marketing Act covers certain types of meat (beef, mutton, pork and poultry); milk, butter and cheese; eggs; cereals and oilseeds; potatoes, vegetables, fruit and berries; and fur skins.

Target prices are provided for milk, grains and some fruits and vegetables. The government and farmers’ organisations annually negotiate target prices and the budgetary framework for payments to farmers. Marketing fees are collected from producers and used to finance marketing activities dealing with surpluses.

Dairy production is controlled by a milk quota system. Milk quotas are farm-specific and tradeable only within the same regional area. Quotas were introduced in 1983, with trading of quotas being introduced in 1997 and leasing of quotas allowed since 2009. Each year the quotas are multiplied by a set factor to fix the amount of milk each producer can deliver to a dairy processor and control the overall supply of milk. New entrants to the dairy industry must procure quotas either through leasing or purchasing existing quotas from farms or the Norwegian Agricultural Agency. Currently a minimum of 40% of all quotas sold must be to the government at NOK 4 per litre (USD 0.42 per litre).

Various direct payments are provided to farmers, including acreage and headage payments, as well as payments based on product quantities for meat. Many of these are differentiated by region and farm size in order to equalise incomes across all types of farms and regions. This is designed to maintain the geographic distribution of farms and production in the country.

Since 2004, agri-environmental measures have been implemented as part of the National Environmental Programme (Nasjonalt miljøprogram), which aims to contribute to sustainable agriculture production with reduced greenhouse gas (GHG) emissions, as well as to fulfilling Norway’s international commitments on environment and climate in the agricultural sector.

The most important agri-environmental measures are the Acreage and Cultural Landscape Support (Areal- og kulturlandskapstilskudd), which provides payments to farmers as an incentive for land to remain in production and prohibits major changes to the natural landscape, such as levelling agricultural land, spraying edge vegetation or channelling rivers or streams. There are requirements and support for livestock on pasture, with extra payments for grazing on unimproved land. Other measures include those for organic agriculture, payments for regional environmental programmes for specific agri-environmental measures, Special Environmental Measures in Agriculture (Spesielle Miljøtiltak I jordbruket) and organised grazing measures (Tiltak I beiteområder). Environmental levies are applied on agricultural pesticides

The Selected cultural landscapes in agriculture (Utvalgte kulturlandskap I jordbruket, UKL) initiative supports farmers who want to make an extra effort to care for the environmental values of cultural landscapes in 51 selected areas deemed important or exceptional. The investment is based on voluntary agreements between the state and landowners. Co-ordination of these cultural landscapes nationally is the responsibility of the Norwegian Directorate of Agriculture, in collaboration with the Norwegian Environment Agency and the National Heritage Board. Each of the selected areas is co-managed by the municipality, landowners and agricultural enterprises, in collaboration with regional agricultural, natural and cultural heritage management.

The Regional Environmental Programme includes payments to reduce water pollution from agricultural fields, environmentally-friendly spreading of manure, management of fields deemed of high natural value or with special biodiversity, maintenance around heritage sites in the agricultural landscape, etc.

Article 19 of the European Economic Area (EEA) Agreement concerning trade in basic agricultural products is reviewed periodically. The last round of these reviews was finalised in April 2017 and changes agreed entered into force in October 2018. Under the EEA, tariff rate quotas (TRQs) expanded on several products, including meat, cheese, vegetables and certain products used in the food industry for making processed agricultural goods. Through the European Free Trade Association (EFTA), Norway has negotiated 30 free trade agreements (FTAs) with 41 partner countries. All agreements include agricultural products, although average tariffs remain above those outside the agricultural sector. For agricultural products, simple average MFN applied tariffs were 37.1% and bound tariffs were 143.1% in 2017.

