After its independence from Sweden in 1905, Norway was the third-poorest country in Europe. Only Finland and Iceland were less well off. Since then, Norway has steadily climbed the ranks and is now the third-richest country of the continent behind Luxembourg and Liechtenstein. Many, including the Norwegians themselves, attribute this change of fortune to their wealth in natural resources: Norway is the sixth-largest oil exporter and second-largest gas exporter in the world.
Thorvaldur Gylfason Professor of Economics at the University of Iceland begs to differ. He argues it was education that propelled the country forward. Claiming that natural resources alone will not make a country prosperous. It is human resources that make the difference. Finland and Iceland too overcame poverty without the black gold at their disposal. Education enabled these countries to establish a profitable high-tech industry. Gylfason says: “Human capital accumulation can lift living standards without natural capital (as in Japan and Singapore, for example), but natural capital is of little help or worse without the human resources necessary to harness it (consider Congo)”.
Gylfason goes on to congratulate the Norwegians for using their oil earnings well. Instead of letting the oil money flood the economy it is put in a fund. The fund formerly called The Government Petroleum Fund, was renamed the Government Pension Fund – Global (GPF-G) in 2006 to better reflect its intended use: providing security for future generation Norwegians. The fund is currently good for $525 billion, making it the second-largest sovereign wealth fund in the world and holding 1% of the global equity markets. That kind of money gives you power and the Norwegians decided to use that power for the good.
The investments of the fund are dictated by ethical principles which were laid down by the government in 2004: “[The GPF-G] should not make investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages.” Such principled behavior sure has an effect on the global investment climate as was revealed in one of the U.S.A Embassy Cables leaked by Wikileaks. The cable discloses concern of the United States administration that the installment of the ethical principles heavily impacts U.S. companies because many of them can’t live up to the Norwegian standards, resulting in a withdrawal of investments.
The Norwegians, in the meantime, use their oil revenues to ensure themselves a place in the energy market of the future. And that is a market of renewables. A staggering $3.1 billion from the GPF-G fund was invested in clean-tech companies in emerging economies like China, India and Brazil. Supporting companies that innovate in renewable energy technology and electricity efficiency. At home large investments are being made in off-shore wind farm development to turn the extensive shore line into the next gold mine.
Despite its oil reserves the country has already weaned itself from oil dependency. Hydropower supplies 99% of the domestic electricity demand. About 850 small hydroelectric plants situated all over the country generate electricity from the ample supply of falling water. As a result all of the gas and most of the oil is exported.
The large scale implementation of renewable energy helps bringing down the sum total of greenhouse emissions. Which can come in handy as the country announced it would bring its deadline to become a carbon-neutral country 20 years forward from 2050 to 2030.
In 2000 Norway’s oil production peaked but it looks like this is not going to stop the country from being a big player in the future of energy production.
Photo: Sigurd R.