Wind of Change: A Scandinavian Perspective on Energy Transition and the ‘Greenification’ of the Oil and Gas Sector
22 Pages Posted: 19 Apr 2021 Last revised: 21 Apr 2021
Date Written: April 19, 2021
The Scandinavian region – Denmark, Norway and Sweden – is a world-leading example of a rapid energy transition as a result of high rates of electrification. These three countries, along with Finland and Iceland, aim to be mostly ‘fossil free’ by 2050; Denmark, Sweden and Norway have some of the world’s most ambitious energy and climate policies. In October 2020 Denmark pledged to reach a 70% reduction in emissions by 2030 and reach climate neutrality by 2050. With less ambitious plans and a large oil and gas industry, Norway aims to reduce greenhouse gas emissions by at least 50%, and hopefully nearer to 55%, by 2030 compared to 1990 levels, having a minimum binding target of 40% by 2030 according to the Norwegian Climate Change Act. Sweden adopted the Climate Act in 2017, pledging to have zero net greenhouse gas emissions by 2045 at the latest, and have negative greenhouse emissions thereafter. In all these Scandinavian energy transition plans, electrification through renewable energy sources (RES) is the key to the green transformation of the energy system.
Despite these plans and their ongoing success in reducing emissions, Scandinavia is not a fossil-free area; oil and gas remain the largest sources of energy in the region. Furthermore, Denmark and Norway are fossil fuel producers and exporters, with hydrocarbons being by far the largest source of income for Norway. However, Scandinavia is also leading the energy transition within the hydrocarbon industry.
We aim to present this innovative aspect of the energy transition in Scandinavia. We show how these countries, and the Nordics in general, set a leading example in energy decarbonization with high electrification rates and blaze the trail in energy transition within the oil and gas industry, with Norway being the pioneer. Our contribution shows how Norway, due to a combination of its climate ambitions, including its aim to reduce greenhouse gas emissions, hydrocarbon regulation and economic dependence on petroleum, is leading the greenification efforts in the oil and gas industry, not by phasing it out but by making it more sustainable, at least as far as the extraction of oil and gas is concerned. Paradoxically, Scandinavia and Norway are at the forefront of the world’s energy transition thanks to a large share of renewable energy consumption. However, oil and gas extraction continues with the aim of not stopping it but making it greener.
Keywords: Renewable energy, greenification, oil and gas, energy transition, Scandinavia, Norway
JEL Classification: Q00, Q01, Q2, Q3, Q4, Q48
Suggested Citation: Suggested Citation