This time, we’re all about money: A task force is working on concepts for a global carbon tax on the fringes of the World Bank meeting, which focuses on restructuring the international financial system. Bernhard Pötter has analyzed for you which areas could be taxed. Next Monday, April 22, at 4.30 pm, he will also be hosting a Live.Table on climate finance. His guests: Germany’s climate envoy Jennifer Morgan, Avinash Persaud, architect of the Bridgetown Initiative, advisor to Barbados and the Inter American Development Bank, and Oxfam financial expert Jan Kowalzig. Feel free to register here!
In Germany, however, only half of the money earmarked for the Climate and Transformation Fund is spent. As Malte Kreutzfeldt has researched, this jeopardizes the country’s climate targets. He also debunks the rumors about the power shortage in Oranienburg that have been making the headlines.
Moreover, a new PIK study shows that climate change could jeopardize a fifth of global income by 2050. Although climate damage costs much more than climate action, the climate is losing relevance in the European elections in June – especially in Germany. This is revealed by the latest Eurobarometer.
On the sidelines of the spring meeting of the World Bank and IMF in Washington, one of the most ambitious projects in international climate financing is being initiated: A group of industrialized and developing countries aims to explore the options for global climate taxes and sound out alliances for this project with a Task Force on International Taxation.
According to the plans of France, Barbados, Kenya, Antigua and Barbuda and Spain, the finalized concept for a global climate tax is to be adopted at COP30 in Brazil. It is now emerging which new taxes could be considered: The main measures being sought are ones that can raise at least 0.1 percent of global economic output for sustainable development and climate action – in other words, more than 100 billion US dollars each.
After preparations at the Paris Finance Summit in June 2023 and the African Climate Summit in September 2023, this task force was launched at COP28 in Dubai in December 2023. The task force is to present plans on how to raise urgently needed capital for climate action, especially in developing countries. It is tasked with developing “new taxation instruments to ensure that all economic sectors, especially those that are currently weakly taxed, would contribute their fair share, consistently with their impact in terms of greenhouse gas emissions.”
An expert panel commissioned by the UN estimates the financial requirements for effective carbon reduction and adaptation, particularly in the countries of the Global South (excluding China), at one trillion US dollars annually in 2025 – and as much as 2.4 trillion in 2030. On Wednesday, the World Bank announced a plan to provide 300 million African people with electricity by 2030. However, this would require 30 billion US dollars in public funds and 9 billion in private investment.
So far, however, the developed countries have only promised to mobilize an annual 100 billion US dollars in climate aid for the Global South by 2025. At this year’s COP29 in Baku, it will be decided how to proceed with this financing in the long term with a “new collective quantified target” (NCQG).
Meanwhile, the Covid pandemic and the war in Ukraine have strained the budgets of developed countries. And almost 50 developing countries are facing national bankruptcy due to the burden of climate damage on their budgets. This is why the task force is looking for revenue that will help vulnerable people in the Global South, not burden consumers in the Global North and make the “polluting industries” accountable for their damage, say sources close to the task force. The capital will be used for “development, climate action and nature.”
Laurence Tubiana, head of the European Climate Foundation (ECF), believes that the new task force opens up a debate that was previously “a total taboo.” Tubiana, who played a key role in negotiating the Paris Agreement as France’s climate envoy, points out that seven trillion US dollars in state subsidies are channeled into fossil fuels every year and that the profits of oil and gas companies currently stand at four trillion US dollars each year – while climate change causes “an enormous loss of wealth and wellbeing in many countries, and no money to pay for that.”
Possible sources for climate and development taxes could be:
The list is similar to the proposals for raising money for the UN’s loss and damage fund. However, this pot has so far been filled at COP28 with voluntary contributions from various countries totaling around 700 million US dollars. Experts currently consider the most likely option to tax flight tickets, and only first-class and business flights, which would limit the burden on higher incomes.
However, even if such a tax is introduced, it does not mean the money will go directly to climate action or sustainability in poor countries. The UN shipping agency IMO has indicated to levy a tax on shipping in 2025. However, this revenue will be used to update fleets to make them climate-neutral. A global carbon price, on the other hand, would probably not generate any additional revenue in regions with emissions trading because the existing revenue has already been utilized.
