The lie behind the rule of action

There are good reasons for spending more of the Oil Fund on politically desired initiatives abroad, such as climate finance and support for Ukraine in the fight against Russia.

Norway has earned its fortune by pumping up oil, a resource with large, negative adverse effects, and we should spend some of that wealth on preventing further adverse effects.

And while Ukraine suffers and Europe's energy prices have skyrocketed as a result of the war, Norway is profiting. Some of that surplus could have been spent on helping Ukraine fight an aggressive major power that is also threatening spring security.

Nevertheless, the answer from Finance Minister Trygve Slagsvold Vedum is that we should keep your fingers off the barrel. Vedum will not support Ukraine or finance climate action abroad outside the rule of action, on the grounds that future Norwegians will also need a large oil fund to draw on. “Children, grandchildren and great-grandchildren should also be able to experience a safe welfare state, and know that they will receive pensions, free schools, free hospitals and medicines the day they fall ill. That's what the Oil Fund is supposed to do.”

Vedum counters such a moral argument for sharing more of the wealth and making up for the damage of fossil production with another moral argument: the generation contract. To use the more than action rule “is to take from future generations,” Vedum says.

But referring to the generation contract to argue against increased oil money use is a false moral narrative.

Sustainable management of natural resources is about leaving the laggards in a situation that in any case makes them no worse off than we are. If circumstances permit, one should also leave them in a position where they can continue the progress from which we have recently benefited.

This could speak in favor of preserving a large oil fund. But if we can use the fund to make investments today to mitigate climate change, create increased development in poor countries and protect Ukraine from a common threat, those are investments for which future Norwegians will thank us.

Future generations will be richer than us, but worse off because of our inadequate climate action. It is likely that they would prefer that we reduce emissions now, even if it goes beyond the wealth they inherit. They need effective climate action more than extra money in the Oil Fund.

Norway and the welfare of Norwegians is affected by far more than our financial wealth, and global problems also often become problems for us, sooner or later. It is naive to think that Norway can be shielded if climate change drives millions to flee, causes world food production to fall, infectious diseases to move north or economic growth to stall.

Using the Oil Fund to support peace and climate cuts, too, can be justified in our financial interests. Extreme weather, destroyed infrastructure, lost production, not to mention global financial instability, are bad store for someone with shares in almost all the world's listed companies.

Making additional withdrawals from the Oil Fund today to address global challenges may therefore — paradoxically — be what produces the highest financial returns for the Oil Fund in the long term.

What should we do? Norway could, for example, invest tens of billions more in Norfund's Climate Investment Fund. The fund is both an effective way to cut climate emissions, while historically providing a financial return that surpasses that of the Oil Fund.

We can also issue state guarantees to development banks and companies that will build more renewable energy, at no particular cost to us. Or we can offer results-based funding to stop deforestation in the rainforest equivalent to all of Norway's emissions.

If we expect the future to be richer than us, what's the point of the rule of action? Why don't we just spend more on ourselves today?

It is due to the actual economic arguments for being careful with oil money spending: the fear of”dutch sick“. In the 1970s, the Netherlands experienced that large deposits of gas led to the undermining of its own industry. When huge revenues from gas flowed into the Dutch economy prices went up and export businesses ran into trouble. The gas became a “curse of the resources”, undermining important parts of the Dutch economy.

That is why the economists at the Ministry of Finance are more concerned about which impulse oil spending has for the Norwegian economy than if we spend more or less than the real return of the fund.

The problem for Vedum is that these arguments cannot be used against the proposals to spend more of the Oil Fund in abroad. If we finance climate investments abroad, it will not cause problems for the Norwegian economy. As long as such investments are in the interests of posterity, we should therefore make them. Climate finance can be a safe long-term investment, for which posterity will thank us. The same applies to the aid to Ukraine.

The rule of action has served us well, but Vedum's references to the generation contract are a false moral narrative that stands in the way of greater Norwegian contributions to threats to our future welfare, including climate change.