Norway is set to introduce a resource rent tax on onshore wind power, effective from January 1st next year, in a move aimed at ensuring that the country receives its "fair share" of the value generated by its abundant natural resources, despite objections from the wind power industry.

The government's modified proposal for the tax includes an effective rate of 35%, structured as a cash flow tax with an immediate deduction of investment costs. This tax measure is designed to ensure that a greater portion of the value generated within the wind power sector benefits society as a whole and is expected to benefit host municipalities.

The government acknowledges that initial revenues from the tax will be modest, mainly due to generous transitional arrangements for existing wind farms.

Prime Minister Jonas Gahr Støre highlighted Norway's longstanding tradition of ensuring that the value created by natural resources benefits society as a whole, and Finance Minister Trygve Slagsvold Vedum emphasized the nation's outstanding wind resources. The government believes that the entire society should benefit from the value generated by the utilization of these common resources.

The government asserts that projects that were profitable before the introduction of the tax will remain profitable under the new taxation framework.

The journey to implement this tax began with consultations in late 2022, during which a 40% tax rate was initially proposed, with the possibility of it coming into effect this year. However, industry opposition, including concerns that the original tax design could lead to project bankruptcies, prompted the government to postpone the tax and modify its structure.

Norwegian energy industry group Fornybar Norge acknowledged that the government had taken its objections into account but noted that the changes made were not entirely satisfactory. The group had called for a complete exemption for existing wind farms, a request that was not granted. Fornybar Norge emphasized the need to assess whether the changes to the transitional arrangements are sufficient to maintain the profitability of existing onshore wind power plants.

The introduction of the "fair share" tax on onshore wind power in Norway reflects the government's commitment to ensuring that the nation's wind energy resources benefit society at large, despite ongoing discussions with the industry regarding the tax's impact on project economics.