Other countries, including Colombia, the Marshall Islands, and Ireland, have indicated that they want to join the Task Force. Developing countries, in particular, do not see their interests represented in the OECD as a club of industrialized countries, and the UN is forced to reach a consensus. However, the Task Force is to collect data and proposals on the various options for new climate taxes without relying on consensus. The advantage is that different coalitions can then rally behind individual ideas depending on their interests.
The Task Force’s secretariat, attached to the European Climate Foundation, aims to present finalized proposals by COP30. In the best case, it will not only be clear where and how much money can come from – but also who collects and manages it and where it should go.
Other players also seek new sources of money for international climate finance. For instance, Brazil’s Finance Minister Fernando Haddad has called for a “billionaires’ tax” on around 3,000 super-rich individuals worldwide. Brazil currently chairs the G20 and proposes that any revenue from the tax should also be used for climate action. Those in favor of this tax point to studies showing that the super-rich not only have a lot of money, but also have a much larger carbon footprint than the average person due to their lifestyle and investments: According to Oxfam, the richest billionaires generate up to three million tons of carbon emissions per capita every year.
The cuts to the German Climate and Transformation Fund resulting from the Federal Constitutional Court’s budget ruling have rightly received a lot of attention in recent months. However, an at least equally important problem with climate action funding has been somewhat overlooked: Only just over half of the budgeted funds have actually been spent in the last two years. In 2022, it was 49 percent, and in 2023 around 56 percent.
These figures are based on the yet-unpublished 13th KTF report by the Federal Ministry of Finance. This week, the Council of Experts on Climate Change warned that the poor outflow of funds could prevent Germany from achieving its climate targets. This Thursday, the think tank Forum Ökosoziale Marktwirtschaft (FÖS) also published an analysis of the outflow of funds, which was available to Table.Briefings in advance, calling for the German government to take action.
The most recent KTF report revealed that only around 20 billion euros of the earmarked 36 billion euros had been spent. This “has an impact on the GHG reduction effect assumed in the Climate Action Program,” the Expert Council wrote in its review report on Germany’s 2023 climate balance published on Monday. “In any case, it can no longer be expected in the time frame specified at the time and no longer to the full extent.” In response to questions from Table.Briefings: Brigitte Knopf, Deputy Chair of the Expert Council, did not want to estimate how significant the deviation would be. However, she said it was clear that the overall effect would be less than the Federal Environment Agency’s forecast had assumed.
The FÖS study also warns of the consequences of the poor outflow of funds. “Climate action projects will at least be delayed,” the authors write. Although the unspent funds flow back into the KTF as a reserve, they could be used for other programs in subsequent years. “These might then have no positive climate protection effect or be compensation measures for energy-intensive industries.”
In fact, KTF spending on programs with no direct additional climate impact is increasing:
The study also shows significant differences in the outflow of funds between different areas. Programs relating to buildings were utilized 64 percent; funding programs for private transport were utilized 67 percent, while only 48 percent were utilized for local public transport. Industrial programs involving compensation payments had a utilization rate of 66 percent, while the figure for hydrogen was 48 percent and only 19 percent for direct climate action in the industrial sector.
Nature-based climate action, which includes the rewetting of peatlands, reforestation and the climate-friendly conversion of forests, fared particularly poorly in comparison. According to FÖS calculations, less than 20 percent of its funds were spent in 2023; for the largest program, the “Measures for Nature-based Climate Action” (ANK), which the Environment Ministry oversees, the figure was just over 2 percent.
As justification, the Environment Ministry writes that “structures for the implementation of the ANK had to be developed and established” first. In addition, the “development of support measures” took longer than planned because it was “not possible to draw on established and optimally coordinated procedures between the stakeholders involved.” These reasons do not sound convincing because the problems probably did not come as a surprise.
However, there have also apparently been conflicts within the government coalition. A note in the report suggests that “coordination within the federal government” also led to “protracted processes.” Apparently, the Ministry of Finance, at some point, questioned whether the government even had the authority to provide the relevant funding. This is suggested by the fact that, according to Table.Briefings information, the government parties want to include the following clarification in a motion for a resolution on the Climate Change Act: “The Bundestag welcomes that the Federal Government promotes measures for nature-based climate action.”
The Environment Ministry expects a significantly higher outflow of funds this year. A spokeswoman said that 21 of 50 programs have now been launched and the remainder should follow by the end of the year. And: “The programs are in high demand.”
