– The oil has served us well and it will remain important to Norway for a long time to come. Facing stricter global climate policies, we must however adapt our petroleum policy in order to prepare it for abrupt and lasting drops in prices as well as higher prices on emissions. The present framework conditions mean there is a high risk of making investments at the Norwegian continental shelf on which the state will lose money, says Vidar Helgesen.
Helgesen is special envoy to the High Level Panel on Building a Sustainable Ocean Economy and former Minister of Climate and Environment and Minister of European Affairs for the Conservative Party. He has headed the independent Climate Commission together with Kristin Halvorsen, director of CICERO and former Minister of Finance and Minister of Education and Research for the Socialist Left Party. The Commission was appointed by Civita, the Norwegain Climate Foundation and WWF, with a broad mix of representatives from politics, academia and the business sector.
– When the world is to cut emissions and become less dependent on fossil energy the risk of low profitability increases. The petroleum companies will always take their own risk into consideration, but the companies do not consider the risk for the rest of the economy. That risk is carried by the state, says Kristin Halvorsen.
The commission’s task is described as follows in the terms of reference: The commission will base for its approach on how a swift, global shift away from fossil energy in line with the Paris Agreement’s goals will affect the Norwegian economy. The commission’s core task is to describe a policy that will prepare, implement and handle the consequences of such a shift. Among other things, the commission will suggest an organization of the petroleum policy that is compatible with reaching the climate goals.
Four main measures for reduced climate risk
Stricter global climate policies may result in an abrupt decline in the petroleum industry. The commission proposes measures to tighten petroleum policies in order to reduce the state’s financial risk.
Limiting awards of new licences
Limiting the awards of new licences is a cost-efficient way of reducing the transition risk following the transformation from a fossil economy to a renewable energy economy. Future licence awards must be limited to expansion or extension of existing production in mature areas.
Introducing stress testing of climate risk for Plan for Development and Operation (PDO)
The Commission is of the opinion the licence holders’ Plan for Development and Operation (PDO) should include a realistic climate stress test of the socio-economic profitability. The premise for the stress test should be scenarios based on the Paris Agreement ambitions.
Neutral petroleum tax
The Commission is of the opinion there should be changes to the petroleum tax to make it neutral and not allowing that investments that are unprofitable before tax become profitable after tax.
The commission recommends that one or more of the surtax deductions must be made less profitable for the companies than they were at the beginning of 2020.
A swifter shift towards sustainable industries
The commission recommends adapting framework conditions in order to shift the entire economy more swiftly, including the petroleum and supply industries, to new low- and zero- emission operations.
– Transforming the Norwegian economy is not only about avoiding losses but also about enabling growth, greater value creation and increased export profit in sustainable industries like for instance renewable energy and electrification, bioecenomy, CCS and hydrogen, says Halvorsen.
The Commission has been independent and consists of:
- Kristin Halvorsen, director of CICERO and former Minister of Finance and Minister of Education and Research for the Socialist Left Party
- Vidar Helgesen, special envoy to the High Level Panel on Building a Sustainable Ocean Economy and former Minister of Climate and Environment and Minister of European Affairs for the Conservative Party
- Hilde C. Bjørnland, professor of economics and provost at BI Norwegian Business School
- Steinar Holden, professor of economics and Head of Department at the University of Oslo
- Linda Nøstbakken, research director of Statistics Norway (SSB) and associate professor at the Norwegian School of Economics (NHH)
- Diderik Lund, emeritus professor of economics at the University of Oslo
- Alexandra Bech Gjørv, CEO of SINTEF research institute
- Geir Inge Lunde, project manager and co-founder of the think tank Initiativ Vest – En tankesmie for Vestlandet
- Terje Osmundsen, CEO of Empower New Energy
- Siren Sundland, Executive Vice President of Sparebanken Vest
- Harald Schjelderup, CEO of BOB and former Chief Commissioner in Bergen
- Stefan Heggelund, Member of Parliament for the Conservative Party
- Ada Johanna Arnstad, County Council Member in Trøndelag for The Centre Party
- Alfred Bjørlo, mayor of Stad municipality for The Liberal Party
- Eirik Sivertsen, Member of Parliament for The Labour Party
Stefan Heggelund dissents from parts of the main recommendations.
Kristin Halvorsen: 0047 93063597
Vidar Helgesen: 0047 91001731