Norway is famous for its extreme climate of long sunny summer days, long dark winter nights,
and extreme cold.
They are also famous for their welfare state (like any other nordic country), but perhaps
most of all they are famous for their smoked salmon!
And it’s not just us who think that - the fishing industry is one of the most modern
and important in the world...
However, in the last few years, the most significant element of the Norwegian identity has been
its commitment to the environment, especially its fight against climate change.
And there is no better place for us to see this than in their adoption of the electric
car.
You see, Norway has the most developed market of electric cars in the world.
In Norway, one out of every two of the cars sold is either electric or hybrid!
But there´s more...
By 2025 (which is basically tomorrow) Norway expects to stop selling gas or diesel powered
cars.
They only want to sell electric and hybrid cars.
It’s pretty hard to imagine, right?
After more than a 100 years of combustion engines, it all seems as if it’s about to
come to an end, at least for this country…
Here, electric “car” mania has even reached their ships.
Two companies are currently developing a project called the “Tesla of the Sea”.
Its goal is to launch the first autonomous ship powered by electric batteries.
The first “Yara Birkeland”, the formal name of the project, is expected to be ready
by the end of 2018.
And this might leave you wondering, well, what’s Norway´s secret?
How on Earth have they made electric cars quite so popular?
Are they really so concerned about the environment?
Well, yeah, maybe that is a part of it.
But the majority reason is rather less idealistic…
The key for this electric car boom has everything to do with the tax incentives that the government
has granted to support this industry.
Look, in Norway, when you need to buy a car, you can save a fortune in taxes if you choose
and electric vehicle.
For instance, you don't have to pay any VAT (and in Norway that’s a 25% right off the
bat).
You also don’t pay for the registration fee or any other additional taxes.
So what’s the result of all of this financially?
Well, according to a recent study, a Tesla Model S, for instance, would cost around $140,000
if all the taxes gas powered cars have to pay for were to be paid on it, but thanks
to this tax relief, the price is actually around $70,000.
50% in savings!
Pretty good, right?
Oh, and then there are the other advantages...
these cars do not have to pay for tolls or even parking meters.
Further, in Norway, most of the electricity is hydroelectric, which means it is both cheap
and clean.
As a result for these and other policies, the government expects to reduce carbon emissions
by 40% in the next few years.
So, now you know this, and also if you consider that this is one of the countries with the
highest living standards in the world...you might be thinking...Well, wow, what a great
country!
Even the Norwegian constitution itself is concerned with the environment.
Consider article 110: “Every person has a right to an environment
that is conducive to health and to a natural environment whose productivity and diversity
are maintained.
Natural resources should be managed on the basis of comprehensive long-term considerations
whereby this right will be safeguarded for future generations as well” Article 110b
of Norway´s Constitution.
However, as always, not everything can be sunshine, lollipops and rainbows...
Norway is a wealthy country, with a huge welfare state.
BUT they do have a small issue…
Or, at least, a problem that makes Greenpeace really angry:
And that issue is about the oil production of the country.
But, really, how oil-dependent is Norway?
Well, let’s take a look...
OIL ADDICTS?
If we could take a time machine back to the beginning of the 20th Century, we would find
Norway with a very basic economy.
All they did was fishing, fishing and more fishing.
If we travelled forward in time and, even though things improved significantly, Norway
during the 1960s was in no way included in the list of the wealthiest countries...
not at all.
In fact, its per capita income was around half the amount of Switzerland's income.
“In 1960, the standard of living in Norway was about 30 or 40 percent lower than in Sweden
or in Denmark.
Now the standard of living in Norway is substantially higher than in those two countries."
Bruno Gerard, an economist at the Norwegian Business School in Oslo.
So now we must ask, well, what happened?
How did Norway become one of the richest countries on Earth in so little time?
Well, it all began to change in 1969, the year when the first oil reserves were found.
And, since then, it’s been a bit of a golden ear.
The country became one of the world's largest oil and natural gas suppliers.
And, as you can imagine, this oil revolution meant tons of money coming in - money that
contributed to building the Norway we know today.
Today, oil and natural gas are keys of this country's economy.
In 2016, for instance, almost 40% of exports and more than a fifth of investment had its
origin in the oil and gas sector.
And, of course, the government gets its share…
Look, depending on the year and the prices of gas and oil, the income the government
obtains from this industry varies from 1 out of 4 to 1 out of 6 Euros of the government´s
tax collection.
That is A LOT of money.
And more public income usually means…
more public spending.
