Oil and gas companies in Norway receive billions in subsidies

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To successfully combat climate change, both supply and demand of fossil fuels have to be dealt with. Norway supplies Europe with huge amounts of oil and gas every day, ensuring easy access to the climate-harming fuels. And government subsidies have allowed Norway to become a large supplier of oil and gas. Here’s an example to illustrate how it works: If an oil company invests NOK 100 billion (roughly €11 billion) in a new oil production field in Norway, the government will pay approximately NOK 89 billion out of the 100, leaving the oil company to pay only NOK 11 billion. You might expect that the Norwegian government then collects 89% of eventual profits. But this is not the case.

If the oil company in the example turns a profit before tax at NOK 100 billion, they get to keep not NOK 11 billion, but NOK 22 billion! This leaves the government, who paid 89 billion initially, with only 78 billion. The discrepancy for oil companies between risk and return makes investments in oil and gas projects incredibly attractive, and drives investment in the supply of these climate-wrecking fuels.

The Norwegian Ministry of Finance has estimated the size of this subsidy since 2013. In the period 2013 – 2017, oil and gas companies have been subsidized with more than NOK 85 billion (more than €8.7 billion) according to the ministry. This is money that should have been spent on ensuring a clean and just transition away from fossil fuels, not on making the climate challenge even harder to meet.

Norway is supporting several important climate initiatives, like REDD+, which objective is to avoid deforestation. But, as it is helping the climate with one hand, it is destroying it with the other. The hypocrisy of these well hidden subsidies reveals the true face of Norway, which is not as climate friendly as you might have thought.