The government increases the CO2 tax and cancels the 26th licensing round in 2022.
On Monday, the government parties Arbeiderpartiet (Ap) and Senterpartiet (Sp) agreed with Sosialistisk Venstreparti (SV) on next year’s state budget.
The agreement means that the CO2 tax will be increased by 28 per cent on the Norwegian shelf and that there will be no 26th licensing round next year (see fact box below).
This makes Frode Alfheim, leader of the LO union Industri Energi, react:
– We completely disagree with the postponement of the 26th licensing round. We held a national meeting last week, and it was with a clear and unanimous demand that both the numbered licensing rounds and the APA rounds must be fixed. Together, these are the tools for the development of the Norwegian continental shelf, says Alfheim.
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Exploration for oil and gas in Norway
There are two types of licensing rounds on the Norwegian shelf:
1) Allocation of production licenses in predefined areas (APA)
These are lit annually and include the mature parts of the shelf. That is, the parts of the Norwegian continental shelf where there have been oil and gas activities for several decades, and where there is already or will be infrastructure. The APA rounds, which were introduced in 2003, ensure that the infrastructure can be utilized over time.
2) Numbered licensing rounds
Here, companies can apply for a production license in searchable areas that are not available in the APA rounds – in so-called immature areas. These areas are less explored, and involve greater uncertainty.
In 2021, seven companies were offered shares in a total of four production licenses in the Norwegian Sea and the Barents Sea.
Numbered licensing rounds have been conducted since 1965.
Source: Norwegian Petroleum Directorate, Norwegian Oil and Gas.
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Requires response from the government
LO and affiliated unions contributed a total of 42.3 million kroner in support of the Labor Party, Social Democrats, Social Democrats and AUF in the election campaign, according to Partifinansiering.no. Industry Energy leader Alfheim expects the government to deliver in accordance with its own government platform.
– It must be crystal clear that this is just a matter of a postponement, as the Solberg government also did when they postponed the 25th round. The Norwegian continental shelf must be developed, not dismantled. It is a separate chapter in the government platform, and then we assume that the government follows up and completes the 26th round during the period, says Alfheim.
The trade union Industri Energi has long had a stated desire to cut support for the Labor Party and other political parties, but has not won the majority in the LO congress.
The interest organization for oil companies on the Norwegian shelf, Norwegian Oil and Gas, is also not impressed by the government’s move.
– We are concerned that the 26th round will be postponed. The important thing is that an attractive area is made available to secure jobs and income for the community, which will also contribute to the new restructuring. Production on the Norwegian shelf will be greatly reduced in the future, and therefore there is a need to look for oil and gas to prevent an excessively steep decline, says CEO Hildegunn Blindheim.
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Terje Aasland, parliamentary deputy leader of the Labor Party and leader of the energy and environment committee in the Storting, says that the party will not decide in advance when the 26th licensing round comes.
– There are no new licensing rounds every year, and there is no drama at all in this. I understand that they are impatient, but there are no changes in our oil policy. We will continue to develop, and not wind up. The Norwegian continental shelf will be a bridge-builder into a renewable life where the industry will be absolutely crucial for, among other things, blue hydrogen, floating offshore wind and carbon capture and storage, says Aasland.
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Kriss Rokkan Iversen is MDG’s acting party leader until 2021, and believes SV should be honored for having pushed the Labor Party and the Socialist People’s Party to concessions in oil policy. Iversen describes the postponement of the 26th licensing round as a small victory, but that it does not contribute to a significant change of direction.
In the previous licensing round, only four licenses were awarded, while 61 licenses were awarded in the APA round. In other words, oil exploration is still in full swing with this budget, and there is no victory for the climate, says Iversen.
She believes the government and SV seem to have forgotten nature policy in the budget.
– This is a blueprint of Ernas Solberg’s nature policy, with the same level of forest protection as Erna. Here, there are no fees for the destruction of nature, as the Labor Party promised before the election, and no money for the municipalities so that they can take better care of their nature. This is much weaker than we had hoped, says MDG’s acting party leader.
The Labor Party’s Aasland says that the party’s party program applies for the next four years, and not just for the budget year 2022.
– We have been sitting in government offices for six weeks. I think we have a lot of good nature policy in this budget, and promise that there will be more in the future – as it also says in the Hurdal platform, says Aasland.
The environmental organization Greenpeace believes that the state budget has gone from “dirty gray to a little light green”. Leader Frode Pleym gives SV all the credit for not having a 26th licensing round in 2022.
– Neither this government nor the previous ones are close to having a climate and environmental profile. SV should be honored for having received as much impact as it was realistic to expect from the fossil comrades in the Labor Party and the Socialist People’s Party, but it is sad that the improvements had to be fought into the budget, says Pleym and continues:
– The state budget will not cut enough in 2022 to be on track to reach the government’s own target of 55 percent cuts by 2030. The longer we wait with annual cuts as the money, the harder it will be to reach the climate goal. We are therefore excited about the announced report on a restructuring fee and a climate agreement for emission reductions.
The Labor Party’s Aasland is aware that there will be stronger measures to achieve the goal of a 55 percent emission cut in 2030, but believes the government is well placed in 2022.
– I am convinced that in the budget for 2022 we set out the right direction, says Aasland.
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The fact that the CO2 tax for the oil industry is increased by 28 per cent means that the costs for the oil companies increase significantly, points out Hildegunn Blindheim in Norwegian Oil and Gas.
– The petroleum industry in Norway is already among the industries that pay the highest total CO2 price globally through CO2 tax and quota price. When there is now a plan for a significant increase in the CO2 tax, it is important that the increased revenue for the state can go to targeted investments in hydrogen, capture and storage of CO2, and offshore wind.
The Progress Party’s energy policy spokesman Frank Sve believes that the government’s increased CO2 bill for the oil industry lowers competitiveness on the shelf compared with other countries.
– It is absurd to witness that at a time when Europe lacks enough natural gas and where Norway is constantly setting new export records on gas, the government’s response is to strengthen Russian energy power and weaken Norway’s position as a reliable gas supplier accordingly, says Sve.
The Labor Party’s Aasland replies that an intensified CO2 tax is what is needed for emissions on the Norwegian shelf to decrease. He is not worried that competitiveness will fall correspondingly – especially not in a time of sky-high oil and gas prices and good earnings on the Norwegian shelf.
– What about when times are not as good as now?
– It must be a strong reminder that CO2 emissions cost, both in good and bad times. I strongly believe that the CO2 tax can make a difference to the climate and that it will serve as an additional motivation to cut emissions on the shelf.
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