However, Karl Bär, one of the authors of the FÖS study, has called for the government to review its processes in general to improve the overall spending rate. “Funding conditions should be published as early as possible,” he told Table.Briefings. What is also needed is “low-threshold information and target group-orientated access.” He said that as a first step, more transparency regarding expenditure and better evaluation are also needed.
Ms. Bergmål, at COP28, Norway strongly supported a resolution stating that countries should “transition away from fossil fuels.” What does this goal mean for Norway, which produces a lot of oil and gas?
We want to be part of this transition. We must reduce emissions worldwide, and that also applies to fossil fuel producers. We want to continue producing oil and gas and are working hard to reduce emissions from our production even further, in order to reduce Norway’s emissions by 90 to 95 percent by 2050. According to the calculations in the EU’s Renewable Energy Directive, Norway has a renewable share of over 70 percent, and we continue to phase out unabated fossil fuels. At the same time, it is important for us to be a stable supplier of oil and gas for Europe also in the future, we need to succeed both in cutting emissions and securing energy security.
Your boss, Energy Minister Aasland, said: Dubai changes nothing for Norway. That sounds strange for a country that is supposed to be moving away from its business model. What did he mean by that?
Even before Dubai, we were already focusing on new industries such as offshore wind, blue hydrogen and CCS. We are building these new industries on the shoulders of oil and gas, and our experience in this area helps us a lot. I therefore believe that what he meant was: We are already working every day to reduce emissions. We can see that after 2030, our production of fossil fuels will fall because of the natural depletion of fields. At the same time, Europe and the rest of the world will still need oil and gas for quite a long time.
At the climate conference, Norway urged that we “move away from fossil fuels,” But is expanding its own production of oil and gas. In recent years, you have issued 140 licenses for new wells. The IEA, on the other hand, says that if we want to stay within 1.5 degrees, there cannot be new fossil fuel infrastructure. How does that fit together?
I don’t know of any projections that completely dispense with oil and gas in the medium-term future. The question is how long we will still need fossil fuels, and there are different views on this. In Norway, we will produce less oil and gas fairly quickly after 2030. Even if we develop new fields, we will produce less in total than we do today. And we also have to realize that the international expansion of renewables is happening quickly, but too slowly for the climate targets. The transition away from fossil fuels must be fair and affordable and ensure access to energy. We must have the people with us. If we reduce our gas production in Norway, this would affect consumers in Europe.
How secure are your government’s plans anyway? A court has just put the licenses for new oil fields on hold. And a government expert group is calling for a moratorium until the plans are in line with the net-zero targets.
I won’t comment on ongoing court cases, but the court has recently said that the temporary injunction does not apply until further notice. The court’s decision relates to three specific plans for development and production that have been approved by the Ministry in the period 2021 – 2023. The court case is not about the overall strategy for oil and gas production. And our expert group has made this proposal, but we believe that we need the expansion to compensate for the predicted fall in production from the current fields.
Oil and gas money is very important for Norway. In 2023, 36 percent of government revenue came from this sector. Can your country do without oil and gas without ruining the Norwegian business model?
Of course, oil and gas are extremely important for Norway. Most of the money goes into the state oil fund, but the sector also provides many investments and secures jobs. At the same time, we understand that we are in a transition and that we need to reach net zero. We believe the petroleum sector is key to helping us achieve this because of the worker’s high competence and the technological development in that field.
How far along are you?
We are in a great position to do this: we have a big head start in CCS worldwide because we have been gaining experience since 1997. Our state-run CCS pilot project “Northern Lights” is running according to plan, it is 70 percent complete and commercially fully booked, and CO2 storage is due to start in mid-2025. Northern Lights has contracts with companies such as Yara in the Netherlands and Örsted in Denmark to supply CO2. And now we have just awarded six licenses to private companies that will operate CCS commercially on the Norwegian Continental Shelf. Around 2030, the commercial e companies have outlined plans to store 40 million tons of CO2 annually. We believe in this future technology because we see no other way of dealing with emissions from sectors that are hard to abate.
Will the revenue from CCS one day be as important for Norway as the money from oil and gas is now?
Oil and gas have been making a lot of money for years. It’s hard to see how any other sector can replicate that. Nevertheless, we are working on it because the future is net zero.
However, your country’s overall greenhouse gas emissions have barely fallen so far. And what does net zero mean for Norway? If your country wants to be at minus 90 to 95 percent by 2050, will you still be selling oil and gas to other countries?
