For 15 years, Norway has supported oil activities in developing countries. Norad boss Bård Vegar Solhjell will now turn the flagship “Oil for development” into climate assistance.
Since 2005, Norway, through the aid program Oil for Development, has tried to help developing countries manage oil and gas resources so that it benefits the population.
The program has been described as a “flagship” in Norway’s development assistance, and in 2019 had a budget of NOK 230 million, and activity in 15 countries.
Norad, the directorate responsible for Oil for Development, is now asking politicians to make major changes.
In a report presented during the economics festival Kåkånomics in Stavanger, Norad proposes to change the program from supporting oil and gas, to becoming an assistance program for energy and climate, where renewable energy will have a large place.
The report was commissioned by the Ministry of Foreign Affairs, which asked Norad to assess the Oil for Development program in light of the Paris Agreement.
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Does not end with oil support
– The biggest change, if the politicians go for this, is that climate becomes an overriding goal in the program, in line with poverty reduction, says Bård Vegar Solhjell, director of Norad to Aftenbladet / E24.
According to Solhjell, the background for the proposal is the Paris Agreement and climate change, and that it must form the basis for everything Norad does. However, the proposal from Norad does not mean stopping helping developing countries with the management of oil and gas resources.
– If the goal is green change, we believe that we have a greater opportunity to influence if we are involved in the entire energy sector. But it will not be natural for us to work with countries that want us with just for the oil. There must be a will for climate change, says Solhjell.
As in Oil for Development, the new development assistance program Norad proposes to work with so-called institution building. This means that Norway can help countries develop, for example, legislation, systems and financing schemes, which make the transition to renewable energy easier.
– This program is also about bureaucrats, not just engineers, says Solhjell.
– Good institutions have been the core of Oil for Development, and it continues. When green transition is also a goal, Norway can, for example, contribute with knowledge about climate risk, action plans to achieve the countries’ own goals under the Paris Agreement and the phasing out of fossil subsidies, says Solhjell.
COMMENT: The idea of assistance with oil extraction deserves reflection, reassessment and revision
Expected the proposals to go further
Minister for Development Aid Dag-Inge Ulstein (KrF), says it would have been “completely irresponsible” if a review of Oil for development had not been made in light of the Paris Agreement.
– We will base what we do on knowledge, and a natural consequence is that we do reviews to ensure that everything we do builds on, and is in line with the Paris Agreement, Ulstein says.
– We can not build on a development that is not sustainable for the countries concerned.
Ulstein does not want to advance the political treatment of Norad’s proposal, but says that “there is a reason why I asked for such a report”, and that he looks forward to “good political discussions”.
– It is a good and thorough report, but I might have imagined that there were recommendations that went even further. The important thing for me is that the participating countries do not end up with yesterday’s technology and yesterday’s energy solutions, says Ulstein.
– About time
Klaus Mohn, professor of oil economics and rector at the University of Stavanger, recently wrote a column in Aftenbladet in which he spoke out in favor of making changes to Oil for Development.
Mohn believes the proposal from Norad is a step in the right direction.
– It is high time that this program is re-evaluated, he says.
Mohn points out in particular that the world will move away from fossil energy in the coming decades, and that it is then “a crossroads of us spending hundreds of millions on promoting oil development in low-income countries”.
– At the same time, both research and experience show that it is far from obvious that oil and gas extraction actually leads to the development of prosperity.
If a possible aid program for energy is to be successful, the resources should be used to strengthen the institutions in the partner countries, Mohn believes.
– State apparatus, judicial system, tax system, the type of institutions. This means that those who operate in this industry get framework conditions that are livable, and the authorities have better opportunities to collect tax revenues that can be distributed.
Both Minister for Development Aid Ulstein and Norad CEO Solhjell believe that Oil for Development has been successful and important for many countries.
They point out, among other things, that Ghana’s Petroleum Act, the Timor-Leste Petroleum Fund and efforts to strengthen environmental work related to petroleum extraction.
– We believe in this way of working, even though it is very, very difficult, says Solhjell.
Nevertheless, oil for development has been, and continues to be, debated. Several countries in the program have been characterized by a lot of power gathered in a few hands, and an elite that is more concerned with putting money in their own pockets, than ensuring a fair distribution.
Both Klaus Mohn, and other experts on the subject, point out that helping with institution building will also make it easier to implement “bad policies”.
– It is a difficult dilemma. You might think that those countries get to sail their own sea, but on the other hand, it is they who need this type of help the most. But if there is too much concentration of political power, it reduces the likelihood of success with a program like this, says Mohn.
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– Obvious advantages and challenges
Tyler Barrott, a doctoral fellow at the Center for Development and the Environment at the University of Oslo, believes that there are “obvious benefits” to changing Oil for development.
– Norway can contribute the expertise and assistance needed to build up energy systems based on renewable sources in several countries, not just those with petroleum resources, he says.
In the years ahead, it may in fact be that the Norwegian “water adventure”, and the expertise that exists among Norwegian players such as Statkraft, will have the most to say when it comes to accelerating the green shift on a global basis and building well-functioning, transparent and inclusive states.
Barrott nevertheless believes that there will be many challenges, and says that in many countries where Oil for Development has operated, an idea has been established that oil is the key to building a welfare state.
– In countries with a lack of resources, this idea can lead to the development of renewable energy sources being downgraded in favor of investing in expensive oil projects. This can also lead to parts of the population becoming skeptical of renewable energy, which may eventually manifest itself in local politics, says Barrott.
– In Tanzania, for example, this has led to political conflict, and if Oil for Development is to work with both petroleum resources and renewable sources, they can quickly contribute to these conflicts without that being the intention. Norway has had the luxury of being able to invest in both at the same time. It is important to point out that many countries cannot afford it.