In 2017 the government introduced the Climate Change Act as part of its goal to transition to a low-emission society by 2050. The Act prescribed into law the country’s targets for emissions reductions by 2030 and 2050 which are to be reviewed every five years. In 2021, these economy-wide targets were officially set at a reduction in emissions of at least 50-55% by 2030 and 90-95% by 2050 relative to 1990 levels (an increase in ambition from the reduction targets of 40% and 80-95% prescribed in the initial 2017 iteration of the Act). The government has since announced its intention to increase its 2030 target to a minimum reduction of 55% based on 1990 levels, however this had not been enshrined into law as of March 2023. The agricultural sector in Norway also has a sectoral target to reduce net CO₂ equivalent emissions by 5 million tonnes (or around 70% of agricultural emissions including land use and land use change) in the 10-year period 2021-30. This target was formed as part of the 2019 annual agreement with the farmers’ organisations and was included in the government’s climate action plan in 2021. Most of this reduction is anticipated to come from government efforts to change consumption patterns and various climate measures in the agricultural value chain (Norwegian Ministry of Climate and Environment, 2021[2]).

Policies, strategies and measures in agriculture are under continuous development to contribute to the fulfilment of international agreements and commitments, typically for the protection of the environment. Fossil fuel emissions from the agriculture sector are subject to the nation’s carbon tax. A combination of economic and regulatory instruments exists to reduce run-off and comply with commitments of the EEA agreement for water protection. For instance, autumn tillage is restricted in areas surrounding the vulnerable Oslofjord estuary to reduce run-off.

Regarding measures related to animal welfare, there is a ban on routine prophylactic use of antibiotics and the use of antibiotics as growth promoters in animal feed. Veterinary services are provided in the whole country to ensure all animals have access to treatment. Investments to promote animal welfare are given priority in the ordinary investment programme for agriculture. A new white paper on animal welfare is due to be presented to the parliament in 2024.

Climate change adaptation policies in agriculture

Norway’s northern position, landscape and production systems provide unique challenges for agriculture under a changing climate. Adverse weather events, such as the 2018 summer drought and regular “iced-in” winter pastures, can affect critical stages of production. A warming climate has the potential to provide the benefits of longer growing seasons, higher yields, and expanded production areas for various crops at Norway’s northern latitude. However, it also carries additional risks of extreme weather events and new pests and diseases. Norway is expected to receive increased rainfall in the future due to climate change, which brings higher risk of landslides and floods (Norwegian Ministry of Climate and Environment, 2013[3]). Migration of some animal species driven further north by climate change might also be a challenge for farmers – the most recent example being wild boars. Similarly, incursions of new diseases such as bluetongue, tick-borne diseases, West Nile fever, Leishmaniasis, and African horse sickness also pose a threat to Norwegian agriculture (OECD, 2021[1]).

Norway published the white papers “Climate challenges – agriculture part of the solution” in 2009 and “Climate change adaptation in Norway” in 2013. These discuss adaptation actions the government will take, such as monitoring and reporting, plant-breeding provision, contingency storage of seed, disease preparedness and legislation, pest research, and sustainable landscape management.

Sustaining agricultural activity throughout the country has been a policy objective since the 1950s to provide economic opportunities in rural and remote areas where there are few alternatives and to promote self-sufficiency. More recently, the government also views this objective as a means to safeguard food supply against extreme weather events, pests, and diseases by spreading production geographically. Agricultural land in Norway is scarce, so the government aims to limit land conversion away from agriculture to a target maximum of 300 ha per year, corresponding to 0.03% of total agricultural land. In 2022, additional support was provided for agriculture in marginal regions and to promote the use of pastures that might otherwise be abandoned.

The political platform of the current government emphasises adaptation solutions that bind soils, store carbon, and guard against damaging erosion, floods and water out of place. Several adaptation policies that support this platform were adopted in 2022 as part of the annual negotiations with farmers’ organisations. These include support for investments in drainage systems to handle excessive water and for cropping practices that abate erosion and run-off. Support was also provided for contingency storage of seed and grain. Norway takes part in missions under Horizon Europe, which has a focus on soil management and adaptation in agriculture.

Research on climate-adapted production, improving agronomic practices, and technology development is a priority for the government. Increased funding was provided this year for research and promotion of climate-adapted varieties of grass, legumes, crops, and vegetables. Funding is also provided for research, extension services, veterinary services, and plant breeding suitable for the unique geographic challenges of Norway’s northern position.

