The Norwegian government announced new plans on Monday to use profits from oil and gas operations to fund clean energy projects.
The electric car market will be one of the sectors to benefit from the new program as "lucrative" subsidies from the country's massive $890 billion sovereign wealth fund will be used to ensure Norway becomes carbon neutral by 2030. The fund also plans to ban gasoline-fueled vehicles and assist impoverished countries in ramping up their environmental efforts, according to officials.
"We know there is a paradox," Vidar Helgesen, the country's climate and energy minister, admitted in an official statement. "We have been living well from oil and gas. But there is no country in the world that has done more to undermine the oil and gas industry than Norway."
Past Norwegian initiatives in the field of environmentalism include projects to contribute $1 billion to maintain the Amazon rainforest in Brazil and donating $350 million annually to protect wildlife in Indonesia and Guyana.
Long heralded as the model for managing oil abundance, Norway has painstakingly sought to prevent the problems that occur with other natural resource-based economies, such as corruption, slow economic growth, currency appreciation, and subsequently, deindustrialization.
Since 1990, Norway has diverted much of its oil earnings to its climate change sovereign wealth fund, which has become the world's largest. The money, reaching $890 billion as of June 2014, amounts to $178,000 for every Norwegian citizen.
The sovereign wealth fund helps Norway avoid some of the problems associated with the "resource curse" by investing capital abroad. The money is set aside to be saved and invested to help the country plan for the eventual decline of oil production, with the intention of transitioning to a more diversified economy that can take oil's place, OilPrice.com reports.
Related: Oil Prices Fall Below $40 As OPEC Ramps Up Output
The early cracks in Norway's petrol-based economy are beginning to show, perhaps quicker than many predicted.
Statoil, the mostly government-owned oil company, has seen its share price cut in half since July 2014. It is idling several offshore rigs as oil prices drop. Three rigs - the COSL Pioneer, Scarabeo 5, and Songa Trym - will be suspended until the middle of 2015 because of lower profitability.
"These measures are necessary due to the overcapacity of rigs compared to the assignments we are prioritizing. This situation is unfortunate, and we are doing what we can to minimize the extent of the suspensions," Statoil procurement head Jon Arnt Jacobsen said in a statement.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More