Norway, Oil, and Climate

Branko Milanovic had an interesting piece over at his blog about Norway’s production of oil. The piece observes that Norway is perhaps the most aggressive country in the world when it comes to climate change policies, both domestically and internationally, but is also a significant producer of oil in the world. From there, Milanovic teases out what this kind of seeming hypocrisy should tell us about the difficulty of climate change politics.

Milanovic’s piece, and many others like it, take it to be obvious that Norway’s actions on climate change are at odds with Norway’s continued extraction and export of oil. Milanovic may ultimately be right about that, but there is actually a reasonably persuasive argument that there is no conflict. In fact, Norway’s commitment to stop climate change may actually require that they continue their oil extraction in the short and medium term. This argument never seems to make it into these pieces, but I’ve seen it dozens of times as part of my general project of keeping tabs on what’s going on in the Nordic countries.

The argument goes like this.

  1. The total emissions from a barrel of oil are the emissions that are produced when you burn that oil and the emissions that are produced when you extract that oil.

  2. Norway’s emissions in extraction are the lowest in the world. Specifically, Norway emits 55kg of CO2 for every ton oil equivalent it extracts, which is less than half of the global average of 130kg.

  3. Norway currently produces 2 percent of the globe’s oil.

  4. The global production of oil is flexible. OPEC countries produce about 40 percent of the globe’s oil and intentionally avoid producing as much as they can. This means they have spare capacity that they could and very likely would utilize if Norway stopped producing oil.

  5. Thus, if Norway stopped producing oil, total global oil production would not decline. Rather, the 2 percent Norway currently produces would be replaced by other countries. Those other countries emit far more carbon during extraction than Norway does and so this would actually increase global emissions.

If you take this argument seriously, then it suggests that the best climate strategy for a country like Norway is to do everything it can to reduce domestic and global demand for fossil fuels while also doing everything it can to hold on to and in fact increase its market share of the (hopefully) dwindling oil market. And this is what they do.