Climanomics in oil hungry Norway
Better for us, worse for them.
I wrote this article in connection with my debate with Øystein Sjølie, a Norwegian economics scholar and college lecturer. Sjølie wrote an opinion piece contesting a call to stop exploring for more Norwegian oil, signed by 159 Norwegian authors at the time, including me. Both articles were published in Aftenposten, Norway’s largest newspaper. During our debate, I have registered that many believe in Sjølie: that continuing fossil fuel extraction will ensure a better future. In this article, I contest this opinion. I call his ideology climanomics.
Background information for international readers: This year the Norwegian government licensed 47 oil and gas fields for exploration. 92 more are planned next year. The Norwegian Author’s Union annual meeting discussed this, which resulted in a petition - “No more oil exploration” - with voluntary sign-up. Now 169 authors have signed. I wrote this piece because I feel it is important to build a defense against the climanomics relativization of climate change.
What is the climanomics ideology?
When it comes to climate policy, Sjølie's main point is that the world's combined GDP - Gross Domestic Product - will increase in parallel with climate change. A wealthier world will be better equipped to deal with climate change. Fossil fuels are the driver of economic development. So we should continue to search for, extract, and use it.
In a previous opinion piece, also in Aftenposten, Sjølie explained that he does not believe that violent climate change will happen. "Fortunately, there is no reason to fear any 'climate catastrophe.'"
If we stop extracting and exploring new fossil fuels, Sjølie concludes, we will strangle economic development to no avail since dramatic consequences of climate change will not occur anyway. Therefore, we should continue to extract oil and gas for as long as possible.
Do economists understand the world better?
Sjølie concludes his response to the author's petition by saying:
Many of us want to change the world for the better. To do that, one must first understand how the world works.
Those who understand the world seem to be economists like Sjølie himself. Thoughts go to the financial crisis of 2008. About this, the Danish author and newspaper editor Rune Lykkeberg has written: “It was the financial markets that were the problem, and the political institutions that were the rescue.”
Nouriel Roubini, one of the few economists who warned of the impending financial crisis, was ridiculed with the nickname Dr. Doom (together with Steve Keen who I will briefly mention below). Almost no mainstream economists predicted the economic crash that had been made possible by their market liberalist doctrines.
One should be cautious about buying (sic!) economists' worldviews uncritically. When it came to the question of slavery in the US, an argument against abolition was that the economy would collapse. This is immoral and at the same time proved wrong.
Scenarios as it suits
A recurring theme in the debate is that IPCC scenarios are just that: scenarios. IPCC is an acronym for The Intragovernmental Panel on Climate Change, and hosts the largest scientific work in history. Still they can’t be a hundred percent sure about their findings. For example, many believe that the RCP8.5 scenario, which is a worst-case scenario, is unlikely because it assumes enormous coal extraction until 2100.
Glen Peters at The Cicero Centre for Climate Research has written that the assumption for the scenario would equate to "a World War II mobilization to burn as much coal & gas as possible". In the climanomics worldview, the RCP8,5 is debunked.
I hope that RCP8.5 is impossible. At the same time, I note that greenhouse gas emissions yet again reached an all-time high in 2022. Uncertain factors such as carbon in permafrost and ice melt should also be taken into consideration. What happens if the deep ocean currents change drastically, as newer research in the scientific journal Nature indicates?
It is correct, of course, that RCP8.5 is only projections based on input data, and that a scenario in reality never plays out exactly as predicted. For example, RCP8.5 has been criticized for including coal-fired power plants in places that, according to the model’s predictions, already will have sunk into the sea.
Such criticism is an elementary scientific discipline.
But you could easily turn the argument around, claiming that it calls for utter caution with greenhouse gas emissions - since reality also could turn out worse than predicted.
Aren't economic predictions scenarios?
The climanomics reasoning becomes even more problematic when they show no uncertainty about the economic scenarios they present themselves. How can Sjølie know for sure that the world's GDP will increase steadily? How accurate are the numbers he refers to? In his article in Aftenposten, he wrote:
[It is] estimated that the world's GDP will be 2-5% lower in 80 years than it would otherwise have been if the temperature rises by an additional 3 degrees.
This rises many questions. Was the war in Ukraine included in his models? Other possible wars we see on the horizon? Possible collapses in the food supply, resulting in regional breakdowns and migration flows? What about the collapse of ocean currents, which will create entirely new weather conditions locally? The list could go on.
The economic scenarios seem to be the sole basis for the climanomics’ belief that we shouldn’t worry about climate change.
The rich get richer, and the poor get poorer
But for the sake of argument, let's assume the climanomics are right. The world's total GDP will continue to grow. To what result?
The following reasoning is based on two studies. First, I will briefly present a large model from Stanford that Sjølie sent me.
The first thing that strikes the reader is that the economy in the Global North will thrive with climate change, while climate change will be disastrous for the economy in the southern hemisphere. For example, in Niger climate change is estimated to reduce the country's GDP per capita by 80 percent in 2100.