Norway invests in conservation and management of genetic resources for food and agriculture. The Svalbard Seed Vault and the national strategy and action plan for management of genetic resources aim for the survival and further development of genetic material as a resource for plant breeding and food production under a changing climate.

The government and farmers’ organisations negotiated a climate agreement for agriculture in June 2019 with a target to reduce emissions and enhance carbon sinks by 5 MtCO₂eq. This equals around 70% of the 7.1 million tonnes emitted in 2019 (including emissions from land use and land-use change, transport, and heating) (Norwegian Ministry of Climate and Environment, 2021[2]). The farmers’ organisations presented a plan to fulfil the target through eight areas:1

• deployment of a climate calculator and increased investment-in-climate advice to all farms by 2030

• targeted efforts to improve roughage quality and use of feed additives, livestock breeding in cattle, sheep and pigs, and improved animal health

• adoption of machinery that runs on electricity, biofuels, biogas or hydrogen

• adoption of fossil-free heating sources

• better use of fertilisers through more environmentally-friendly spreading methods, better storage capacity, and timing.

• increased use of livestock manure for biogas production to reduce GHG emission in agriculture and other sectors

• use of cover crops, biocarbon and grazing to remove carbon from the atmosphere and store it in plant biomass and soil

• Development and application of new technologies that reduce GHG emissions and increase carbon storage

In 2022, the government announced the establishment of Bionova, which began operating in January 2023 as a financing mechanism for initiatives addressing the impact of climate change on agriculture and increasing value creation in the circular bioeconomy. It will serve as an important tool to reach the climate objective of the agreement between the government and farmers’ associations.

Domestic policy developments in 2022-23

Main policies in agriculture are subject to annual negotiations with farmers’ organisations leading to an annual agricultural agreement. In May 2022, the Norwegian Government agreed to a significant expansion of support for 2022-23 during these annual negotiations, in part to compensate for the recent significant increases in input costs stemming from the war in Ukraine. Projected budget outlays of the agricultural agreement are projected to grow by approximately 9% higher in 2022 and 31% in 2023. This is in line with an objective of the government’s platform on agriculture – to address what it considers insufficient income of farmers and low self-sufficiency of Norwegian agriculture. The main elements of the agreement were:

• An increase in target prices with an effect on revenue of about NOK 1.5 billion (USD 156 million) from 1 July 2022. Target prices for grains were increased by NOK 1.00 (USD 0.1) per kg for food grains and NOK 0.93 (USD 0.9) per kg for feed grains, on average. The food grade wheat target price was increased by 26% to NOK 4.80 (USD 0.50) per kg and the feed barley target price was increased by 28% to NOK 4.06 (USD 0.42) per kg. This was done to encourage increased production of grains in response to increasing costs of key inputs.

• An extraordinary payment of NOK 2 billion (USD 208 million) in autumn 2022.

• Increased tax deductions for agriculture by NOK 367 million (USD 38 million) from 2022 to 2023.

• The marketing arrangements for cereals were temporarily changed to prevent animal feed prices from changing as a result of fluctuations in global prices for cereals.

• A 30% increase in funds for Regional Agri-Environmental Programmes. These were mostly dedicated to measures to abate run-off in the vulnerable Oslofjord estuary. This continues a trend in recent years towards a more climate and environmentally friendly direction.

• Increased direct and investment subsidies for small and medium-sized farms. The direct subsidies are prioritised for producers of sheep and cattle.

From 2022, at least 40% of milk quotas sold must be to the government at a fixed price of NOK 4 per litre (USD 0.42 per litre). There are no price controls on the remaining 60% that is allowed to be sold privately to other producers within the seller’s production region. By restricting quota sales between the 14 production regions for cow milk, the government seeks to maintain geographical distribution, cost‑effective food production and equal economic opportunities for producers in all regions.