The plan is that Norway will still be producing oil and gas in 2050. But not as much as today. And we will mainly export this. Of course, these exports will then have to be used emission-free. The technology for this will develop. Norway is committed to developing CCS solutions.
What does such a CO2-free export of fossil fuels look like? Will you sell oil and gas and guarantee to store the corresponding amount of CO2 in Norway?
If we can produce and burn oil and gas without CO2 emissions, we can continue to sell it. If we look at blue hydrogen production, with CO2 captured and stored in Norway, it could be possible to do this with very low emissions.
Norway is Europe’s largest gas supplier, but the EU is aiming to reduce emissions by 90 percent by 2040. There is an extensive study commissioned by environmental organizations that says: If Norway expands its oil and gas sector now, Europe will be buying less and less oil and gas from 2040 onwards. This would eliminate an important market for Norway’s exports.
If there is no market, nothing will be produced. This is also why Norway is working to cut the demand for unabated fossil fuels worldwide.
Aren’t you risking a huge wave of stranded investments? You open up new fields and your biggest customer wants to say goodbye to these products?
There will still be a need for oil and gas imports to Europe, also in the most ambitious climate scenarios the commission has presented. Of course, there is still a risk regarding what prices the oil and gas will receive in the market, but the companies operating on our Norwegian Continental Shelf are very conscious about the risk when they make investment decisions.
But Norway’s largest oil and gas company, Equinor, is 67 percent state-owned.
Yes, but we don’t decide politically what they do. They are run as an independent company.
If I were the owner of such a company, I would say: Better be careful before you take such a risk.
But Equinor has its own experts who make these calculations. And we don’t see a big risk of stranded investments.
So Norway is betting that the EU will not achieve its climate targets?
EU countries such as the Netherlands are also making long-term plans for fossil fuels. CCS can be the solution to the climate targets: If we can make oil and gas production emission-free and if we can make consumption emission-free, then there would be no problem in reaching the climate targets.
Aren’t those two very, very big “ifs”?
Emissions from Norwegian oil and gas production are already very low. And we have CCS for use. All our forecasts say that Europe and the world will still need oil and gas in 2050. That’s another 26 years. Who knows what the world will invent by then. In any case, we will remain a reliable supplier.
This time, we’re all about money: A task force is working on concepts for a global carbon tax on the fringes of the World Bank meeting, which focuses on restructuring the international financial system. Bernhard Pötter has analyzed for you which areas could be taxed. Next Monday, April 22, at 4.30 pm, he will also be hosting a Live.Table on climate finance. His guests: Germany’s climate envoy Jennifer Morgan, Avinash Persaud, architect of the Bridgetown Initiative, advisor to Barbados and the Inter American Development Bank, and Oxfam financial expert Jan Kowalzig. Feel free to register here!
In Germany, however, only half of the money earmarked for the Climate and Transformation Fund is spent. As Malte Kreutzfeldt has researched, this jeopardizes the country’s climate targets. He also debunks the rumors about the power shortage in Oranienburg that have been making the headlines.
Moreover, a new PIK study shows that climate change could jeopardize a fifth of global income by 2050. Although climate damage costs much more than climate action, the climate is losing relevance in the European elections in June – especially in Germany. This is revealed by the latest Eurobarometer.
On the sidelines of the spring meeting of the World Bank and IMF in Washington, one of the most ambitious projects in international climate financing is being initiated: A group of industrialized and developing countries aims to explore the options for global climate taxes and sound out alliances for this project with a Task Force on International Taxation.
According to the plans of France, Barbados, Kenya, Antigua and Barbuda and Spain, the finalized concept for a global climate tax is to be adopted at COP30 in Brazil. It is now emerging which new taxes could be considered: The main measures being sought are ones that can raise at least 0.1 percent of global economic output for sustainable development and climate action – in other words, more than 100 billion US dollars each.
After preparations at the Paris Finance Summit in June 2023 and the African Climate Summit in September 2023, this task force was launched at COP28 in Dubai in December 2023. The task force is to present plans on how to raise urgently needed capital for climate action, especially in developing countries. It is tasked with developing “new taxation instruments to ensure that all economic sectors, especially those that are currently weakly taxed, would contribute their fair share, consistently with their impact in terms of greenhouse gas emissions.”
