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| Fig. 1: Norwegian Oil Rig. (Source: Wikimedia Commons) |
Norway is recognized as one of the world's leading nations in sustainable energy generation. [1] This progression began in the late 19th century when Norway started to harness its geographical features, particularly its rivers and fjords, to generate electricity with hydroelectric technology. [2] Since 1945, there has been a significant surge in domestic hydroelectric investments, resulting in the construction of over 400 new dams, fostering the country's clean energy generation. [3] However, a closer examination also reveals some inconsistencies. [4]
Between 2011 and 2021, hydroelectricity accounted for the majority of Norway's energy consumption. Peak hydro consumption reached 69.65% in 2012, while the lowest was 64.32% in 2019. [5] Hydroelectricity is a reliable and sustainable energy source, reflecting Norway's commitment to sustainable practices and reducing global carbon emissions.
In addition to its abundant hydroelectric resources, Norway possesses substantial natural gas and oil reserves. (See Fig. 1.) In 2021 Norway made up 8.9% of the world's oil exports, and in 2020, 3.7% of the worlds natural gas exports. [6] Despite its small size, Norway is a leading player in natural gas exports, trailing only behind Russia and Qatar. [6] Both its oil and natural gas production considerably exceed its own needs. [5]
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| Table 1: Norwegian Oil and Natural Gas: Consumption, Production, Consumption-to-Production Ratio (2011-2021). [5] Oil production has been converted to EJ using the standard tonne of oil equivalent 4.188 × 1010 J tonne-1 = 4.188 × 10-8 EJ tonne-1. |
Table 1 compares Norwegian oil and natural gas consumption and production between 2011 and 2021. It may be seen that only a fraction of Norway's oil and natural gas production is consumed domestically. Given that Norway's oil and natural gas storage capacity is limited, the difference between production and domestic consumption approximates Norway's exports. In 2021 alone, this amounted to 3.55 EJ y-1 of oil and 3.97 EJ y-1 of natural gas. [5]
Unsurprisingly, the country's economy and trade dynamics heavily rely on exporting conventional energy resources, building the foundation of Norway's wealth and economic prosperity. [5] On average, over the last decade, oil and gas export revenue has generated a breathtaking 490 billion NOK annually. (490 billion NOK × € 0.085 NOK-1 = € 41.65 billion) [1]
The situation surrounding Norway's energy policies does indeed seem controversial. Norway presents itself as a nation dedicated to the green energy transition and actively promotes adopting sustainable hydroelectric power, yet it is the fifth-ranking oil exporter in the world. [6]
Norway is essentially transferring its environmental challenges to other countries. It does not take responsibility for the combustion of its exported conventional energy resources and the resulting CO2 emissions released into the atmosphere. This combustion happens outside of Norway's borders, in countries that import its natural energy resources. This situation raises an important question: How does Norway hold itself accountable for the indirect consequences of its environmentally harmful exploration activities?
The answer may be found in the investment charter of Norway's Government Pension Fund Global. Established in 1990, its goal is to invest the revenues from its oil and natural gas activities across various asset classes, sectors, and technologies. [7] As one of the world's most significant sovereign wealth funds, it has assets valued at 15.765 trillion NOK (€ 1.34 trillion ) as of December 31, 2023. [7]
In recent years, legally binding investment criteria were introduced, mandating a focus on environmentally friendly investments and allowing for organizational exclusions from Norway's Government Pension Fund Global due to significant pollutant output. [8] From this perspective, Norway seemed to follow a path of sustainable energy investments. However, in reality, this was not the case.
Firstly, the amended investment criteria were not primarily based on a desire to pursue a more environmentally friendly investment strategy, but rather on preventing a decline in fund performance in the event of a permanent drop in oil and gas prices. [9] Given that Norway already had high-risk exposure to oil and natural gas prices, it didnt want to increase its market risk even further by investing in the same asset class even more abroad.
Secondly, this raises a controversy concerning the source of wealth and the use of funds. If Norway genuinely aims to be sustainable, it should not only continue to invest in sustainable initiatives but also withdraw from its own oil and natural gas production as its source of wealth that drives these alternative investments.
Lastly, when looking at the total investment value in unlisted renewable energy infrastructure relative to the fund's overall value, it raises further questions about Norway's commitment to reducing indirect CO2 emissions. For instance, in 2023, investments in unlisted renewable energy infrastructure accounted for only 0.1% of the funds market value at the end of the year. [7] In this context, how credible is Norway's claimed leadership role in the global energy transition?
Norway's dual focus on the energy transition and its gas and oil exploration undoubtedly highlights the conflicting demands between its environmental goals, economic dependence, and continuous monetization by exporting oil and natural gas. Since Norway does not appear to be leaving its remaining energy resources untapped in the coming decades, the financial benefits of continuing to extract conventional energy outweigh the responsibility for addressing the direct and indirect environmental impact arising from its oil and natural gas activities.
© Max Madrian. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Energy Transition Norway 2022," Det Norske Veritax, 2022.
[2] M. Carroll, "Norway's Leading the Charge on a Sustainable Electric Future," National Geographic, 26 Jun 19.
[3] T. Jensen et al., "Norway's Hydroelectric Development 1945-1990," Norwegian Water Resources and Energy Directorate, 2021.
[4] K. Szulecki eet al., "Norwegian Oil and Gas Transition: Building Bridges Towards a Carbon Neutral Future," University of Oslo, 2021.
[5] "BP Statistical Review of World Energy 2022," British Petroleum, June 2022.
[6] A. Delivorias and A. de Martini, "EU Energy Partnerships: Norway," European Parliamentary Research Service, September 2023.
[7] "Government Pension Fund Global - Annual Report 2023," Norges Bank Investment Management, 2024.
[8] "Investing Responsibility," Norges Bank Investment Management, August 2020.
[9] A. Vaughan, "World's Biggest Sovereign Wealth Fund Proposes Ditching Oil and Gas Holdings," The Guardian, 17 Nov 17.
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