When Oil Funds Climate Justice: Norway’s Paradox and the Road Ahead

The Green Reputation—and Its Fossil Foundation

Norway prides itself as a climate leader: 98% of its electricity comes from renewables, and nearly 90% of new car sales in 2024 were electric vehicles. Yet beneath that green veneer lies a stark truth: nearly half of Norway’s export revenues still come from oil and gas, with the petroleum sector accounting for a significant share of GDP (28% in 2022, for example). This fossil wealth finances the Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund, worth roughly NOK 19 trillion (~US$1.8 tn as of late 2024). The paradox is clear: a fund praised for ethical investing rests on oil revenue sourced from the combustion that drives climate damage.

A Partial Retreat from Fossil Investments

In 2019, Norway’s parliament instructed GPFG to sell stakes in companies focused solely on oil and gas exploration and production. The move was widely hailed, but the motivation was financial risk management instead of ethics, as the decision was driven by a desire to reduce the Norwegian economy's exposure to oil price volatility.

Crucially, the divestment was partial. GPFG exited smaller explorers but kept shares in global majors—Shell, BP, ExxonMobil, Chevron, and Norway’s Equinor—arguing that diversified firms investing in renewables could be influenced through shareholder engagement. The fund also divested from coal-heavy firms, but fossil exposure remains: the fund has held billions of dollars in these companies, and in 2025, it trimmed its stake in ExxonMobil to a valuation of US$6.12 billion. In short, Norway has narrowed its fossil ties, but has not fully disentangled.

Norway’s Climate Investments: Domestic and Global

Since the early 1990s, Norway has saved petroleum revenue rather than spend it, shielding future generations. GPFG now invests in nearly 8,700 companies across 70 countries. In 2025, Norges Bank Investment Management (NBIM) introduced a Climate Action Plan, requiring portfolio companies to align with net-zero by 2050, covering around 74% of financed emissions.

Internationally, Norfund manages a Climate Investment Fund delivering NOK 10 billion (~US$1 billion) over 2022–27 to renewables in emerging markets, prioritizing South Africa, India, Vietnam, Bangladesh, and others. However this figure is miniscule compared to the annual net cash flow of Norway’s petroleum sector (NOK 698 billion in 2025—a figure 70 times larger than Norfund’s 5 year budget).

Domestically, Norway is electrifying offshore oil installations and developing Carbon Capture and Storage (CCS) projects like Longship/Northern Lights, aiming to reduce upstream emissions. While significant, these initiatives pale in scale compared to the oil wealth they seek to reform, and there is no plan to halt new exploration or production.

Why Norway Isn’t Doing More

1. Economic Dependence & Political Caution

The petroleum sector is the single largest component of the Norwegian economy, providing the greatest share of value creation, government revenues, investments, and export value. In 2022, the sector accounted for 28% of Norway's gross domestic product (GDP) and 58% of its exports. The industry is also a significant employer, linked to around 200,000 jobs.

2. Conservative Fund Mandates

The Storting mandated NBIM to support net-zero by 2050, but did not include portfolio-level emissions targets or a Paris-aligned trajectory for the fund as a whole. The government argues stricter targets could skew diversification and increase risk, as greener indices remain limited.

3. Continued Licensing for New Fields

Norway has continued to award new licenses for oil and gas exploration. In January 2025, Equinor was awarded 27 new production licenses. The Ministry of Energy announced it has awards scheduled for early 2026, and the acreage has been expanded to include 76 new blocks in the Barents and Norwegian Seas. Officials cite energy security and supply predictability as rationale.

4. Civil Society Pushback & Legal Challenges

Environmental NGOs and Sámi activists are pursuing legal action against approvals for gas fields like Yggdrasil, Tyrving, and Breidablikk, arguing that the environmental impact assessments failed to include Scope 3 emissions. A court ruling did invalidate several of these approvals, forcing a reassessment. However, in a separate case, the Supreme Court ruled in 2020 that future emissions from exported oil were too uncertain to be legally actionable and therefore did not constitute a violation of the Norwegian Constitution.

What Norway Should Realistically Do

1. Shift from Fossil Expansion to Catalytic Green Investment

The clearest climate signal is a moratorium on new exploration, especially in the Arctic. Research shows North Sea producers, including Norway, are unaligned with the Paris Agreement, with Norway being the "worst of all five North Sea countries" in this regard. This contrasts with Denmark, which has committed to a gradual phase-out by 2050 and has cancelled all future licensing rounds.

Norway should halt new licenses, capping future emissions and reducing dependence on fossil revenue. Simultaneously, GPFG should move from passive index-following to mission-driven climate investments—renewables, hydrogen, offshore wind, and industrial decarbonization—domestically and abroad. Norway has established CCS and offshore wind technology; redirecting O&G expertise could drive jobs and value creation in emerging green industries.

Active transition policies, such as renewable energy investment, worker retaining, and green innovation can moderate economic impacts and build a more resilient and sustainable structure by diversifying an economy away from its reliance on a single, volatile revenue source. Investments in green innovation and renewable energy can also stimulate economic growth and have a higher employment multiplier effect. For every million dollars invested, for example, solar power creates over 2.7 times more jobs than fossil fuels.

Ultimately, economic diversification, fostered by these policies, is strongly correlated with improved macroeconomic performance, greater resilience to external shocks, and sustainable growth.

2. Embed a Just Transition with Dedicated Funding

Norway’s fiscal framework allows the government to spend up to 3% of GPFG’s value each year, roughly US$50–55 billion, or the long-term real return. Currently, most of this is directed to domestic spending, with only a small fraction going to climate finance through aid and Norfund’s Climate Investment Fund (NOK 10 billion over five years). A realistic reform would be to earmark about one-third of the annual draw—US$15–20 billion—for global climate resilience, adaptation, and clean energy projects. Such an approach would align oil wealth with climate justice while preserving the fund’s long-term value.

3. Set Portfolio-Level Emission Targets

GPFG already excludes coal and severe polluters, and sold smaller oil explorers in 2019. In 2022, it adopted a net-zero by 2050 goal, requiring portfolio companies to set emission targets, disclose scope 1–3 emissions, and present credible transition plans.

The Ministry of Finance should mandate portfolio-level trajectories aligned with 1.5 °C, as passive stewardship—voting and engagement—is insufficient; measurable targets and credible pathways ensure GPFG’s climate commitments have real-world impact.

Norway’s position

Norway possesses one of the world’s largest sovereign funds and one of its most sophisticated fiscal systems. Norway isn’t just wealthy, it is uniquely positioned as a mature democracy with deep resources and political capacity to set a higher bar. That means no more new oil; it means real climate investment and ambitious emission targets. Only then can oil-funded climate leadership move from optics to genuine transformation.