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Among these economies, Norway, the world’s third-largest natural-gas exporter, faces a unique challenge. But, while Norway’s industrial structure and investments are heavily tied to carbon-based industries and services, with hydrocarbons accounting for 36% of total exports in 2019, the country’s domestic energy comes almost entirely from renewable resources (hydropower). The Norwegian economy thus would be ripe for a green industrial transition, except that falling global demand for fossil fuels will hamper its main growth engine.
Norway’s carbon “lock-in” is a symptom of Dutch disease – the problem of one dominant sector’s success coming at the expense of most other sectors. Since hydrocarbon investments dwarf investments in other industries, the fossil-fuel sector attracts the most high-skilled talent. At the same time, the oil and gas sector’s extraordinary profitability has inflated price and wage growth in the rest of the economy, creating difficulties for other exporters.