Norway’s Economic Resilience and Climate Leadership: A Balancing Act in 2025

Norway’s Economic and Environmental Landscape in 2025

Norway’s economy continues to demonstrate remarkable resilience amid global uncertainty, with mainland real GDP growth forecast to increase to 1.5 percent in 2025 from 0.6 percent in 2024.

In a landmark environmental commitment, Norway has announced an ambitious new climate target to reduce greenhouse gas emissions by 70% to 75% by 2035, compared to 2019 levels. This bold move positions Norway as a global leader in environmental sustainability and reinforces the momentum behind the Paris Agreement.

Leading the Electric Vehicle Revolution

Norway maintains its world-leading position in electric vehicle (EV) adoption, thanks to sustained government support and regulation. The country is successfully transitioning away from fossil fuel vehicles, with the added benefit that electrification of transport leads to significantly larger emission reductions compared to other countries, given Norway’s already decarbonized power sector.

Challenges and International Initiatives

Recent progress reports reveal some challenges, as Norway’s current trajectory shows it achieving only 26.3% of its 55% GHG emissions reduction target by 2030, falling significantly short of its aims.

To address global climate challenges, Norway has launched new international initiatives, including a commitment of up to US$740 million under the Paris Agreement Article 6 to support emission reductions and green growth in developing countries. The Norwegian Global Emission Reduction (NOGER) Initiative will focus on expanding renewable energy and phasing out fossil fuel subsidies.

Economic and Environmental Balance

The country is carefully managing its economic policies, with Norges Bank initiating monetary policy normalization by lowering the policy rate to 4.25 percent, while moving towards a broadly neutral fiscal policy stance to support disinflation efforts and improve overall macroeconomic policy coherence.

However, environmental challenges persist, including concerning rates of nature destruction, with one square meter of nature disappearing every minute in 2024 due to land use changes. While the government has introduced a Nature Action Plan, experts note the need for greater coherence and ambition in nature protection efforts. Norway’s focus on carbon capture and storage, rather than complete fossil fuel phase-out, has also drawn criticism from environmental experts.