An expert panel commissioned by the UN estimates the financial requirements for effective carbon reduction and adaptation, particularly in the countries of the Global South (excluding China), at one trillion US dollars annually in 2025 – and as much as 2.4 trillion in 2030. On Wednesday, the World Bank announced a plan to provide 300 million African people with electricity by 2030. However, this would require 30 billion US dollars in public funds and 9 billion in private investment.
So far, however, the developed countries have only promised to mobilize an annual 100 billion US dollars in climate aid for the Global South by 2025. At this year’s COP29 in Baku, it will be decided how to proceed with this financing in the long term with a “new collective quantified target” (NCQG).
Meanwhile, the Covid pandemic and the war in Ukraine have strained the budgets of developed countries. And almost 50 developing countries are facing national bankruptcy due to the burden of climate damage on their budgets. This is why the task force is looking for revenue that will help vulnerable people in the Global South, not burden consumers in the Global North and make the “polluting industries” accountable for their damage, say sources close to the task force. The capital will be used for “development, climate action and nature.”
Laurence Tubiana, head of the European Climate Foundation (ECF), believes that the new task force opens up a debate that was previously “a total taboo.” Tubiana, who played a key role in negotiating the Paris Agreement as France’s climate envoy, points out that seven trillion US dollars in state subsidies are channeled into fossil fuels every year and that the profits of oil and gas companies currently stand at four trillion US dollars each year – while climate change causes “an enormous loss of wealth and wellbeing in many countries, and no money to pay for that.”
Possible sources for climate and development taxes could be:
The list is similar to the proposals for raising money for the UN’s loss and damage fund. However, this pot has so far been filled at COP28 with voluntary contributions from various countries totaling around 700 million US dollars. Experts currently consider the most likely option to tax flight tickets, and only first-class and business flights, which would limit the burden on higher incomes.
However, even if such a tax is introduced, it does not mean the money will go directly to climate action or sustainability in poor countries. The UN shipping agency IMO has indicated to levy a tax on shipping in 2025. However, this revenue will be used to update fleets to make them climate-neutral. A global carbon price, on the other hand, would probably not generate any additional revenue in regions with emissions trading because the existing revenue has already been utilized.
Other countries, including Colombia, the Marshall Islands, and Ireland, have indicated that they want to join the Task Force. Developing countries, in particular, do not see their interests represented in the OECD as a club of industrialized countries, and the UN is forced to reach a consensus. However, the Task Force is to collect data and proposals on the various options for new climate taxes without relying on consensus. The advantage is that different coalitions can then rally behind individual ideas depending on their interests.
The Task Force’s secretariat, attached to the European Climate Foundation, aims to present finalized proposals by COP30. In the best case, it will not only be clear where and how much money can come from – but also who collects and manages it and where it should go.
Other players also seek new sources of money for international climate finance. For instance, Brazil’s Finance Minister Fernando Haddad has called for a “billionaires’ tax” on around 3,000 super-rich individuals worldwide. Brazil currently chairs the G20 and proposes that any revenue from the tax should also be used for climate action. Those in favor of this tax point to studies showing that the super-rich not only have a lot of money, but also have a much larger carbon footprint than the average person due to their lifestyle and investments: According to Oxfam, the richest billionaires generate up to three million tons of carbon emissions per capita every year.
The cuts to the German Climate and Transformation Fund resulting from the Federal Constitutional Court’s budget ruling have rightly received a lot of attention in recent months. However, an at least equally important problem with climate action funding has been somewhat overlooked: Only just over half of the budgeted funds have actually been spent in the last two years. In 2022, it was 49 percent, and in 2023 around 56 percent.
These figures are based on the yet-unpublished 13th KTF report by the Federal Ministry of Finance. This week, the Council of Experts on Climate Change warned that the poor outflow of funds could prevent Germany from achieving its climate targets. This Thursday, the think tank Forum Ökosoziale Marktwirtschaft (FÖS) also published an analysis of the outflow of funds, which was available to Table.Briefings in advance, calling for the German government to take action.
The most recent KTF report revealed that only around 20 billion euros of the earmarked 36 billion euros had been spent. This “has an impact on the GHG reduction effect assumed in the Climate Action Program,” the Expert Council wrote in its review report on Germany’s 2023 climate balance published on Monday. “In any case, it can no longer be expected in the time frame specified at the time and no longer to the full extent.” In response to questions from Table.Briefings: Brigitte Knopf, Deputy Chair of the Expert Council, did not want to estimate how significant the deviation would be. However, she said it was clear that the overall effect would be less than the Federal Environment Agency’s forecast had assumed.
