Norway Is Planning to Profit From Climate Change

In early January, German Vice Chancellor Robert Habeck embarked on his first diplomatic mission of the year: in pursuit of a Baltic Sea pipeline. But this had nothing to do with Russian gas or the controversial Nord Stream project. On a snowy day in Oslo, Norway’s capital, standing against a blue backdrop emblazoned with the Norwegian coat of arms, Habeck detailed a vision of a 750-kilometer (466-mile) channel to this Nordic nation that will bring 4 million metric tons of hydrogen fuel to Germany per year by 2030.

“Norway is our most important energy supplier today and should remain so as we move toward a climate-neutral future,” Habeck said.

Soon after Russia invaded Ukraine last year, Norway emerged as the conscience-clearing alternative to Russian petroleum—quickly ascending to be Europe’s top source of gas and a major source of crude oil. For Norwegian Prime Minister Jonas Gahr Store, 2022 was a year of diplomatic missions across Europe to launch or strengthen energy partnerships. In March 2022, at a joint press conference with Store, Danish Prime Minister Mette Frederiksen stated plainly what many European leaders had likely been thinking: “I would much rather have energy from Norway than from Russia.”

In early January, German Vice Chancellor Robert Habeck embarked on his first diplomatic mission of the year: in pursuit of a Baltic Sea pipeline. But this had nothing to do with Russian gas or the controversial Nord Stream project. On a snowy day in Oslo, Norway’s capital, standing against a blue backdrop emblazoned with the Norwegian coat of arms, Habeck detailed a vision of a 750-kilometer (466-mile) channel to this Nordic nation that will bring 4 million metric tons of hydrogen fuel to Germany per year by 2030.

“Norway is our most important energy supplier today and should remain so as we move toward a climate-neutral future,” Habeck said.

Soon after Russia invaded Ukraine last year, Norway emerged as the conscience-clearing alternative to Russian petroleum—quickly ascending to be Europe’s top source of gas and a major source of crude oil. For Norwegian Prime Minister Jonas Gahr Store, 2022 was a year of diplomatic missions across Europe to launch or strengthen energy partnerships. In March 2022, at a joint press conference with Store, Danish Prime Minister Mette Frederiksen stated plainly what many European leaders had likely been thinking: “I would much rather have energy from Norway than from Russia.”

But as the conflict raged on and energy prices soared, this tiny nation faced criticism for making extraordinary gains. In 2022, Norway earned around €121 billion (or $131 billion) in net income from its petroleum industry, an increase from about €27 billion (or $29 billion) in 2021. In May 2022, Polish Prime Minister Mateusz Morawiecki called on Norway to share these “excess profits” to help rebuild Ukraine. Store’s government didn’t bite. It did, however, begin pivoting energy talks toward nobler ends: to help other countries go green.

“During the war, Norway realized it could play this more visible role as an energy supplier to Europe,” said Roman Vakulchuk, head of the Centre for Energy Research at the Norwegian Institute of International Affairs. “It’s well-positioned to emerge as the next clean energy superpower.”

This country knows how to channel morally fraught profits to greener alternatives. In the early 1980s, after a decade of accumulating oil wealth, Norway began investing billions of dollars into building a robust domestic renewable supply. Today, Norwegians enjoy a 95 percent renewable electricity grid, around 92 percent of which comes from hydropower. Since the 1990s, they’ve also poured billions of dollars into onshore and offshore wind, and millions of dollars more into carbon capture and storage under the North Sea. As many other European nations scramble to build out renewable infrastructure, Norway provides a model for a smooth domestic energy transition. It’s also sitting on a comfortable renewable surplus ready for export.

Europe’s largest economy, Germany, has plenty of demand. With more than 15 times Norway’s population packed into a similar geographic area, Germany will never be energy self-sufficient. And hydrogen, a clean fuel that produces only water when burned, is a key part of Germany’s plan to decarbonize heavy industry. This reflects a broader European Union strategy: The European Commission said 24 percent of global energy demand could be met with clean hydrogen by 2050. But EU leaders still can’t decide which kinds of hydrogen count as clean. Green hydrogen, produced using renewable electricity, is considered the gold standard for reaching zero emissions. Blue hydrogen, on the other hand, still requires burning natural gas, though these emissions must be captured and stored.

Habeck, who represents Germany’s Greens, has led his nation’s disavowal of blue hydrogen. In 2022, Habeck helped establish so-called hydrogen alliances with both Canada and Australia that will deliver only green hydrogen. In mid-January 2022, Habeck announced that Germany’s hydrogen subsidies package will not include blue hydrogen.

But, at least at first, the 4 million-metric-ton hydrogen delivery from Norway will be strictly blue. According to the nations’ joint hydrogen agreement, the pipeline will “subsequently be phased” into a fully renewable green hydrogen provider. But it didn’t specify a timeline for this transition. Felix Schenuit, a political scientist at the German Institute for International and Security Affairs, said Habeck’s blue hydrogen concession came as a surprise.

“Clearly Norway has a long experience with organizing these relationships; they’re talking a green minister into blue hydrogen,” Schenuit said.