“World's Most Generous Welfare State Leaves 20% on the Dole”Yep, that’s right.
To a certain extent, we could say the Norwegian model of a huge welfare state with public
control of many of the large companies, has a lot to do with oil.
However, the fall in the prices of this raw materials has led the government to take a
very controversial measure:
For the first time in 20 years, the government has granted new exploration licences.
In particular, 10 new licences of oil exploration in the Barents Sea, in the heart of the Arctic
Circle.
And the truth is, this movement has made Greenpeace and other environmental organizations really
angry.
Greenpeace has, by the way, taken the government to court accusing them of violating the Paris
Agreement and also of violating the Norwegian Constitution itself.
As we already told you, the environment is well protected in Norwegian law.
But the thing is, Norway´s green commitment has certain limitations...
“Norway has set out to be a global leader in climate action, yet continued expansion
of oil and gas production could eclipse the benefits of Norway’s domestic emission reduction
efforts”.
Peter Erickson, a senior scientist with the Stockholm Environment Institute.And the reality
is that the world’s largest welfare state does not come cheap…We, as a country, we
are petroholics [...] we depend so much on the income from the oil.
Just like alcoholics, we do want to stop, but we don’t know how.”
Thomas Nilsen, Editor of the Independent Barents Observer.
But, hey, it is not as if Norway was like those other countries that only rely on oil.
Absolutely not.
The country is dependent on oil to a certain extent, but it is not even close to how dependent
Venezuela or Saudi Arabia are.
In Norway, things are very different.
Although the government carries a lot of economic weight, Norway has tried to be open to business,
and they have tried to use all this oil money to fund productive activities and to provide
a quality education.
They’ve also been very committed to saving.
THE FUND OF FUNDS
For a country that has made so much money with the oil industry, Norway is very different
to what we are used to.
Oslo, the capital city, is not taken over by sky-scrapers, or massive malls, or extravagant
complexes.
In other words, they may have spent a lot of money, but the key to Norway is, probably,
that they haven't wasted it (as it has happened in other countries.)
The Norwegian government made the sensible decision to save a lot of their oil money.
They set up a sovereign wealth fund to invest the money, and buy assets all around the globe.
And this is the biggest sovereign wealth fund on Earth.
Not even Saudi Arabia and Kuwait have saved so much.
Consider this: “Norway's Sovereign Wealth Fund Hits $1
Trillion” ForbesA.
Trillion.
Dollars.
This is a fortune of around $190,000 per citizen.
Instead of wasting the oil money, they decided to invest in companies all around the world.
This fund has invested money in more than 9,000 companies in 78 countries.
Some of these companies are really famous: Apple, Nestlé, Shell or Alphabet (better
known as Google).
Yes, indeed, we could say that the Norwegians own part of YouTube!
And you know what?
One of their targets is to eventually replace their oil income with income from these investments.
These investments they all produce profit (as you can probably imagine)...
Well, since the creation of the Norwegian Sovereign Wealth Fund, the average annual
return has been around 5.7%.
So, if this level of return was to be kept the same, Norway would get an average of $50
billion in profit.
That’s equivalent to 25% of their public spending.
Sound good, right?
On top of that we must add the income the government gets from oil and local companies…
Companies that, despite being state-owned, work with market criteria.
So, well, you might be thinking that Norway has nothing to worry about, right?
Well, wait just a second.
The welfare level seems to have a solid base, but the government is determined to achieve
economic diversification, in order to have a more competitive economy, so they ultimately
get rid off their dependency on oil.
THE REFORMS
Since 1927, the centre-left Labour Party has been the most popular in general elections.
But in Norway, absolute majorities are not common.
In 2013, a coalition of centre-right wing parties like the Progress Party (famous for
its radical position on immigration) managed to put Erna Solberg in office.
She is known as the Norwegian version of Angela Merkel.
Recently, in the elections of 11th September 2017, this coalition was re-elected.
The intention of the government is to get some distance from what has been known as
the Norwegian mode.
The government wants to improve the competitiveness of the country by reducing taxes, especially
for companies (both public and private).
But, they also intend to keep developing the oil industry.
Anyway, if they are sure about something in Norway, it is that innovation and development
are the best ways to obtain high standards of living and improve the environment.
So, now it is your turn.
Do you think Norway is an example to be followed in the management of natural resources?
Leave your answer in the comments as well as in the survey.
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Also, don’t forget to check out our friends at the Reconsider Media Podcast - they provided
the vocals in this episode that were not mine!
And as always, thanks for watching!