Environmental concern was not on the agenda when competitive reform was introduced into the Norwegian and UK electricity industries. After the reform in 1989, short-term environmental improvement has been recorded in the UK, primarily because natural gas has replaced coal-fired capacity on a massive scale. No real boost for renewable energy has yet occurred, however. In Norway, the most noticable short-term impact has been a halt in new large-scale hydro power project development of watercourses. The most comprehensive change has been a cognitive one - brought about by the creation of the free-market area in electricity between Norway and Sweden in 1996. A common exchange, Nordpool, has been established, in which also Finnish and Danish companies have become traders. The Norwegian hydro-based electricity system suddenly became integrated with thermal-based systems, relying on coal and nuclear power. The Norwegian environmental debate could no longer take place in isolation from those in the neighbouring countries. As to long-run environmental challenges, the new energy legislation in Norway and the UK direct the state (regulator), industry and consumers to share responsibility for finding effective solutions. The state has problems in fulfilling its environmental responsibility since it comes into conflict with other overriding duties. The industry has been given scant incentives, whereas consumers still have been relatively passive. As our Swedish example of ＇green labelling of electricity contracts＇ shows, however, there are exciting new arrangements, pushed by environmentally concerned consumers, which may eventually have dramatic effects on the liberalised electricity supply industries, and push the market towards improved environmental performance.