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[mk_dropcaps style=”simple-style”]W[/mk_dropcaps]hen it comes to world rankings, Norway sits near the top of almost every list. It’s the best-governed nation on The Economist’s International Democracy Index and has the highest quality of life according to the United Nations. But Norway’s 10th place ranking on the global Environmental Performance Index is perhaps most impressive, especially when you consider the Scandinavian nation is a major exporter of crude oil and natural gas. How do they do it?
[/vc_column_text][/vc_column][vc_column width=”2/3″][mk_image src=”http://energyexchange.wpengine.com/wp-content/uploads/2014/06/Norway_Feature_800px.jpg” image_width=”700″ image_height=”400″ crop=”true” lightbox=”true” frame_style=”simple” target=”_self” desc=”PHOTO: THINKSTOCK” caption_location=”outside-image” align=”left” margin_bottom=”10″][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”15″]Not without shrewd long-term planning and implementation. The Norwegian oil fund, a dedicated repository of all public petroleum profits, is currently worth about $900 billion, increasing by $1 billion per week. The fund holds more than one per cent of global equities and is projected to swell past $1 trillion USD by 2020.
Unlike the resource debates here in Canada, the oil industry in Norway enjoys broad buy-in from its citizens because almost all taxpayers know they are benefiting from a sector that is highly taxed, well regulated and has an excellent safety record.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][mk_custom_box border_width=”0″ bg_color=”#d9d9d9″ bg_position=”left top” bg_repeat=”repeat” bg_stretch=”false” padding_vertical=”5″ padding_horizental=”5″ margin_bottom=”15″ min_height=”100″ el_class=”ImageBox”][mk_gallery column=”1″ height=”450″ frame_style=”simple” disable_title=”false” image_quality=”1″ pagination=”false” count=”10″ pagination_style=”1″ order=”ASC” orderby=”date” images=”7486″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″ el_class=”Image.Description”]
A Statoil-owned offshore rig on the Sleipner natural gas field in the North Sea off Norway
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PHOTO: HARALD PETTERSEN/STATOIL ASA
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While Canadians might learn much from their Norwegian cousins, it also makes sense to draw comparisons more specifically with Alberta. Although there are significant differences between the two jurisdictions, Canada’s largest oil-producing province has roughly the same petroleum production and population as the Nordic nation. Similar to Western Canada, from which about three million barrels of crude oil flows via pipeline every day, Norway’s offshore oil and gas production facilities are connected to the mainland by an extensive network of pipelines, including eight major oil lines with a capacity of just under two million barrels per day. And, like Norway, Alberta is in charge of collecting resource rents and managing environmental policy.
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”false” align=”left” margin_bottom=”0″]So apart from foresight, what’s the secret to Norway’s success? There is no doubt that Brent crude from the North Sea is worth more on the world market than bitumen from northern Alberta and that production costs in Canada’s oil sands are higher. But it’s interesting to note the revenue streams that Norway has invested in beyond charging resource rents.
Through their government, Norwegians are the majority owner of their state-owned oil company Statoil, which has yielded $23 billion in dividends since it was founded in 1972. The Norwegian government also owns about half of the nation’s oil production and reserves, bringing in another $227 billion in public oil profits over the past four decades. Taxes on petroleum profits are high in Norway — more than 70 per cent — resulting in over $60 billion in public revenue in 2011.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]By Norwegian law, all petroleum revenues must be deposited directly into the oil fund and invested outside of the country. This is meant to avoid inadvertently inflating the Norwegian currency should global oil prices increase, and to effectively diversify the nation’s investment portfolio. The firewall between the oil fund and general revenue also ensures that politicians don’t rely on short-term oil money to balance the books. Since the Norwegian government can access only four per cent of the capital value each year, and investment returns and annual deposits are often double that amount, the fund keeps growing larger.
Last year, the Norwegian government rolled out more than $1.5 billion in spending, a new “climate and energy fund,” to reduce carbon emissions. While the northern European nation is also investing in global carbon-offset efforts, such as reducing deforestation in the tropics, the climate and energy money is aimed at scaling up renewable energy and improving energy efficiency on the home front. And in Norway, where hydropower already accounts for 97 per cent of all electricity produced, the fund will be focused on cutting emissions and saving energy by developing new technologies for the industrial sector.[/vc_column_text][/vc_column][vc_column width=”1/2″][mk_custom_box border_width=”0″ bg_color=”#d9d9d9″ bg_position=”left top” bg_repeat=”repeat” bg_stretch=”false” padding_vertical=”5″ padding_horizental=”5″ margin_bottom=”10″ min_height=”100″ el_class=”ImageBox”][mk_gallery column=”1″ height=”985″ frame_style=”simple” disable_title=”false” image_quality=”1″ pagination=”false” count=”10″ pagination_style=”1″ order=”ASC” orderby=”date” images=”7567″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″ el_class=”Photo-Caption”]
MAP: THOMAS HERBRETEAU
[/vc_column_text][/mk_custom_box][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]Transportation is another environmental policy priority for Norway. Almost $200 million has been earmarked for upgrading public transit, bike lanes and footpaths, while generous incentives to electric-vehicle buyers have recently made the electric-powered Tesla the country’s top-selling car. The Norwegian taxpayer is also providing about $2 billion to operate and expand the country’s rail system. (Canada’s Via Rail has a quarter of that budget, with a passenger rail system that covers three times more distance.)
