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.