Providing for the future: to use or not to use Norway’s oil and gas

OsloMet researcher Marianne Takle has studied Norway’s history of extracting and selling oil and gas. In her research, she has sought to better understand why the prevailing conversation shifted from preserving resources to building capital.

An historical perspective

As long as Norway has had oil and gas, there have been debates over how to use it. When Philips Petroleum discovered oil in the North Sea in 1969, they set off Norway’s oil boom and from the start, there was an understanding that the needs of future generations should be considered. Back in the 1970’s, the Norwegian Parliament wanted to preserve the oil and gas wealth, but emphasised that any benefits from extraction should not come at the cost of environmental destruction.

If you want to figure out the problems of today, you need to understand the decisions of the past – Marianne Takle

Initially, this philosophy of conservation focused policy on limiting extraction so it could be used (or not used) later. However, when parliament introduced nasjonalformuemodellen, the national wealth model, in a report in 1984, they started viewing natural resources as interchangeable with physical and financial capital. In Takle’s view, this model allowed policymakers to think of sustainability in terms of the monetary value of the environment rather than preservation of the environment itself.
This financial model now dominates the debate and the question of whether to extract in the first place has been lost.

The fund

The oil fund ("Oljefondet") that the Norwegian parliament created in 1990 was heavily based on sustainability as described by the national wealth model. This concept, what Takle refers to as “weak sustainability”, frames the wealth and financial security that the fund provides for future generations as an acceptable exchange for exhausting natural resources and degrading the environment.

In the early 2000’s, there were three major changes to the fund that Takle says cemented this economic-centered thinking:

The fiscal rule, or "handelsregelen," limits the amount of money that can be used from the fund to 4% (reduced to 3% in 2017) in order to shield the future wealth from oil and gas price fluctuations and provide wealth even after the resources are gone.
Second, ethical guidelines barred investments in unethical and unsustainable projects. Paradoxically, this includes extraction.
And third, the fund was renamed The Government Pension Fund Global—Statens Pensjonsfond Utland in Norwegian—and connected to the National Insurance Scheme as a way of signalling that the welfare state would continue even as oil and gas were depleted.

Dependence on oil

The fund has grown quickly over the past 15 years. At over 11 trillion NOK, it now plays a significant role in providing the way of life Norwegians have grown to expect. While only 3% of the oil fund revenue can be used each year, that amounts to almost 20% of the annual state budget.

Portrait of Research Professor Marianne Takle.

This money supports healthcare, unemployment, pensions, infrastructure projects, and much more. The devastating economic effects of the recent Covid-19 pandemic and the government’s use of the fund to finance anti-crisis measures has made people even more aware of Norway’s reliance on this money.

“As the oil fund got bigger, we started to only talk about the positive aspects of the fund. There’s just so much interest and money in oil and gas that people don’t want to think about where the money comes from,” says Takle.

“The more people benefit from the fund and the extraction economy, the harder it is to have a conversation about whether we can justify to future generations that we built this fund through the extraction of oil and gas.”

Planning for the future

Takle’s research traces how Norway’s idea of preserving wealth for the future became so focused on capital. This history has made it difficult to have a conversation about whether people in the future might have different priorities. “People today have a very positive view of the fund, but maybe future generations would rather we kept the oil in the ground.”

Over the past 30 years, the fund has undoubtably provided Norway with unprecedented economic benefits, but Takle has found that people are starting to push back against the idea this wealth can replace an unliveable environment.

Beginning around 2015, protests from the Norwegian public over the environmental effects of extraction and unethical investment plans led to the formation of several parliamentary commissions. While these commissions did restructure the way the fund is invested, they still have not addressed the core issue of whether the fund should continue to come from oil and gas extraction.

Strong sustainability

These protests may be the start of a push toward what Takle calls “strong sustainability”, the idea that the environment must also be maintained for future generations to meet their needs. A generation-spanning coalition of environmental groups, including Young Friends of the Earth and the Grandparents Climate Campaign, brought a case to the Norwegian Supreme Court arguing that continued drilling violates Norway’s constitutional environmental protections.

In December 2020, the court ruled against the environmentalists and said that the constitution does not prevent the Norwegian government from issuing new drilling permits. The Norwegian Grandparents’ Climate Campaign has sent a complaint to the European Court of Human Rights, but they face an uphill battle even as more and more people are embracing the need for strong sustainability.

Norway has maintained the idea that wealth should be preserved for the future, but decades of focus on only economic ideas of sustainability has made it difficult to think of their needs in any other way. A policy of strong sustainability may not be compatible with current practices. “If you agree that morally, the fund is for the future, think of what is best for them”.

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