As part of the agreement, Germany also committed to build out hydrogen infrastructure; this month, construction on the first section of Europe’s planned hydrogen pipeline network began in the region of Saxony. The two nations also made several broader agreements, including joint projects in offshore wind, batteries, green shipping, and a pipeline that will channel carbon from Germany to the Norwegian continental shelf. Germany also agreed to work on EU-wide carbon capture and storage standards—perhaps a sign that Germany can help facilitate similar relationships across Europe.

One major obstacle still stands in the way of Norway’s export ascendancy: ordinary Norwegians. Currently, Store’s government is extremely unpopular, thanks to skyrocketing wartime energy costs. But, unlike those in other European nations, Norwegians see these costs as avoidable, given the decades of taxpayer-funded investments in energy independence. Store, an outspoken advocate for “interconnectedness,” has supported trans-European power grids and has equipped offshore wind with hybrid cables that also connect to the European mainland. But last year, these connections created vulnerabilities to volatile European energy markets. Bard Lahn, a senior researcher at the Centre for International Climate and Environmental Research in Norway, said the current backlash reflects a particular Norwegian point of view: Norwegians produce petroleum to sell, and they produce renewables to live.

“At the moment, clean energy exports are a lot more controversial in Norway than fossil fuel exports, which is something of a paradox,” Lahn said.

It doesn’t help that clean energy will simply never bring in fossil fuels cash. In contrast to last year’s €121 billion petroleum haul, Norway earned just around €1 billion from renewable exports. And even with its ambitious new partnerships, projections still put that number at a modest €8 billion by 2030. Lahn said the difference in potential revenue is so vast that even the most aggressive renewable export plan has “nowhere near a possibility to play even a large role” in compensating for lost fossil fuels funds.

Norwegians, who still broadly support the petroleum industry, know how to live with paradox. And this wartime crisis has been a boon for the green country’s aggressive fossil fuels agenda. In 2021, the European Union criticized Norway for continuing its fossil fuels exploration in the Arctic. Today, the EU is dependent on those very supplies. And Norway is expanding ambitiously: Last November, petroleum company Equinor announced a $1.44 billion investment in a new gas field in the Norwegian Sea as well as similar so-called discoveries in the Barents Sea earlier that year. Just last week, the Norwegian government offered energy companies a record-high 92 new petroleum exploration blocks in the Arctic. (In 2022, they offered only 28 areas for exploration.)

Norway’s stubborn posture on petroleum has slowed a renewable agreement with the rest of the EU. Last February, Norway and the EU began exploring a so-called Green Alliance for industry, and the EU brought a draft agreement to the United Nations climate change summit in Egypt. But the two parties left without a resolution—and still haven’t reached one. According to Norwegian newspaper DN, which obtained leaked copies of the draft and its revisions last November, the European Commission has twice rejected Norway’s efforts to secure a commitment to its oil and gas beyond 2030.

Andreas Bjelland Eriksen, state secretary of the Norwegian Ministry of Petroleum and Energy, said the EU’s hard line on petroleum represented a “disappointing” reversal of position. Last June, at the height of wartime energy uncertainty, European Commission Vice President Valdis Dombrovskis signed off on a joint statement on energy with Norway. This statement noted Europe’s increased dependence on Norway, acknowledged the Norwegian Arctic’s still-significant petroleum reserves, and declared that the nation “can, through continued exploration, new discoveries and field developments, continue to be a large supplier to Europe also in the longer term beyond 2030.”

“In any scenario where we meet common climate goals, we still have a need for gas moving forward in a post-2030 world,” Eriksen said. “It takes time to turn the world’s most advanced machine around completely.”

According to Lahn, Norway’s partnership with Germany may help secure a new role for Norwegian fossil fuels in service of the renewable energy transition. Norway’s petroleum companies have a strong interest in whether the EU decides to classify blue hydrogen as a clean energy source. This blue hydrogen pipeline, endorsed by one of the EU’s foremost green leaders, may help legitimize their stance.

Although renewables will never match petroleum earnings, Eriksen noted that Norway has more to export than raw power alone. For example, he said, the Norwegian petroleum industry has 50 years of experience building floating terminals that will provide global offshore wind development. The nation also boasts 25 years of successful carbon capture and storage technology as well as entire industries built to produce high-performing wind, hydropower, and hydrogen infrastructure. As the rest of Europe gets serious about domestic renewables, he believes that Norway will continue to earn dividends off of its expertise.

“We’re lucky that we can capitalize on these partnerships,” Eriksen said. “Not just for the benefit of Norwegian companies and Norwegian welfare but also for the benefit for the green transition globally.”

Schenuit believes Norway’s moment may be just that: a moment. Inevitably, he said, markets will diversify and new relationships will form to meet each country’s specific needs. For instance, France, unlike Germany, has nuclear power and so would never choose to import blue hydrogen. Plus, with an interconnected European grid built on flexibility and proximity, the next energy era will likely never create the kind of dependencies modeled by the fossil fuel era.

What’s more worth watching, Schenuit said, is whether Norway seizes this opportunity in energy leadership to take a bold and urgent stance against the industry that enabled its rise.

“With time, they will be scrutinized to see what they did during this war and how serious they were about making these systems green,” Schenuit said. “Maybe not this year or even in five years, but Norway will face uncomfortable questions about how fast they decided to move.”