A State Budget for a Better World?

Jørgen Randers

Norway uses four times more money to increase the world's greenhouse gas emissions than it uses to lower emissions, claims Jørgen Randers, who keeps fighting for a sustainable world.

COMMENTARY: Jørgen Randers on Norway's State Budget for 2019

Is the government's state budget proposal for 2019(see the hyperlink to www.statsbudsjettet.no) a budget for a better, more climate friendly, world?

The answer is both yes and no.

  • Yes, because the budget supports some measures that will contribute to lower emissions from Norwegian territory – at least in the long run.
  • No, because the budget will not lead to a significant reduction in the world's use of coal, oil and gas.

The use of coal, oil and gas creates 70 % of the world's total greenhouse gas emissions. As a consequence, the world can never reach the UN Sustainable Development Goals without reducing the use of coal, oil and gas.

And if we want to bring global warming to a complete stop, it is necessary for the world to terminate all use of coal, oil and gas. And before 2050 if we want to keep below +1.5 deg C. That includes all oil and gas produced on the Norwegian Continental Shelf and the small quantities that are actually consumed in Norway.

See Jørgen Randers' presentation: Statsbudsjettet 2019: A budget for a sustainable world? (Presented at BI's state budget seminar held on 10 October 2018).

Three measures for a Sustainable World

Norway can and should do three important things to create a sustainable world:

  1. Reduce the world's overall greenhouse gas emissions – to reduce the occurrence of extreme weather events.
  2. Contribute to economic growth in developing countries – to reduce global poverty.
  3. Maintain the Norwegian welfare state (i.e. the inalienable right of citizens to have a collectively funded safety net with free education, free health care, plus adequate benefits for the disabled, the unemployed, and pensioneers) – to demonstrate that it is indeed possible to maintain a liberal market-based democracy with welfare for all.

Let's discuss the first point: what can Norway do to reduce greenhouse gas emissions around the world.

Norway as a successful example

Norway can and should do three things to reduce the world's greenhouse gas emissions:

  1. Reduce greenhouse gas emissions on Norwegian territory (approximately 52 MtCO2e/year).
  2.  Reduce emissions from Norwegian oil and gas being used around the world (approximately 520 MtCO2e/year).
  3. Reduce greenhouse gas emissions in other, foreign countries (approximately 52 000 MtCO2e/year).

Please note that (2) is ten times greater than (1). If Norway lowered its petroleum exports by 10 %, it would have the same global effect as stopping all emissions on Norwegian territory.

Also note that (3) is a thousand times greater than (1). So, if Norway could be a successful role model within a specific sector (such as electric cars), the global effect could be stronger than stopping all Norwegian emissions.

But, I am afraid these ideasis will remain distant dreams. It is more practical to look at what Norway is actually doing to reduce emissions in Norway and abroad.

A lot of talk, and little action

Norwegian emissions have remained almost constant in the last 10-15 years, despite all the talk you hear about our efforts to change. It is the Norwegian industrial sector that has done the most to reduce emissions. The oil and gas sector, on the other hand, has increased its emissions steadily in pace with oil and gas production. Emissions from the transport sector have also increased.

The government is already doing much to reduce emissions, but this is not nearly enough.Table 3.13 of the state budget shows that adopted and proposed measures will only reduce emissions from the current 52 MtCO2e/year to 51 in 2020 (−2%) and to 45 in 2030 (−15%). This is not much compared to the lofty ambitions of 30 to 40% cuts.

What Norway is doing domestically

Let's take a look at what we are actually doing on our own soil. There is a lot of good work being done here.

Overall, around 16 billion Norwegian kroner in the 2019 budget (a very approximate estimate) goes to specific measures to reduce emissions in Norway.

Subsidies for electric cars comprise 7 billion kroner a year (VAT exemptions etc. adopted until 2020). About 3.7 billion kroner were allocated to develop public transport in cities, along with pedestrian solutions and bike lanes. ENOVA offers grants worth 3.3 billion kroner in aid to promote other cuts. About 0.7 billion kroner is allocated through Gassnova for carbon capture. Governmental funds for investing in additional climate control technology are also available. Some support is given to build quick-charge stations and trials with electric short-distance plane travel.

Proposed investment in new railways amounts to 27 billion kroner. But this should be compared with 37 billion proposed for new road construction. Whether the sum leads to more or less emissions is hard to tell.

An important signal

The government also has many ongoing projects that are not part of the state budget. This applies to i.a. from the ban (from 2020) on fossil-fuel heating of homes and offices, upgrading the electric grid for electrification of transport and heating (Statnett), laying subsea cables to the UK and Germany, the construction of wind farms, requiring ferries to limit emissions, ordering operators to consider electrification of the continental shelf, and to require the admixture of biofuels in fossil gas and diesel.

Finally, I see it as a very important signal that the Ministry of Ministry of Finance seems to suggest that the net annual capture of CO2 in Norway’s forests should be included as part of the climate accounting.If this view wins forth, it will have a major influence on how Norway will treat its forests, and serve as a good model for the rest of the world to learn from.

Norway’s action abroad

The government continues to work on a number of initiatives to reduce emissions abroad. Altogether, the government has allocated 5 billion kroner to rainforest preservation, renewable energy assistance, support for international climate organizations, reducing plastic waste that can reach the sea, and purchasing carbon credits/quotas abroad. In many other areas, such as agriculture, nothing is being proposed.

Climate mitigation measures are fading away

The budget proposes using around 16 billion kroner a year on domestic climate mitigation measures, and approximately 5 billion kroner a year abroad. A total of 21 billion kroner a year, which includes 2 billion per year in investments which will probably see no yield. This amounts to 0.6% of Norway's GDP, which is 3500 billion kroner a year.

This is not much money if we think climate change is the world's most pressing problem right now. 4000 kroner per inhabitant per year. In addition, allocations for railways, at 27 billion kroner a year, must be compared with the 37 billion kroner being used on roadways.

Climate allocations just over 20 billion kroner is a pale amount if we compare it to what Norway will invest to produce more oil and gas in the future, which amounts to approximately 80 billion kroner a year.

To put it in simple words: The Realm will be using 4 times as much money to increase the world's emissions in the future as we use to lower emissions.

My dream

I would like to see Norway make a concerted effort and take global responsibility by supporting an orderly winding-up of the petroleum industry – by implementing linear cuts in production across the board from 2020 to 2050, as the UN International Panel on Climate Change (IPCC) suggested in its report published the same day that Norway presented its proposal for the state budget for 2019. That would really help reduce the world's greenhouse gas emissions in the long term.

But this is probably no more than a pipe dream of mine. Even though it would have been possible to resolve to follow the declining production profile that the government presented in the state budget. It would have meant a decision to stop issuing new exploration concessions, complete the 18 fields that are under development and the three that are pending approvals. And to enjoy the huge cash flow that would arise from producing and selling the planned amount without further investments. Part of the cash flow could be used to oil the transition, and the to prepare Norway for life after oil and gas.

This article is a revised version of a working paper that Randers prepared for the BI state budget seminar held on 10 October 2018. 


Professor Emeritus Jørgen Randers, Department of Jurisprudence & Governance at the Norwegian School of Management (BI).
Randers is affiliated with the Center for Green Growth at BI.

Published 24. October 2018

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