The dilemma Norwegians face in Monday’s election is how to reconcile their embrace of electric cars and environmental awareness with the need to wean their oil-rich economy off its key source of wealth.
The release of a landmark United Nations-backed report urging drastic measures to end carbon emissions has thrust climate change to the very heart of the campaign. But it’s also apparent that the two biggest parties in the country are still advocates for a $40-billion industry hooked on fossil fuels.
So even if the opposition Labor Party ousts a Conservative-led government, as polls indicate they will, the reality is that change to oil and gas policy can only happen if smaller parties gain enough backing to become kingmakers.
The Socialist Left, which already has experience governing with Labor, enjoy more support than the Greens. Both would call for a halt to new exploration licenses and make it a condition for joining any ruling coalition.
Norway is a key political test ahead of major climate talks set to start Oct. 31 in Glasgow because it will test voters’ appetite for real change. Norwegians love their Teslas but they can afford them because the small Scandinavian country got rich on oil and built a $1.4-trillion sovereign wealth fund. The economy hasn’t diversified enough to meet the sacrifices needed on climate.
Bloomberg ranked the likeliest coalition scenarios, and spoke to experts to spell out what it could mean for green policy.
Labor-Center-Socialist Left: End of oil exploration on the table
Labor, headed by millionaire Jonas Gahr Store, is tipped to kick Premier Erna Solberg, known as a political friend of Angela Merkel, out of office after two terms in power. But Labor only enjoys a three per cent lead over Solberg’s party, according to Pollofpolls.no, an aggregator of surveys by various pollsters.
So alliances will make the difference.
Store, 61, campaigned to reverse tax cuts to finance more welfare for “ordinary” people and a “fair” climate policy. He admits the oil era will soon be over, but he’s against ending oil exploration. He’ll be forced to compromise if the Socialist Left, on track to post their strongest results in at least two decades, are his only path to power.
The Center backs the oil industry while the Socialist Left have said radical changes are “realistic.”
Will Hares, a senior industry analyst at Bloomberg Intelligence: “While the oil sector will remain core to Norway for many years and we don’t expect limitations on development or exploration, new restrictions would still represent an acknowledgment that indefinite oil growth is incompatible with climate goals.”
Labor-led Coalition+: Norway to become carbon neutral by 2035
If the parliamentary math force Labor into an even broader coalition, they will have to court the communist Red Party and the Greens — both of whom are against new exploration and are polling around the five per cent mark. Suddenly, Norway reaching carbon neutrality by 2035 becomes viable.
There is a cautionary note though. The last elections showed support for the Green cause fizzled over dismay that the end of oil would hurt people’s standards of living. Also, with Store ruling out cooperation with the Greens and baulking at the idea of a support agreement with the Red Party, this is looking like a very unstable coalition.
Solberg Surprise: A Win for Big Oil
Don’t rule out a Conservative win. In 2017 elections, Solberg came from behind to clinch it. She’s helped by record spending from the sovereign wealth fund, the world’s largest, and has weathered the pandemic better than many. The economy has rebounded swiftly with Nordea Bank raising its 2021 growth forecast for mainland Norway to 3.9 per cent, the fastest pace since 2007.
Some environmentalists have welcomed Solberg’s proposal last month to change how Norway taxes the companies that extract petroleum from fields off its coast, a move that could tighten demands on oil companies and reduce risk of losses for taxpayers.
Anniken Hauglie, head of Norway’s oil lobby and a former Conservative minister: “It goes without saying that there are a number of forces now on the rise that will have major negative consequences for Norway, not just for the industry. This will weaken our ability to meet our climate commitments, but also to contribute to the much-needed transition. Some believe it is possible to separate the oil and gas industry from the green shift. I think that is infinitely naive.”
© 2021 Bloomberg L.P.