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02/07/2020

Imagine a clean energy based sovereign wealth fund

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Imagine a place where there was enough funding for all essential services. Where increasing funding to one essential area, such as health, did not require reducing spending elsewhere, such as education. Where helping individuals and businesses recover from major setbacks did not require taking on even more debt. Where each year, as the budget has to stretch a little further, we did not all have to make do with a little less.

Norway has a lot in common with Tasmania. Like here, their high mountains and deep valleys have allowed them to build a hydro system that provides almost 100% of their electricity needs. They place great value on the outdoors, with many pre-schoolers attending “outdoor pre-schools”. Although their population density is a little higher than Tasmania’s, it is still lower than places like New Zealand. Like Tasmania, not having a ‘mega-population’ means their natural resources have the capacity to provide more than their own population consumes, but also means they do not have a large labour pool to draw upon. Norway’s export industries include mining and minerals, wood and timber products, aquaculture, and agriculture. Their annual population growth is consistently very low.

But some things are very different in Norway. They have 46 weeks of paid parental leave. Their telecommunications infrastructure is one of the most developed in the world. They lead the world in electric vehicle adoption. Most of their rail network is electrified. Norway contributes significantly to global goals such as ending tropical deforestation. Although their cost of living is slightly higher, their average net income is double that of Tasmanians.

Norway’s significant wealth has come from exporting energy. While Tasmania has abundant wind and pumped hydro potential, Norway has oil and gas. Like Tasmania, but unlike other Australian states, Norway maintains significant public ownership of its energy infrastructure. This has ensured that the government directly benefits from the revenue generated by the industry despite over 40 local and international companies being active on the shelf.

Experiencing a surplus every year since the oil industry began, in 1990 Norway created a fund to prevent the economy overheating and to buffer against oil price shocks and eventual market decline. The “Government Pension Fund Global” is now worth over US$1 trillion and is the largest sovereign wealth fund in the world. Under its ethical investment framework, the fund has divested from tobacco, cluster munitions, nuclear weapons, and oil and gas exploration. This year will be one of the few that Norway has drawn on the fund to date. Per capita, it would be the equivalent of Tasmania having a $100 billion “rainy day” fund.

As recently as the 1950’s, very few people even believed there was any prospect of the existence of Norway’s oil resource, with experts writing off the possibility as late as 1958. Starting in 1966, 200 drills over four years came up dry before the first productive well was drilled. Some commentators doubted the new industry would be financial. As the infrastructure was built to support the industry, there were people who protested on environmental and other grounds.

Norway was not poor before oil; they were doing ok. But like Tasmania, people outside major population centres were doing it considerably tougher, with unequal access to health services, education, transport, waste services, and technology.

This is Norway’s exceptional achievement: they have invested the state’s wealth into improving the standard of living for all residents, rising to the top of global equality and happiness indices. While many other high GDP countries exhibit immense inequality, Norway has taken the approach that everyone, no matter where they live, should receive an equal level of service.

Here in Tasmania, our roads and bridges are getting older, as are we. The state’s costs are rising. To boost the state’s revenue, growth industries such as tourism, education and renewable energy are supported. But growth in any industry inevitably has its impacts, whether it is increasing traffic, bigger crowds, tougher competition or contentious infrastructure.

Australia and the world are still in the early days of transitioning to renewable energy. While Norway’s oil is on the decline, renewable energy, by definition, will be here for good. By supporting growth in the renewable energy industry, we can build our state’s wealth at a pace that matches our needs and maintains our way of life. Will clean energy export be the key to sustaining Cradle Coasters’ way of life for future generations?

Tanya Denison is the Future Energy Facilitator at Cradle Coast Authority.

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