Norway, oil and the issue of climate change

You can see why Saudi Arabia wants to go on pumping as much oil as it can. Oil exports account for 87% of the Saudi government budget and 42% of GDP. The Saudi population, now 35 million, is growing by two-thirds of a million a year, and the country already imports 80% of its food. They’d be starving in a few years if they stopped pumping.

Denmark, by contrast, is ending exploration for new fossil fuel resources now and promises to stop pumping all oil and gas by 2050. But there are only five million Danes, and fossil fuels account for only four-tenths of 1% of GDP. Most Danes would hardly notice even if they stopped all fossil-fuel production right now, so why not?

Norway, however, is in a much more interesting place. It’s the world’s seventh largest exporter of oil and gas, and those exports account for 42% of the country’s gross domestic product (GDP). Per capita income is higher than in the United States, partly thanks to the fossil fuel industry, and the income is far more evenly distributed.

So the five million Norwegians do have a major stake in their fossil fuel industry. Indeed, 7% of the population actually works in it. Yet Norwegian attitudes towards carbon dioxide emissions are seriously conflicted, and the question of whether the country should stop pumping has even become an issue in national politics.

The Conservative Party, which lost last month’s election after eight years in power, never had a big problem with living off the proceeds of fossil fuel exports. When asked in an election debate last week for the party’s preferred date to end production, one Conservative candidate said: “In about 300 years’ time.” Not much nuance there.

The Labour Party, which won the most seats and must now build a left-wing coalition government, was also careful not to alienate potential supporters who worry about their jobs. Party leader Jonas Gahr Store promised not to include any party in the new coalition that demands a halt to all exploration or production — but that leaves some room for manoeuvre.

Both Labour’s traditional coalition partners, the Socialist Left and the Centre Party, take a more robust approach to the question of curbing Norway’s fossil fuel exports. “Our demand is to stop looking for oil and gas, and stop handing out new permits to companies,” said Lars Haltbrekken, climate and energy spokesman for the Socialist Left party.

Labour might choose to dispense with the Socialist Left, but the smaller Red and Green parties (both would be needed for a majority government) are even more radical on the subject. And there is considerable public support for that more radical approach, even despite the implications for personal incomes in Norway.

Nobody wants to shut all oil and gas production down now — that would be far too great a shock to the economy — but just under half the population would be willing to stop exploration now. With no new fields coming on line, that would automatically imply that production of oil and gas would taper off to virtually nothing in 20 or 30 years’ time.

This is not a view you will encounter very often in Kuwait, Russia or Alberta, but Norway is a very conscientious place where people worry a lot about climate change. Its grid runs almost entirely on hydroelectric power, and 70% of new car purchases this year were allelectric. Indeed, nothing else will be available on the domestic market after 2025.

It helps, too, that Norway has a very strong safety net. It is one of the most generous welfare states in Europe, and its sovereign wealth fund of $1.4 trillion (47,3 trillion baht), saved up from past oil revenues, is the biggest in the world. In fact, it’s so big that the whole country could take three years off work and still maintain its current living standard.

But it’s no crime to be prudent, and that safety net creates the possibility that Norway could pioneer where other fossil-fuel producing countries will eventually have to follow. The first step could even be taken during the forthcoming coalition talks.

One imaginable compromise that could bridge the gap between Labour and its prospective partners was outlined last week by Labour’s Energy spokesperson, Espen Barth Eide. Most of the country’s oil and gas still comes from older offshore fields in the North Sea, he pointed out, but most of the untapped and unexplored reserves are in the Barents Sea, above the Arctic Circle.

Drilling up there is a red line for environmentalists, but the outgoing Conservative government refused to stop handing out licences for it. Labour has made no such commitment, and withholding those licences would be a modest but meaningful step in the right direction: no dramatic costs right now, but an implicit commitment to a longer-term decline in production.