An increase in resource rent tax on hydropower and clarifications around the CO2 compensation scheme are proposals outlined in the national budget for 2023 that will particularly impact Hydro.
On September 28, the Norwegian government proposed an additional resource rent tax and a new high price contribution on hydropower and wind power. The increase in the resource rent tax on hydropower from 37 to 45 percent will apply to Hydro's equity power production and will be applicable for the full year 2022. The increase implies an additional resource rent tax for Hydro of approximately NOK 250 - 300 million for 2022. Hydro’s understanding is that other changes in taxation of power production will have limited effect on Hydro.
The CO2 compensation scheme for 2023 is included in the national budget and applies to Hydro on compensation for both purchased power and equity power volumes used in Hydro’s production of aluminium. The framework for the CO2 compensation scheme has been set by the EU. The scheme covers specific industries that are power intensive, producing goods for the global market in competition with countries where power prices are not affected by CO2 costs. The CO2 compensation scheme partially compensates for CO2 costs the industry cannot counteract. For the budget year 2023, the government has introduced a floor of NOK 200 per ton CO2. CO2 compensation for 2022 is expected to amount to around NOK 2.2 – 2.3 billion, paid retroactively during 2023. In comparison, a CO2 compensation for 2021 of around NOK 1.7 billion is expected to be distributed in 2022.
"A robust and predictable CO2 compensation scheme is an important prerequisite for continued investment and development of industry in Norway. In today's demanding power market, CO2 compensation is particularly important for reducing indirect CO2 costs for power intensive industry. The high power prices have led to a significant shutdown of industry in Europe," says President and CEO Hilde Merete Aasheim.
Hydro produces 9.4 TWh of equity power annually during a normal year and operates five fully owned primary production sites in Norway, with a combined capacity of about 1.1 million tonnes of primary aluminium. In addition, Hydro has an aluminium extrusion plant in Magnor and is headquartered in Oslo. The operations employ around 4,500 people.