The FÖS study also warns of the consequences of the poor outflow of funds. “Climate action projects will at least be delayed,” the authors write. Although the unspent funds flow back into the KTF as a reserve, they could be used for other programs in subsequent years. “These might then have no positive climate protection effect or be compensation measures for energy-intensive industries.”
In fact, KTF spending on programs with no direct additional climate impact is increasing:
The study also shows significant differences in the outflow of funds between different areas. Programs relating to buildings were utilized 64 percent; funding programs for private transport were utilized 67 percent, while only 48 percent were utilized for local public transport. Industrial programs involving compensation payments had a utilization rate of 66 percent, while the figure for hydrogen was 48 percent and only 19 percent for direct climate action in the industrial sector.
Nature-based climate action, which includes the rewetting of peatlands, reforestation and the climate-friendly conversion of forests, fared particularly poorly in comparison. According to FÖS calculations, less than 20 percent of its funds were spent in 2023; for the largest program, the “Measures for Nature-based Climate Action” (ANK), which the Environment Ministry oversees, the figure was just over 2 percent.
As justification, the Environment Ministry writes that “structures for the implementation of the ANK had to be developed and established” first. In addition, the “development of support measures” took longer than planned because it was “not possible to draw on established and optimally coordinated procedures between the stakeholders involved.” These reasons do not sound convincing because the problems probably did not come as a surprise.
However, there have also apparently been conflicts within the government coalition. A note in the report suggests that “coordination within the federal government” also led to “protracted processes.” Apparently, the Ministry of Finance, at some point, questioned whether the government even had the authority to provide the relevant funding. This is suggested by the fact that, according to Table.Briefings information, the government parties want to include the following clarification in a motion for a resolution on the Climate Change Act: “The Bundestag welcomes that the Federal Government promotes measures for nature-based climate action.”
The Environment Ministry expects a significantly higher outflow of funds this year. A spokeswoman said that 21 of 50 programs have now been launched and the remainder should follow by the end of the year. And: “The programs are in high demand.”
However, Karl Bär, one of the authors of the FÖS study, has called for the government to review its processes in general to improve the overall spending rate. “Funding conditions should be published as early as possible,” he told Table.Briefings. What is also needed is “low-threshold information and target group-orientated access.” He said that as a first step, more transparency regarding expenditure and better evaluation are also needed.
Ms. Bergmål, at COP28, Norway strongly supported a resolution stating that countries should “transition away from fossil fuels.” What does this goal mean for Norway, which produces a lot of oil and gas?
We want to be part of this transition. We must reduce emissions worldwide, and that also applies to fossil fuel producers. We want to continue producing oil and gas and are working hard to reduce emissions from our production even further, in order to reduce Norway’s emissions by 90 to 95 percent by 2050. According to the calculations in the EU’s Renewable Energy Directive, Norway has a renewable share of over 70 percent, and we continue to phase out unabated fossil fuels. At the same time, it is important for us to be a stable supplier of oil and gas for Europe also in the future, we need to succeed both in cutting emissions and securing energy security.
Your boss, Energy Minister Aasland, said: Dubai changes nothing for Norway. That sounds strange for a country that is supposed to be moving away from its business model. What did he mean by that?
Even before Dubai, we were already focusing on new industries such as offshore wind, blue hydrogen and CCS. We are building these new industries on the shoulders of oil and gas, and our experience in this area helps us a lot. I therefore believe that what he meant was: We are already working every day to reduce emissions. We can see that after 2030, our production of fossil fuels will fall because of the natural depletion of fields. At the same time, Europe and the rest of the world will still need oil and gas for quite a long time.
At the climate conference, Norway urged that we “move away from fossil fuels,” But is expanding its own production of oil and gas. In recent years, you have issued 140 licenses for new wells. The IEA, on the other hand, says that if we want to stay within 1.5 degrees, there cannot be new fossil fuel infrastructure. How does that fit together?
I don’t know of any projections that completely dispense with oil and gas in the medium-term future. The question is how long we will still need fossil fuels, and there are different views on this. In Norway, we will produce less oil and gas fairly quickly after 2030. Even if we develop new fields, we will produce less in total than we do today. And we also have to realize that the international expansion of renewables is happening quickly, but too slowly for the climate targets. The transition away from fossil fuels must be fair and affordable and ensure access to energy. We must have the people with us. If we reduce our gas production in Norway, this would affect consumers in Europe.
