mazzucato27_JAN KARE NESSAFP via Getty Images_norway JAN KARE NESS/AFP via Getty Images

Waking the Norwegian Green Giant

As one of the world's leading exporters of natural gas, Norway faces a unique challenge in a world that is increasingly moving away from fossil fuels. The country has all the financial, technological, and human resources it needs to thrive in a decarbonized future; what's missing is policy leadership.

LONDON – Responding to the climate emergency is a challenge for everyone, but particularly for countries that are economically reliant on petroleum extraction or production. Decarbonization has created an opportunity for many countries to pursue a green industrial revolution. But as more countries embrace this route to future prosperity, the value of fossil-fuel assets, technologies, and capabilities will diminish, threatening jobs, export revenues, and industrial innovation in petroleum-dominated economies.

Among these economies, Norway, the world’s third-largest natural-gas exporter, faces a unique challenge. But, while Norway’s industrial structure and investments are heavily tied to carbon-based industries and services, with hydrocarbons accounting for 36% of total exports in 2019, the country’s domestic energy comes almost entirely from renewable resources (hydropower). The Norwegian economy thus would be ripe for a green industrial transition, except that falling global demand for fossil fuels will hamper its main growth engine.

Norway’s carbon “lock-in” is a symptom of Dutch disease – the problem of one dominant sector’s success coming at the expense of most other sectors. Since hydrocarbon investments dwarf investments in other industries, the fossil-fuel sector attracts the most high-skilled talent. At the same time, the oil and gas sector’s extraordinary profitability has inflated price and wage growth in the rest of the economy, creating difficulties for other exporters.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

or

Register for FREE to access two premium articles per month.

Register

https://prosyn.org/O2tDo7H