Putting Oil Profits to Global Benefit

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Norway should redirect future oil and gas revenues from domestic accumulation (Oil Fund 1.0) into an international fund (Oil Fund 2.0) to help poorer countries meet Paris Agreement climate goals.
Proposal originated in a November newspaper article by Auke Lont, Harald Norvik, and Peter Mellbye and is endorsed by the authors Arne Jon Isachsen and Thorvaldur Gylfason as "concrete, simple, and compelling."
Rationale: a little more oil money to the world, a little less to the Norwegian state, and a better climate.

The Paris Agreement is characterized as unfair because it requires poor countries to help solve a problem created primarily by rich countries that used up most of the atmosphere's capacity to store greenhouse gases.
Because CO2 remains suspended in the atmosphere and takes thousands of years to disappear, accumulated emissions over the past 250 years should be a starting point in considering responsibility.
Under Article 1 of the International Covenant on Civil and Political Rights adopted in 1966 by the United Nations General Assembly, “All people may, for their own ends, freely dispose of their natural wealth and resources.” The provision's wording emphasizes "people, not states."

Norway’s oil history:
- North Sea production since the early 1960s; oil extraction began in 1969.
- Since 1969, Norway has extracted 29 billion barrels of oil.
- Consumption of that oil produced 11.6 billion tons of carbon dioxide (CO2).
Government Pension Fund Global (Oil Fund 1.0) details:
- At the beginning of 2022, the fund amounted to NKr 12.34 trillion ($1.25 trillion).
- Invested in more than 9,000 companies in 70 countries.
- The fund's current $1.25 trillion balance is twice Sweden‘s annual GDP, three times Norway‘s, and 60 times Iceland’s.
- Under Oil Fund 1.0 rules, the Norwegian government may spend 3 percent of the fund‘s value each year, or $7,500 a person, in line with the expected annual return; that is about 20 percent of annual government revenues.
Distribution history:
- Since oil production began in 1969, about 80 percent of Norway´s oil revenue has accrued to the people via Oil Fund 1.0.

Norway is unique among the 38 OECD countries: its oil revenue amounts to 4.3 percent of GDP—compared with 0.2 percent for the OECD as a whole.
Norway’s historical taxation:
- In the early 1970s Norway set marginal tax rates of more than 75 percent on oil companies operating in the North Sea.
- The average oil tax rate is 49 percent for OECD countries.

Global requirement to transform the economy for net-zero emissions by 2050: $10 trillion a year, cited from McKinsey calculations.
The authors argue that Norway (and other petroleum powers) could contribute oil revenue to help cover this $10 trillion a year shortfall.

Positive effect conditional on developing economies’ success at reducing carbon emissions using the funds.
Two possible pathways for Norway:
- Continue oil and gas extraction and use future revenues to finance global decarbonization (the Oil Fund 2.0 approach).
- Close down the oil business entirely, which would reduce emissions domestically but eliminate the flow of funds that could help decarbonize the rest of the world.

Adopt the Lont, Norvik, and Mellbye proposal to transfer future oil and gas revenues to Oil Fund 2.0 for helping countries meet climate goals.
Other oil-producing countries—including the United States, Russia, Saudi Arabia, Canada, and China—could follow suit.
The United Nations might consider establishing and implementing a set of internationally agreed principles to govern transfers of petroleum revenue for global decarbonization.
The UN could consider selective internationalization of oil reserves in exceptional cases to ensure oil wealth benefits people rather than elites.

Observed problem: autocratic regimes worldwide have used oil wealth to enrich elites at the expense of ordinary citizens.
Norway's model contrasted with rent capture by elites elsewhere; Norway’s Parliament created the Oil Fund to benefit current and future generations of Norwegians and to avoid concentration of wealth.
The proposal implies normative judgments about redistributive uses of resource rents across borders in service of global public goods (climate mitigation).

Redirecting future Norwegian oil profits into an international climate-focused fund would be a tangible way for a significant oil producer to assume partial responsibility for global emissions and to help finance the transition to net-zero by 2050.
The effect would depend on governance and the ability of recipient countries to use funds effectively to reduce emissions; other petroleum powers are encouraged to consider similar measures.

Source: Putting Oil Profits to Global Benefit, F&D Magazine, Arne Jon Isachsen and Thorvaldur Gylfason