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The Government Pension Fund Global is saving for future generations in Norway. One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population.’

Norway, the country of mountains and fjords, and home to 5.2 million people features on top of the World Happiness Index and is looked upon by the world community with complete awe. They boast of a world-class education system, scenic beauty, robust economy and a trillion-dollar sovereign wealth fund, the largest in the world.

The Norwegians hit gold in the late 1960s when oil wells were discovered in the North Sea, which continues to be the driving force behind the flourishing economy. Norway is home to one of the largest fossil fuel reserves in the world, and exports of the same account for almost 50% of the total exports of the country.

Yet what distinguishes Norway from several other nations gifted with rich natural resources is the astuteness and the discipline it has exercised in utilising the natural resources, instead of squandering the nation’s wealth. To mitigate the possibility of being a victim of the infamous ‘Dutch disease’ – it refers to the malaise associated with overdependence of the economy on the export of a single natural resource, which in turn reduces the cost competitiveness of the other export goods of the economy and leads to widespread unemployment – the Norwegian Government created the Government Pension Fund Global.

The fund took shape by funnelling the oil export revenue each year, which amassed into a trillion-dollar behemoth. It was set up to allow the government to distribute the risk associated with volatile oil prices and the limited supply of the same. In the course of the first 50 years since extraction began, Norway used up half of its reserves. And if extraction continues at the same rate, reserves will exhaust by 2060. Hence the Norwegian government found it imperative to lay down the framework for developing a sustainable means of wealth generation for the future generations which isn’t reliant on revenues arising from oil exports and prudent management of oil revenue.

According to the Norges Bank, the Norwegian Central Bank, the fund is invested globally in international equities, fixed income assets and real estate. The goal is to have well-diversified investments that distribute risk and generate the highest possible return. At present the fund has been invested in almost 9000 companies, spanning 77 countries.

It isn’t necessary to delve deeper into the intricacies of the fund since it has been and continues to be extensively covered and analysed by the world community. Instead, going forward this piece will be used to bring out something paradoxical about Norway and its wealth fund.

The fund subscribes to high ethical standards in its investment practices. The fund refuses to invest in firms with products deemed unethical, such as tobacco or many sorts of weapons. It is also becoming more activist in the approach to its portfolio, divesting from those seen as grossly corrupt and flagging concerns over companies’ misuse of water and energy, or any risk that they benefit from child labour.

The fund has been instructed by parliament to help fight climate change. So, 1% of its portfolio is in firms deemed to be green. It has divested from heavy polluters, firms involved in deforestation and, this year, from coal companies.

And yet what is paradoxical is that the fund continues to invest in oil companies, namely the Royal Dutch Shell which is one of its largest holdings. The Norwegian Government seeks to reflect its values and ethos and their deep-rooted concern for environmental protection and climate change through their investment basket, yet one can’t possibly overlook the fact that the means they use to take this moral high ground and come off as a progressive society stem from revenues earned out of oil trade. The same oil which will probably be used recklessly by industries without adhering to any environmental norms in some developing or underdeveloped nation. This would be analogous to a drug mafia, using his wealth arising out of drug smuggling and morbid violence to fulfil his debaucheries and simultaneously engage in charity to benefit the poor or a faithful and loyal husband running an escort service.

To put things in perspective, the fund is primarily created out of revenues stemming from fossil fuel exports to other nations. However, what is baffling is that a nation plush with oil reserves doesn’t utilise the same for energy generation in its homeland. Almost all gas and oil produced on the Norwegian shelf is exported. Company and government revenues arising out of oil trade have gone a long way in creating the modern Norwegian society. And this seems extremely hypocritical and paradoxical on multiple levels.

In Norway, 98 per cent of electricity production comes from renewable energy sources. Hydropower is the source of most of the production.

Interestingly Norway also happens to be the country where the electric vehicle segment has the largest market share, which is pegged at approximately 29.1% of new car sales. It also has the highest market penetration per capita of electric vehicles in the country. Moreover, Norway has laid down the aim to sell only zero-emission cars by 2025.

According to an article on Forbes, even though the U.S. has the most Tesla superchargers worldwide at 380, according to the website, the story is different when it comes to charging points per inhabitant. In this case, the United States has 1.2 for every million people. Denmark is another Scandinavian nation experiencing strong Tesla sales and it boasts 1.7 per million inhabitants. Norway is way in front of the pack, however, with an impressive 6.3 operational Tesla superchargers for every million people.

The means that Norway has utilised to achieve this commendable feat has been through offering myriad of incentives: Electric vehicle manufacturers are not required to pay sales tax, consumers are exempted from paying value-added tax and purchase tax, electric vehicles do not attract any registration fee or parking fee, and most importantly, electric car owners enjoy free charging from the state.

Although the aggressive push of the state towards a cleaner society is praiseworthy, what is irksome is that the expenditure incurred on account of the sops given to incentivise potential electric vehicle owners is financed from the Government Pension Fund Global, which in turn is comprised of funds arising from oil trade.

So, to make things more lucid, you have a nation which incentivises the use of electric cars in its homeland by utilising funds earned out of people purchasing petrol or diesel in some third world or developing nation.

This makes even more sense considering that the fact that according to the Norwegian Electric Vehicle Association about 72 per cent of buyers are choosing an electric vehicle for economic reasons and only 26 per cent for environmental ones. Hence, one could reasonably conclude that the progressive society which is being carved by the Norwegian government has been through economic cajoling with help of its coffers brimming with revenue from oil trade, rather than from altruistic concern about the environment or society.

One is also drawn into asking the question whether this modus operandi of carving such a society by the state machinery sustainable in the long run, especially considering the fact the oil reserves will dry up in the next three decades, and thereby put an end to the gold rush that Norway has been accustomed to.

Although the Norwegian economy has been a spectacle of prudence in the backdrop of several nations grappling with debt and struggling economies, it has several complexities to deal with. The inflows into the fund have grown slower due to sluggish oil prices and growing supply of shale oil by America. The public expenditure associated with coaxing people into using electric vehicles has also grabbed eyeballs and there are increasing calls for more austerity in this regard. However, it is highly likely that if the incentives are withdrawn, Norway’s push for a zero-emission car sale will face severe roadblocks.

And yet, what significance does morality hold at the end of the day in today’s 21st-century world.

By Arnab Dutta


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