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Norway’s Sheer Folly to Invest in Oil and Gas, August 25, 2018

Norway’s sovereign wealth fund announced its intention last year to divest its oil and gas holdings. Now a government commission is urging them not to, arguing that doing so would lower revenues, not risk. Granted Norway’s oil and gas holdings have been profitable, but the risk argument is disingenuous because Norway has no plans to disinvest from its state-owned oil company, once called Statoil, now called Equinor. That holding dwarfs all others, so Norway would remain at risk of an oil-price crash even if it divested from other oil and gas companies.

What Norway should do is begin to divest from all fossil fuel companies, including their own, and to invest in other, sustainable sources of revenue, such as technology, health and tourism. That oil prices and shares face a crash is not a risk but a certainty. The world has binged on oil and gas for the last 150 years, but the fossil fuel industry’s hegemony has only a few years left to run. That fossil fuel industry magnates can’t see it is not surprising; their heads are buried in the sand of many years of business and profits as usual. Bankers and financiers are likewise blinded by the long status quo.

Yet the world is now in the midst of an energy transition from high-carbon to low-carbon energy sources. Alternatives such as wind, solar, hydro, and biomass are growing faster than fossil fuels, electric vehicles of every brand and sector are hitting the market, and several nations have mandated them exclusively by 2030 or 2040. People around the world beset by heat waves, wildfires, droughts, devastating storms, floods, and landslides this year have awoken to an awareness of the urgency and the necessity to curb the emissions of greenhouse gases that are driving climate change.

For Norway’s $1 trillion wealth fund not to divest from all oil and gas investments would be folly, sheer folly. Norway’s very place in the emerging new world order depends on it.

Update:

In 2014, the Norway Sovereign Fund had already divested from 53 coal companies around the world, including companies in the U.S., India, and China. As a result, the total value of the fund’s coal holdings fell by 5% to $9.7 billion. In 2014, the fund also sold its stakes in 59 out of 90 oil and gas companies in which it holds shares.

In August 2017, a group of academics, analysts, and activists met in the Lofoten Archipelago in Norway and created the Lofoten Declaration. Activists have successfully blocked offshore oil drilling in this site of great natural beauty for decades. The Declaration is an international manifesto calling for the end of exploration and development of fossil fuels for the purpose of mitigating climate change. It calls for divestment in fossil fuels and the phasing out of their use, and a just transition to a low-carbon economy. 

Signed by about 600 activist organizations based in over 70 countries, a key tenet of the Declaration is that early action is required from those countries that have benefited from fossil fuel development:

The Lofoten Declaration affirms that it is the urgent responsibility and moral obligation of wealthy fossil fuel producers to lead in putting an end to fossil fuel development and to manage the decline of existing production.

In March 2019, the Ministry of Finance recommended divestiture from its oil and gas exploration and production holdings. While it is believed that the Lofoten Declaration has helped to influence the government of Norway to divest from fossil fuel exploration and production, the fund managers said that protecting against risk of declines in the price of oil was the motivating factor. The fund is also retaining investments in energy companies that they believe will play major roles in developing green energy, such as Shell.

As of 2019, guidelines prohibited the fund from investing in companies that produce over 20 million tons of coal annually. The fund announced plans to phase out its investments in over $10 billion in stocks from companies using too many fossil fuels. In hopes of improving the Norwegian economy, the fund is investing in companies that promote renewable energy.

image:

Norway To Ban Fossil Fuel Use

https://www.theguardian.com/business/2018/aug/24/norway-1tn-wealth-fund-urged-to-keep-oil-and-gas-investments?CMP=Share_AndroidApp_Gmail
https://www.equinor.com/en/news/15mar2018-statoil.html

https://www.treehugger.com/world-energy-use-over-last-years-graphs-4858222 http://www.lofotendeclaration.org/

https://www.forbes.com/sites/davidnikel/2019/06/12/norway-wealth-fund-to-dump-fossil-fuel-stocks-worth-billions-in-environmental-move/?sh=73cfb98748a3
https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway
https://www.theguardian.com/world/2019/mar/08/norways-1tn-wealth-fund-to-divest-from-oil-and-gas-exploration

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