– Gigantic waste – NRK Norway – Overview of news from different parts of the country

In the spring of 2020, the economy came to a standstill due to the corona pandemic, and oil prices plummeted. The oil industry warned against mass redundancies in the supplier companies.

Unemployment in Norway was high, and one of the most important contributors to the Norwegian economy was down for the count after a dramatic drop in oil prices.

At its lowest point, the price of North Sea oil was 20 dollars a barrel. The handbrake was applied in the industry. Equinor had minus figures in the accounts after huge write-downs.

The oil industry asked to recover the tax more quickly for investments that had to be made, so that the wheels could more easily be kept in motion. But during the negotiations in the Storting, the tax package was adjusted so that the industry also received a tax break.

Exact where the high price tag was for the taxpayers, the Ministry of Finance is no longer counting on. But the consulting company Vista Analyse has, on behalf of the Church’s Aid, made a calculation:

– The total revenue loss due to the oil tax package is NOK 68 billion, the report states.

This is a higher estimate than what has previously been presented. The report will be launched and debated at a seminar on Monday morning.

– In retrospect, it appears to be a serious waste of public resources. It is money that could have been used to settle Norway’s climate commitments, says general secretary Dagfinn Høybråten of the Church’s Emergency Aid (KN).

– Instead, Norway is now using money from the aid budget to pay its own obligations following climate change. It is a good Norwegian double standard, to put it very simply and popularly, he says.

Chief economist Marius Menth Andersen at Offshore Norway says that the organization is agree with the Ministry of Finance, which itself should have stated that it is complicated and meaningless to calculate the revenue effects of the temporary tax changes.

– The projects that have been sanctioned under the temporary changes are very profitable and will in the future provide significant income to the state. Calculations show net income to the state in the order of 750 billion kroner in 2023. It is difficult to call it waste, but important income for the community, he says.

Boom in 2022

A number of projects were submitted towards the end of 2022, which was the deadline for getting projects under the favorable tax regime.

The report concludes that the oil tax package was a subsidy. The fact that it was not reported as such may have influenced the Storting’s decisions, it says.

It also emerges that fossil investments that would otherwise have been unprofitable may have been made profitable by the package.

But no concrete examples are mentioned of unprofitable investments actually being carried out as a result of the temporary tax changes.

The report from the Norwegian Church Aid also states that it is not too late to partially reverse the package, to avoid it costing taxpayers even more.

The Norwegian oil industry brings in large amounts of tax to the state every single day. But the NOK 68 billion referred to in the recent KN report is money the companies have received in tax cuts to make new investments under a particularly favorable tax regime.

The investments that fall under the oil tax package increase production, and thus also increase tax revenue.

NOK 68 billion corresponds to almost three times as much as Norway spends on the police in 2024.

June 2022 is the last time the government produced the calculator. They then arrived at a loss of tax revenue in the range of NOK 11 to 58 billion.

– Huge subsidies

SV has always been against the crisis package for the oil industry.

– There are huge fossil fuel subsidies that we now use in Norway to stimulate the oil and gas industry, says fiscal policy spokesperson Kari Elisabeth Kaski.

She points out that it was Ap, Sp, Frp and Høyre who pushed the package forward in the Storting. The original proposal from the Ministry of Finance was neutral for the state, but this changed in the Storting proceedings.

– SV secures the government’s majority for the budgets. What responsibility does SV have for this?

– Our pressure has contributed to the package becoming somewhat less favorable during the last negotiations. But we haven’t got the subsidies to the oil industry abolished, unfortunately, says Kaski.

– Too generous

In the light of hindsight, a number of politicians, both from the right and the left, have acknowledged that the package was too favorable.

Right-wing leader Erna Solberg, who was prime minister in 2020, admitted to NRK almost two years ago that they stimulated too hard.

Climate and Environment Minister Andreas Bjelland-Eriksen (Ap) is also now taking a self-critical look in the rear-view mirror.

But he understands that the package was hammered through in the Storting in early summer four years ago, on the basis that one must be careful with this type of package in the future.

– I think we have to understand the tax package based on the time when it was implemented. It was a time when there were very uncertain times for the industry, where it was important to keep the activity going and ensure activity in the supplier industry, he says to NRK.

Norway is critically important for Europe’s energy supply

The oil price was down to 20 dollars a barrel when the pandemic hit hardest, but quickly recovered.

– I would like to emphasize that this package contributed to moving forward with very important projects at an important time for Europe. Norway contributes to the European energy system in an absolutely critical way.

– Church Aid calls this a gigantic waste?

– It is not a waste to ensure that we have activity, that we avoid redundancies. But there is no doubt that, as I have emphasized before, one should be very careful about making temporary changes to the framework conditions for an industry.

Bjelland-Eriksen also does not want to be part of Norway acting with double standards.

– Norway is clear about our work against fossil subsidies. We have a broad front with many countries internationally.

– Is it a given that the state has lost tax revenue overall as a result of the oil tax package?

– No, that in and of itself is not a given. It is clear that if these investments had been put on hold and stopped during a period where Norwegian oil and gas play an absolutely critical role, it could have become demanding for Norway, but also for Europe.

After Russia’s war of aggression against Ukraine, Europe effectively lost large parts of its energy supply from Russia, which was the continent’s largest supplier. Norway’s importance as a supplier of critically important energy has increased.

The case has been updated after publication with a comment from Offdhore Norway. The update was published on 6/5 at 10.02