This paper is an examination of Norway's national strategy for developing local environmental policies and institutions from the late 1980s to the present, and how this strategy has been influenced by changes in the dynamic between central government and local political institutions. It is argued that the strategy has changed during the period of study, shifting from a strong emphasis on the development of local institutions to an emphasis on the delegation of responsibilities from central government to local governing bodies. This new policy of delegation has been advanced at a time when municipalities are suffering from a weakened institutional capacity for environmental policy-making because of changes in the country's overall regulatory approach. The authors argue that this approach, which first and foremost has been motivated by national, macroeconomic objectives and the role of local government in service production, is inconsistent with the government's ambitions of a more important role for local government in environmental policy. The nature of environmental challenges, which often cut across political and administrative borders and often involve conflicts between different levels of government, suggests that local institutions are crucially important within the environmental policy domain.