Balancing Welfare and Climate: Explaining Norway’s Inequality Inducing Electricity Price Support Scheme (for Panel 7 Chaired by Jale Tosun)

As climate and energy transitions deepens, more conflicts between climate objectives and social welfare have emerged. This became particularly visible in 2022, when many European countries introduced energy price compensation schemes aiming to alleviate negative effects of spiking energy prices. The scientific discussion about climate justice and energy poverty is encompassing and vibrant, but we lack a scientific literature on how to design energy price compensation mixes that promote equality without compromising the climate transition. This paper contributes to scientific discussions about how to design such support scheme mixes, and which conditions that may allow for adoption of such policy mixes. By combining perspectives from transition studies, environmental economics and political science we develop a framework for describing and explain variance across countries and over time in energy price compensation schemes. Governments can compensate high energy prices by introducing consumption support (compensating for parts of energy prices), as well as investment support (for energy efficiency and renewable energy) for households. Both types of support can be designed as universal policies, offering a fixed level of support for each consumed energy unit, or be targeted towards disadvantaged groups. In traditional welfare policies, universal policies tend to provide similar support to everyone. In most situation, the support will be similar for each individual or household and not increase based on consumption. Hence, it will be relatively more important for the individuals that consume the least, which is often those that are less well off. This article shows that universal designs have the reverse effect in relation to consumption-related welfare measures such as energy price compensation – they systematically channel more funding to the wealthiest consumers that consume the most energy or have the most resources to apply for investment support. We specify four different types of support mixes: 1) Inequality inducing, 2) Carrots for the poor3) Sticks for the rich or 4) Inequality reducing, and present a causal framework aimed a explain differences across countries with respect to these types of support mixes. This framework specifies which institutional and political conditions that can produce policy mixes that combine climate and equality concerns. Lastly, the utility of this scheme is illustrated through a case study that explains why Norway developed an inequality inducing support scheme mix, in the time-period 2022-2025. Although this case centres on electricity, the framework is also relevant for other types of energy, such as gas for heating and transport fuels. Since Norway initially lacked organizational structures that allowed for targeted support, it developed a universal scheme that favoured the wealthiest consumers and undermined climate targets. Over time, political dynamics contributed to gradually strengthen this approach, resulting in a support scheme mix that increasingly undermine both climate and equality concerns. Politicization and populism played an important role in this development. Based on the Norwegian case, we discuss the conditions that needs to be in place to move towards inequality reducing support scheme mixes, and the relevance of the theory framework for other highly developed welfare states.