Go to the Globe and Mail homepage

Jump to main navigationJump to main content

AdChoices
Barrie McKenna

Barrie McKenna

Norway proves oil-rich nations can be both green and prosperous Add to ...

Conventional wisdom suggests a big fossil fuel-producer like Canada can’t be both green and prosperous. It’s one or the other.

Norway’s experience suggests this is a false choice.

Through a combination of steep carbon taxes, careful management of its oil wealth and strategic investments in innovation, oil-rich Norway has found a comfortable balance between the environment and growth.

It’s a lesson Canadians should take to heart in the wake of a stark new warning from the United Nations’ Intergovernmental Panel on Climate Change that the planet is headed for destructive and irreversible climate change without dramatic carbon emission cuts.

Forget Dutch disease. Canadians should embrace the Norwegian antidote.

Compared to Canada, Norway’s economy is more competitive, scores better on a range of innovation performance measures and consistently produces higher per capita gross domestic product, and incomes.

And it’s greener, too.

“Norway’s performance on environmental productivity indicators suggests that it is possible for resource-rich countries to generate strong economic growth with lower environmental damage and depletion of natural assets,” according to a report issued last week by Canada’s Ecofiscal Commission, made up of leading Canadian economists and prominent former political leaders, including Preston Manning and Bob Rae.

The commission makes the case that sound environmental solutions don’t have to come at a punishing economic cost. Governments in Canada could raise billions of dollars a year by taxing carbon emissions and other forms of pollution, while cutting economically stifling taxes on labour and income.

On a relatively small scale, British Columbia’s six-year-old carbon tax proves that it’s possible to discourage fuel consumption and provide offsetting tax breaks without wrecking the economy.

But there is room to do more. At slightly more than 1 per cent of GDP, Canada’s carbon taxes are the bottom of the pack among Organization of Economic Co-operation and Development countries. Only the U.S. and Mexico tax carbon at a lower rate.

Norway has been redistributing its energy wealth since it discovered a gusher of oil and gas off its North Sea coast in the late 1960s.

The key elements of Norway’s resource strategy are steep taxes (up to 78 per cent of resource profits), plus the creation of a government-owned oil company (Statoil) and a sovereign wealth fund (the Government Pension Fund Global) to sock away royalties for post-fossil fuel generations.

Norway’s sovereign wealth fund is now the world’s largest, with assets of roughly $1-trillion (Canadian). That’s the equivalent of $196,000 for each of the 5.1-million Norwegians.

The approach has proven to be both sound, and remarkably forward-thinking. Norway’s oil reserves are slated to run dry in 2060. By law, the government can’t dip into more than 4 per cent of the fund in any one year, ensuring there’s money for future generations.

The dividends from Norway’s oil wealth have been strategically reinvested into higher education, health care and research and development – much of it aimed at making the country’s energy sector greener and more productive.

Too many of Canada’s policies do the opposite.

Alberta’s Heritage Savings Trust Fund, created by former Premier Peter Lougheed in 1976 to save a chunk of oil royalties for future generations, has too often been used as a government ATM.

Years of pilfering have left the fund with just $17.5-billion, or less than $4,300 for every Albertan. That’s roughly enough cash to buy a couple of Calgary Flames season tickets in the cheap seats of the Saddledome. Alberta’s entire nest egg is worth roughly half the surplus cash that Norway’s Global fund generates every year.

Norway has managed to secure its financial future with less oil than Alberta. It has produced about 38-billion barrels of oil since 1971, compared to Alberta’s 54-billion.

Ottawa has also been shortsighted about resource development. It has showered oil companies with generous tax breaks to spur risky projects in the oil sands and elsewhere, while doing too little to discourage emissions.

Norway is not Canada. Its economy is smaller, less diversified and much more oil-dependent. It is also one of the most expensive countries in the world – a place where a cappuccino can cost $10 and a burger twice as much.

But, surely, somewhere between doing nothing and wisely preparing for the future, there is a made-in-Canada solution, capable of transforming us from environmental laggard to innovator.

Report Typo/Error

Follow on Twitter: @barriemckenna

Next story

loading

In the know

The Globe Recommends

loading

Most popular videos »

Highlights

More from The Globe and Mail

Most popular