How secure are your government’s plans anyway? A court has just put the licenses for new oil fields on hold. And a government expert group is calling for a moratorium until the plans are in line with the net-zero targets.
I won’t comment on ongoing court cases, but the court has recently said that the temporary injunction does not apply until further notice. The court’s decision relates to three specific plans for development and production that have been approved by the Ministry in the period 2021 – 2023. The court case is not about the overall strategy for oil and gas production. And our expert group has made this proposal, but we believe that we need the expansion to compensate for the predicted fall in production from the current fields.
Oil and gas money is very important for Norway. In 2023, 36 percent of government revenue came from this sector. Can your country do without oil and gas without ruining the Norwegian business model?
Of course, oil and gas are extremely important for Norway. Most of the money goes into the state oil fund, but the sector also provides many investments and secures jobs. At the same time, we understand that we are in a transition and that we need to reach net zero. We believe the petroleum sector is key to helping us achieve this because of the worker’s high competence and the technological development in that field.
How far along are you?
We are in a great position to do this: we have a big head start in CCS worldwide because we have been gaining experience since 1997. Our state-run CCS pilot project “Northern Lights” is running according to plan, it is 70 percent complete and commercially fully booked, and CO2 storage is due to start in mid-2025. Northern Lights has contracts with companies such as Yara in the Netherlands and Örsted in Denmark to supply CO2. And now we have just awarded six licenses to private companies that will operate CCS commercially on the Norwegian Continental Shelf. Around 2030, the commercial e companies have outlined plans to store 40 million tons of CO2 annually. We believe in this future technology because we see no other way of dealing with emissions from sectors that are hard to abate.
Will the revenue from CCS one day be as important for Norway as the money from oil and gas is now?
Oil and gas have been making a lot of money for years. It’s hard to see how any other sector can replicate that. Nevertheless, we are working on it because the future is net zero.
However, your country’s overall greenhouse gas emissions have barely fallen so far. And what does net zero mean for Norway? If your country wants to be at minus 90 to 95 percent by 2050, will you still be selling oil and gas to other countries?
The plan is that Norway will still be producing oil and gas in 2050. But not as much as today. And we will mainly export this. Of course, these exports will then have to be used emission-free. The technology for this will develop. Norway is committed to developing CCS solutions.
What does such a CO2-free export of fossil fuels look like? Will you sell oil and gas and guarantee to store the corresponding amount of CO2 in Norway?
If we can produce and burn oil and gas without CO2 emissions, we can continue to sell it. If we look at blue hydrogen production, with CO2 captured and stored in Norway, it could be possible to do this with very low emissions.
Norway is Europe’s largest gas supplier, but the EU is aiming to reduce emissions by 90 percent by 2040. There is an extensive study commissioned by environmental organizations that says: If Norway expands its oil and gas sector now, Europe will be buying less and less oil and gas from 2040 onwards. This would eliminate an important market for Norway’s exports.
If there is no market, nothing will be produced. This is also why Norway is working to cut the demand for unabated fossil fuels worldwide.
Aren’t you risking a huge wave of stranded investments? You open up new fields and your biggest customer wants to say goodbye to these products?
There will still be a need for oil and gas imports to Europe, also in the most ambitious climate scenarios the commission has presented. Of course, there is still a risk regarding what prices the oil and gas will receive in the market, but the companies operating on our Norwegian Continental Shelf are very conscious about the risk when they make investment decisions.
But Norway’s largest oil and gas company, Equinor, is 67 percent state-owned.
Yes, but we don’t decide politically what they do. They are run as an independent company.
If I were the owner of such a company, I would say: Better be careful before you take such a risk.
But Equinor has its own experts who make these calculations. And we don’t see a big risk of stranded investments.
So Norway is betting that the EU will not achieve its climate targets?
EU countries such as the Netherlands are also making long-term plans for fossil fuels. CCS can be the solution to the climate targets: If we can make oil and gas production emission-free and if we can make consumption emission-free, then there would be no problem in reaching the climate targets.
Aren’t those two very, very big “ifs”?
Emissions from Norwegian oil and gas production are already very low. And we have CCS for use. All our forecasts say that Europe and the world will still need oil and gas in 2050. That’s another 26 years. Who knows what the world will invent by then. In any case, we will remain a reliable supplier.
