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Norway’s oil rises to top of election agenda as climate fears grow

Norway’s voters are to give their verdict next week in what has become a “climate election” — jolted into life by the UN report last month that issued a stark “code red” over the impact of environmental change.

The UN report has forced Norway to examine a big contradiction at the heart of its economy. The country is one of the largest proponents of green solutions such as electric cars and carbon capture storage: seven in 10 new cars sold last month in Norway were fully electric.

But the country is also western Europe’s biggest petroleum producer, with a massive sovereign wealth fund accumulated on the back of oil and gas output.

That dissonance is being tested in the election on Sunday and Monday. Support is rising for the Green party, which says it will only join a government that promises an immediate halt to oil and gas exploration. The two other main parties campaigning on climate, the Socialist Left and Liberals, are also rising in the polls. The Greens’ membership numbers have jumped by a third in just a few weeks.

“It was a game-changer for Norway when that UN report came out. It is now the most important seven days in Norway’s history,” said Kriss Rokkan Iversen, deputy leader of the Greens.

Espen Barth Eide, energy spokesman for the centre-left Labour party agreed: “This is clearly the climate election, even more than people thought it would be.” Labour leads in polls but oil is likely to be an obstacle to a viable coalition.

Norway’s two biggest political parties — Labour and the centre-right Conservatives of prime minister Erna Solberg — stand firmly behind the oil industry, which is responsible for about 160,000 direct jobs, or about 6 per cent of the total.

Labour leader Jonas Gahr Store with prime minister and Conservative leader Erna Solberg © Gorm Kallestad/Reuters

Tina Bru, the Conservative oil and energy minister, is firmly against ending exploration or setting an end date for Norway’s petroleum production, arguing for doing more to cut global demand.

“We are preparing for a future with less demand for oil and gas, we’re building new green industries, but we won’t get there by hurting our economy, destroying jobs and dismantling an industry,” she said.

Eide said: “We want to undermine the prospects for a long-term oil industry rather than closing the supply.”

Norwegian oil production has risen in recent years following the discovery of the giant Johan Sverdrup field in the North Sea. It is set to fall again from 2025 or so.

Solberg told the Financial Times this summer that she would not act to accelerate that decline but that Norway was on a gradual “shift” to green industries.

Following a tax tweak last year that helped the oil industry, Solberg’s government this month proposed another complicated fiscal change that appears mildly positive in the short term for most companies active in Norway, while making speculative exploration costlier.

Extinction Rebellion environmental activists protest outside Norway’s oil ministry
Extinction Rebellion environmental activists protest outside Norway’s oil ministry © Ole Berg-Rusten/AFP/Getty Images

“It’s a sign that the oil market in Norway is becoming mature and is only attractive to fewer companies. But the worry is that this is the second change in two years after years of stability — it shows how oil could become more of a political football,” said a senior executive at an oil company active in Norway.

For the Greens, the tax debate is a sideshow. As well as ending exploration, they also want to halt production by 2035.

Iversen said Norway was a petroleum pioneer in the 1960s and 1970s but did not have the same spirit for the “green shift” — with, for instance, the world’s largest wind farm developer found in neighbouring Denmark.

Of the willingness to stick by the oil industry, she said: “It’s a question of feeling and identity for many Norwegians. I don’t think it’s rational.”

Defenders of the oil industry have also stepped up their rhetoric. Sylvi Listhaug, the leader of the populist Progress party, this summer posted a social media picture of her filling her car up, with the caption: “Lovely with the smell of real fuel.”

Barth Eide said Labour, under its leader Jonas Gahr Store, would not go into government with a party that insisted on stopping exploration or production. However, its two favourite coalition partners — Centre, and the Socialist Left — hold almost opposing views on Norway’s biggest industry.

Eide said a compromise was possible, avoiding over-investing in oil but refusing to put an end-date on either production or exploration. He also hinted that contentious exploration in the Barents Sea, inside the Arctic Circle, could end as companies such as state-controlled Equinor favour proven areas in the North and Norwegian Seas.

The Greens’ Kriss Rokkan Iversen
The Greens’ Kriss Rokkan Iversen. Support for the party has risen recently © Siri Døsen

Labour is likely to have a much more interventionist industrial policy as it attempts to speed up the green transition. “It has clearly gone too slowly . . . The pace does not fit with the remaining time,” Barth Eide added.

Economists believe Norway’s move away from oil will be expensive but unavoidable. “Can we afford to wind down? It’s going to be extremely costly. But can we afford not to? No, we can’t. It’s hard to say that doing nothing is the best option, but we need to find a good balance,” said Hilde Bjornland, economics professor at BI Norwegian Business School.

Iversen argued that if Norway failed to move away from oil quickly enough, it could hurt both the climate and its famously generous welfare state.

“In the middle of the climate and Covid crises . . . we locked ourselves even more into oil and gas,” she said. “It is like we have this oil fog blurring our view and stopping us setting a course for our future.”

Climate Capital

Norway’s oil rises to top of election agenda as climate fears grow

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