What Crisis? Global Lessons from Norway for Managing Energy-Based Economies
Provincial governments across Canada are currently feeling the pinch as plummeting oil prices put a strain on budgets. The federal government has taken the unusual step of delaying its budget. Alberta, after violently resisting for decades, even floated the idea of introducing a provincial sales tax.
This volatility would not be nearly as pronounced if Canadian governments had followed Norway in establishing an investment fund. Energy development also plays an important role in Norway but, in contrast to Canada, it has no plans to radically change its budget as a result of the oil crisis. In fact, it has a budgetary buffer of $8.5 billion.
The difference is that, 25 years ago, Norway created a sovereign wealth fund to capture its oil revenues and remove them from general government revenues.
This takes away the temptation for free-spending politicians to use an ephemeral benefit – revenue from natural resources – to plug holes in government budgets brought on by swings in the economy or over-spending.
This report begins with a stark reminder of the impact of the current fall of oil prices on oil economies within Canada and abroad, and contrasts this with the situation in Norway. Next is an overview of what sovereign wealth funds are and the different policy goals they serve. The paper then outlines the path to the development of the most successful sovereign wealth fund in the world, Norway’s Government Pension Fund Global. Finally, it outlines policy directions the resource-producing provinces and territories, as well as Canada, should follow to produce sustainable, prosperous futures based on a cornerstone of natural resource wealth.
Click on the following to access the full report: http://www.macdonaldlaurier.ca/files/pdf/MLICommentaryPoelzer02-15-V7-WebReady.pdf
Greg M. Poelzer
Executive Chair, ICNGD and Fulbright Arctic Initiative Scholar
Dr. Greg Poelzer is a Professor in the School of Environment and Sustainability (SENS) at the University of Saskatchewan. He the Co-Lead of the Fulbright Arctic Initiative III program. He is the Co-Director of a multi-million dollar SSHRC Partnership Grant (2019-2026), Community Appropriate Sustainable Energy Security (CASES), which spans 17 Indigenous and Northern communities across Canada, Alaska, Norway, and Sweden. He also is the Lead of the Renewable Energy in Remote and Indigenous Communities Flagship Initiative at the University of Saskatchewan and Lead of the UArctic Thematic Network on Renewable Energy.Read More