Each year, milk supply is controlled by milk quotas and a set quota ratio is determined by the government which dictates the maximum amount of milk that can be produced per quota allotment. For the 2023 quota year (1 January 2023 to 31 December 2023), the cow milk quota ratio was set at 0.95, meaning that farms can deliver a maximum of 95% of their allotted milk quota. This is a four-percentage point drop from the 0.99 ratio in the 2022 quota year. The goat milk quota ratio in 2023 remained unchanged at 0.99 of quota levels.

Domestic policy responses to Russia’s war of aggression in Ukraine

The government held extraordinary negotiations in autumn 2021 to compensate for rising building material and fertiliser costs already being experienced before the war. These negotiations yielded an extraordinary payment of approximately NOK 750 million (USD 78 million) to the agricultural sector. Following the outbreak of war, the 2022 annual agreement (as discussed in the section above) included several measures specifically designed to compensate for rising input costs. These include an additional extraordinary payment totalling NOK 2 billion (USD 208 million), investment grants totalling NOK 200 million (USD 21 million) and an extension of the tax deduction for agriculture.

To compensate for rising energy costs, a general electricity support scheme was introduced. The scheme provided relief to both households and businesses but provided special treatment to agricultural operations. Agricultural holdings were provided with higher consumption limits than households and other businesses, including unlimited consumption limits on greenhouse and irrigation operations. The electricity support compensates a given percentage of electricity prices above NOK 0.70 per kWh (USD 0.07). Initially this percentage was set at 55% for all entities but was later increased to 80% for agricultural holdings, compared to 90% for households. For greenhouse farming, 100% of costs over NOK 0.70 per kWh (USD 0.07) are covered. This scheme will be continued until 31 December 2024.

The marketing arrangement for cereals was also temporarily changed through the agricultural agreement in 2022. Deficiency payments were introduced in July 2022 for imported carbohydrate raw materials used for animal feed. Separate subsidy rates were calculated on various crops such as wheat, barley, corn and peas. This was done to ensure that costs of carbohydrate raw materials for animal feed did not change as a result of volatile world cereal prices caused, or exacerbated, by Russia’s illegal invasion of Ukraine.

Trade policy developments in 2022-23

Norway is party to the European Free Trade Association (EFTA) through which it is currently negotiating several free trade agreements. In June 2022, the EFTA officially launched free trade negotiations with Kosovo. Negotiations remain ongoing for free trade agreements with India, Thailand, Malaysia, Viet Nam and Moldova. Negotiations with Mercosur (Argentina, Brazil, Paraguay and Uruguay) concluded in substance in August 2019, however had not yet entered into force as of May 2023.

Contextual information

Norway’s agricultural production is dominated by livestock, accounting for around 70% of the value of agricultural production. This largely reflects Norway’s geographic endowments, with a shortage of land suitable to crops, but an abundance of grassland and pastures. The most favourable land is dedicated to arable crops as a matter of policy design, while ruminant livestock is allocated to regions with less favourable conditions. As a result, crop production mainly takes place in central parts of Norway, and production of cow and goat milk, and bovine and sheep meat takes place in rural areas.

Due to climatic conditions that are generally unfavourable to broadacre agriculture, the agricultural sector produces a rather narrow range of commodities. The primary activities have traditionally been sheep farming, cattle (both for milk and meat) and cereals (mainly used as animal feed). The farm structure is dominated by relatively small family farms, many of which are in remote locations.

Table 22.3. Norway: Contextual indicators

	Norway		International comparison
	2000*	2021*	2000*	2021*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	166	435	0.4%	0.4%
Population (million)	4	5	0.1%	0.1%
Land area (thousand km2)	365	364	0.4%	0.4%
Agricultural area (AA) (thousand ha)	1 042	986	0.03%	0.03%
			All countries1
Population density (inhabitants/km2)	12	15	52	64
GDP per capita (USD in PPPs)	36 941	80 496	9 350	23 401
Trade as % of GDP	27.5	27.1	12.3	15.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	2.1	1.8	2.9	3.9
Agriculture share in employment (%)	4.1	2.3	-	-
Agro-food exports (% of total exports)	0.8	0.9	6.2	7.9
Agro-food imports (% of total imports)	5.6	10.1	5.5	7.2
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	29	30	-	-
Livestock in total agricultural production (%)	71	70	-	-
Share of arable land in AA (%)	84	82	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