Norway was one of the first countries in the world to introduce a carbon tax more than 20 years ago, and the nation recently doubled the rate charged on emissions from the petroleum sector. Revenues from that carbon pricing were about $1.4 billion last year.
But Norway has its share of challenges too. The Norwegian government has spent $1.2 billion since 2007 developing carbon capture and storage technology for gas-fired power plants but has yet to bring anything out of the laboratory. Last year, the government cancelled a major installation planned for 2020 that would have captured one million tonnes of CO2 per year from an oil refinery and gas plant. Cost overruns and poor management were cited in a critical report authored by the Norwegian Auditor General.[/vc_column_text][mk_blockquote style=”line-style” font_family=”Open+Sans:400,600,700,800″ font_type=”google” text_size=”18″ align=”left”]
Norway was one of the first countries in the world to introduce a carbon tax more than 20 years ago.
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The carbon capture and storage projects for gas refining have been more successful. Since 1996, Statoil has been injecting carbon dioxide extracted from raw natural gas into undersea rock in the North Sea Sleipner gas field — the first operational offshore carbon capture and storage project in the world. So far, 14 million tonnes of CO2 have been stored underground, with another three million projected over the project’s lifetime. A similar installation in the Barents Sea has been operating since 2008 with a lifetime capacity of up to 40 million tonnes of CO2.
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In spite of these efforts, Norway, like many oil-producing countries, is struggling to reduce overall carbon emissions. The nation was one of the first signatories to the Kyoto protocol and pledged to restrict its carbon footprint to one per cent above 1990 levels by 2012. Emissions have instead climbed by 4.6 per cent, although they have been on the decline in recent years. It remains to be seen whether Norway can meet the second round of commitments to reduce emissions to 16 per cent below 1990 levels by 2020.
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Norway’s oil wealth has supported public transportation upgrades, and the nation’s standard of living in general thanks to $23 billion in dividends to the country’s coffers since 1972.
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PHOTO: PIXABAY
[/vc_column_text][/mk_custom_box][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]Norway’s national struggle to profit from oil riches while being responsible stewards of the environment is reflected in changes to its iconic oil fund. Norwegian Prime Minister, Erna Solberg, recently announced increases in renewable energy investments of up to $8.3 billion. The fund already has a $5.7-billion stake in 166 green energy companies internationally.
Environmental groups, however, were calling for a much larger commitment of $40 billion — or roughly five per cent of the fund — dedicated to green energy investments, arguing that capital support from the massive oil fund could be a global game-changer for the nascent sector.
The Norwegian government also recently struck an expert panel to consider whether the fund should be divested from the fossil fuel companies. The debate continues.[/vc_column_text][mk_custom_box border_width=”0″ bg_color=”#d9d9d9″ bg_position=”left top” bg_repeat=”repeat” bg_stretch=”false” padding_vertical=”5″ padding_horizental=”5″ margin_bottom=”10″ min_height=”100″ el_class=”ImageBox”][mk_gallery column=”1″ height=”300″ frame_style=”simple” disable_title=”false” image_quality=”1″ pagination=”false” count=”10″ pagination_style=”1″ order=”ASC” orderby=”date” images=”8498″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″ el_class=”Image-Description”]
Even as it profits from oil riches, Norway is investing in renewable energy projects to provide power, including for communities such as Ålesund (ABOVE) and Bergen.
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PHOTO: PIXABAY
[/vc_column_text][/mk_custom_box][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]Last year, the International Monetary Fund released a major report on global energy subsidies — now topping $1.9 trillion USD — that estimated global carbon emissions could be reduced by 13 per cent by eliminating inadequate taxation on the fossil fuel sector.
Norway and Canada both subsidize oil and gas production to the tune of billions of dollars every year, using tools such as tax exemptions on exploration expenses and research and development grants. Although most developed countries have pledged to eliminate inefficient fossil fuel subsidies — including a commitment by G20 countries at the Pittsburgh Leaders Summit in 2009 — real progress has yet to materialize.
There is little doubt the world will need fossil fuels for many years to come. But cheap oil means more is used while governments have fewer resources to begin the transition to a low-carbon economy. Making progress to that end will surely require the money to pay for it — whether it’s investing in other green energy projects or in advancing innovations in carbon sequestration technologies, for example, that can make fossil fuel production less carbon-intensive.[mk_font_icons icon=”icon-stop” size=”small” padding_horizental=”4″ padding_vertical=”4″ circle=”false” align=”none”][/vc_column_text][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″ el_class=”Story.Author”]
– Jane Dermott
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