As far as the economy is concerned, a conversation about Norway might as well be a conversation about oil and gas. The Norwegian government holds a 67% stake in the country’s largest oil & gas company, Statoil, and has counted on the petroleum sector for significant portion of GDP revenues since the 1970s.
Figure 1: Macroeconomic Indicators for the Petroleum Sector, 2015 .
Figure 2: Norway’s government cash flow from petroleum activities, 1971-2015 .
“We know there is a paradox. We have been living well from oil and gas. But there is no country in the world that has done more to undermine the oil and gas industry than Norway .” –Vidar Helgesen, Norway’s Minister of Climate & the Environment
Despite oil & natural gas being the largest sector contributor to Norway’s GDP, the country uses almost none of it (an estimated 99% of Norway’s energy use is hydropower). In fact, the government prides itself in its commitment to sustainability, and has gone to great lengths to reduce emissions by subsidizing innovation, implementing a carbon tax, and publicly setting a target for Norway to be 100% carbon neutral by 2030. Oh, and let’s not forget the legislation largely responsible for Norwegians becoming the #1 buyers of Tesla’s electric vehicles outside of the United States; the Norwegian government eliminated import tax on the vehicles (automotive tax in Norway is typically around 50%), parking, tolls, charging station fees, and even allowed Tesla owners to drive in bus lanes .
Demand for power caused by population growth and economic development is outpacing innovation of technology producing alternative sources of energy; although Statoil management predicts the energy mix will continue to shift gradually towards renewables and away from coal and traditional oil & gas, they argue that critics of the industry will need to get used to the idea of relying on Petroleum for at least a couple more decades if they want to keep the lights on. That being said, the firm is very much in favor of governments taxing emissions (Norway was one of the first countries to approve the climate agreement signed at the 21st Conference of Parties, COP21, in December 2015) .
“It might sound strange that an oil and gas company that kind of produces carbon is advocating ‘please put a tax on carbon’, but that’s actually what we’re doing. Last year we sent a letter to Christiana Figueres and the ones running the Paris agreement that said, ‘please introduce a CO2 tax because we need that’.” -Bjorn Otto Sverdrup, Statoil’s Senior Vice President for Sustainability, in an interview with ABC News .
Statoil has gone to great lengths to demonstrate true commitment to implementing sustainability measures, investing heavily in R&D to develop technology that reduce greenhouse emissions, while holding suppliers accountable to the same high standards. Additionally, the company has contributed over $1.3B to sustainability projects focused on planting trees and regenerating natural resources in various countries including Brazil, Indonesia, and Guyana .
Ok, so what should Statoil do next?
Innovation, innovation, innovation… but not alone. No firm is in a position to combat global warming single handedly, and even a small coalition could create a first mover disadvantage given the high costs. It was just announced this morning that Statoil is teaming up with 9 other major players in the oil industry to launch the Oil and Gas Climate initiative, a platform by which they will jointly develop carbon capture and storage technologies over the course of the next decade . The energy sector should continue building these types of partnerships to share the cost burden as well the benefits of technological advances, in order to meet the energy demands of the future.
- http://www.norskpetroleum.no/en/economy/governments-revenues/ Accessed November 2016
- http://qz.com/119662/why-tesla-is-focused-on-oil-rich-norway-as-it-expands-beyond-the-us/ Accessed November 2016
- http://www.statoil.com/no/InvestorCentre/AnnualReport/AnnualReport2015/Documents/DownloadCentreFiles/01_KeyDownloads/Annual_report_on_form_20-F.pdf Accessed November 2016
- http://phys.org/news/2016-08-paradox-nation-norway-climate-leader.html#jCp Accessed November 2016
- http://www.abc.net.au/news/2016-09-27/norwegian-paradox-fighting-climate-change-selling-fuels/7876368 Accessed November 2016
- http://seekingalpha.com/news/3221336-big-oil-invest-1b-10-years-carbon-capture-technology?uprof=45 Accessed November 2016
- http://www.statoil.com/en/technologyinnovation/researchinstatoi/pages/default.aspx Accessed November 2016
http://www.oilandgasclimateinitiative.com/ Accessed November, 2016
http://www.statoil.com/annualreport2009/en/sustainability/climate/pages/climate.aspx Accessed November, 2016
http://www.statoil.com/annualreport2011/en/shareholderinformation/pages/majorshareholders.aspx Accessed November, 2016