Norway’s GDP grew by 2.5% in 2022, slightly slower than the OECD average of 2.8%. Norway’s GDP per capita is among the highest in the world, helped by a substantial petroleum sector and a regulative framework conducive to business development. The country is broadly successful in its prioritisation of low inequality and the universal provision of core public services, including health and education. The gap between the highest and lowest incomes is among the smallest in the OECD area and rates of poverty are low (OECD, 2022[4])

Strong headline consumer price inflation in 2022 has been driven by large electricity price increases. Global supply bottlenecks in computer chips, lumber and shipping were also strong contributors to inflation (Figure 22.5). Housing in Norwegian cities has become still more expensive with a new surge in prices during the pandemic (OECD, 2022[4]).

Figure 22.5. Norway: Main economic indicators, 2000 to 2022

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

Norway is a net importer of agricultural products (excluding fish). Agro-food products represent around 10.1% of total imports, compared to only 0.9% of total exports. The European Union is Norway’s main trading partner, accounting for about two-thirds of both imports and exports. Within the European Union, Sweden and Denmark together account for one-third of Norwegian agro-food exports, whereas imports are more broadly sourced. Outside the European Union, the United States and Japan are important export destinations. Most agro-food exports are in products for final consumption, while a small majority of imports are for further processing.

Figure 22.6. Norway: Agro-food trade

 

Notes: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Agricultural output in Norway grew at an average rate of 1.7% between 2011 and 2020, only slightly lower than the global average growth rate of 1.9% (Figure 22.7). Norwegian growth has been driven primarily by advances in productivity, as captured by the total factor productivity (TFP) indicator, and to a lesser degree by the intensification of intermediate input use such as nitrogen fertilisers. This has more than offset declining use of primary inputs, such as labour and machinery. Despite having relatively high TFP growth since 2000 compared to the OECD average, the rising use of nitrogen fertilisers alongside declining total agricultural land and stable livestock numbers has resulted in little improvement in environmental outcomes. Norway’s current levels of nitrogen and phosphorus surpluses, which place pressure on soil, water, and air quality, are amongst the highest in the OECD (OECD, 2021[1]).

Figure 22.7. Norway: Composition of agricultural output growth, 2011-20

Note: Primary factors comprise labour, land and capital (livestock and machinery). Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Table 22.4. Norway: Productivity and environmental indicators

	Norway		International comparison
	1993-2002	2011-2020	1993-2002	2011-2020
			World
TFP annual growth rate (%)	5.7%	1.4%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2021*	2000*	2021*
Nitrogen balance, kg/ha	85.3	94.5	32.2	30.4
Phosphorus balance, kg/ha	12.0	11.0	3.3	3.0
Agriculture share of total energy use (%)	1.6	1.5	1.7	2.0
Agriculture share of GHG emissions (%)	8.4	9.2	8.6	10.5
Share of irrigated land in AA (%)	4.2	3.3	-	-
Share of agriculture in water abstractions (%)	..	..	46.6	49.7
Water stress indicator	..	..	8.3	7.4

Notes: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[2] Norwegian Ministry of Climate and Environment (2021), Norway’s Climate Action Plan for 2021-2030, http://www.government.no/.

[3] Norwegian Ministry of Climate and Environment (2013), Climate change adaptation in Norway. White paper, http://www.government.no.

[4] OECD (2022), OECD Economic Surveys: Norway 2022, OECD Publishing, Paris, https://doi.org/10.1787/df7b87ab-en.

[1] OECD (2021), Policies for the Future of Farming and Food in Norway, OECD Agriculture and Food Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/20b14991-en.

Note

← 1.  See http://www.bondelaget.no/tema/landbruketsklimaplan/landbrukets-klimaplan.