OSLO, Dec 3, 2025 (BSS/AFP) - Norway said Wednesday it will set up a commission to examine how to transition its economy away from oil and gas, a commitment the Greens Party secured in exchange for backing the government's 2026 budget bill.

Norway, the largest producer of oil and natural gas in Europe excluding Russia, owes much of its prosperity to its vast reserves of oil and gas, which are also responsible for climate change.

In hard-fought negotiations overnight Tuesday to Wednesday, the minority Labour government agreed to a Greens' demand to set up the commission.

The commission will "examine various scenarios and measures aimed at improving the adaptability of the Norwegian economy, particularly how the workforce and natural resources can be used more effectively, as the Norwegian continental shelf enters a new phase marked by a decline in oil and gas production," the government said.

In their party programme before Norway's parliamentary elections in September, the Greens wanted the country to adopt a plan to phase out hydrocarbons by 2040.

The Greens also secured another victory in the late-night negotiations: an extension of the phase-out of a VAT exemption on the purchase of electric cars.

In its 2026 budget proposal, the Labour government proposed lowering the threshold above which the purchase price of a new electric vehicle would be subject to value-added tax (VAT), from 500,000 kroner ($50,000) to 300,000 kroner, starting next year.

The VAT exemption -- VAT is 25 percent in Norway -- would have then been removed entirely in 2027.

But according to the agreement clinched early Wednesday, the removal of the VAT exemption will be pushed back until 2028, subject to approval from European authorities.

Norway has the highest rate of electric car adoption in the world, representing nearly 100 percent of all new car registrations.