For Norway, the same figure is plus 249 percent. That's a pretty big difference! To our advantage, by the way.
Sjølie argues that the model from Stanford is extreme, probably because it is based on the RCP8.5 scenario described earlier. He refers to another article from Advancing Earth and Space Science, which he calls more mainstream. This article calculates relative differences in the development of GDP at different levels of temperature increase.
This is important because the author’s petition "No to Oil Exploration" attempts to make the Norwegian government act in line with the 1.5-degree target in the Paris Agreement.
As Fatih Birol has stated quite blankly, it’s not compatible to search for new gas and oil fields and at the same time claim you are acting in accordance with the Paris Agreement. Even the fossil fuel giant Shell has calculated this by now (though the company put their belief in continuing growth in innovations - more on that below.)
Searching for new fossil fuels and at the same time advocating for climate action is heresy, that’s bleeding obvious - but out of reach to grapple with for the Norwegian government, the fossil fuel BIG players - and their climanomics “theorists”.
Greed is good
The same unjust pattern permeates the article from Advancing Earth and Space Science as well. In terms of GDP, the Global North will be largely unaffected by climate change, while the Global South will be hit hard.
The authors write: "It is clear that falls in GDP for countries near the equator are especially dramatic."
The Philippines, a poor country already, will experience a reduction of 10 percent at 2 degrees of temperature increase and 20 percent at 4 degrees. For the sake of Norway, the corresponding figures are 0.3 and 0.9 percent.
The inherent truth of the numbers is clear. If the economists' models should actually turn out to be correct, and the world's overall GDP increases steadily in parallel with climate change, this will benefit the countries that are already rich, while the poor will become poorer - at the same time as they will be hardest hit by climate change.
Paradoxically, the two studies say that the worse climate change develops, Norway will benefit relatively more – contrary to countries in the Global South.
Could this be the real reason for the climanomics’ reluctance to set an end date for the extraction and profit from fossil fuels?
In contrast to Sjølie's columns, it should be noted that the article from Advancing Earth and space science strongly qualifies the outcome of the calculations due to the extreme complexity and the many uncertain factors they are based on.
Both Weitzman (2012) and Stern (2016), among others, have warned that current economic modeling may seriously underestimate the impacts of potentially catastrophic climate change and emphasize the need for a new generation of models that give a more accurate picture of damages.
Double standards
In light of the above figures, it is tempting to read the poignant commitment that Sjølie shows for Africa's poor in the counter-opinion to the author's appeal as classic double standards.
How poor people in rural Africa do not have access to any energy other than cow dung becomes, in his argumentation, an imperative that Norway must pump up gas to help them.
Sjølie writes:
Over 90 percent of households in many African countries still lack modern energy and instead burn wood, grass, and cow dung. This energy poverty has many causes, but it illustrates the real dilemma we face. Billions of people have poor access to energy.
Note how Sjøli elegantly does not directly link Norwegian gas and oil to the replacement of cow dung with propane cylinders. Nevertheless, he lets it hang as an implicit claim. But this is far-fetched.
According to the Norwegian Petroleum Institute, 95 percent of Norwegian gas is exported via pipelines to countries in Europe. As for oil, EU countries, the UK, China, and the US are our most important trading partners, according to Statistics Norway.
The climanomics (sincerely?) claim that Norway, by finding new oil and gas fields, will contribute to increasing the world’s GDP, thereby also lifting the living standards of poor people, and making them better equipped for climate change.
But their economic scenarios tell a different story: By pumping up new oil and gas, Norway continues to increase its GDP while at the same time reinforcing the burden from climate change on the Global South.
To pretend that climate change is not a big problem due to economic growth will, to the degree of unforgivable, strengthen the trend we have seen in recent decades, where the rich get richer and the poor get poorer – even deathly poor.
Sources of Inspiration
The climanomics’ big hero is William Nordhaus, a highly respected Yale University professor, and laureate of the so-called Nobel Prize in economics. He has developed the DICE model (Dynamic Integrated Climate-Economy Model). Nordhaus is known for concluding that optimal global warming, economically speaking, is somewhere far above what the Paris Agreement has set as a goal.
While this may be true in the frame of the DICE model, it’s certainly not true in a broader perspective.
First, we must accept that the price people in equatorial regions, low-lying megacities, and Pacific Islands will pay when fleeing their homes can be measured in money.
Second, it implies that the high-cost economy in countries such as my own is morally justified and applicable to the world as a whole - an idea promptly rejected by an ecological approach. Only a minor part of the planet’s population, such as us Scandinavians, can use four times the Earth’s resources every year.
Third, the DICE model highly underestimates the uncertain dynamic of climate change. Many scenarios have already turned out worse in reality than projected.
The climanomics rely on a fault in logic when they place economic growth higher than a reliable and sustainable climate. They are out of touch with our biophysical reality.
What is the result of the climanomics’ mistaken logic?
3 degrees Celsius is fine?
One example: Many climanomics claim that a 3-degree Celsius temperature increase wouldn’t be bad at all. Quite the contrary: In the North, such a temperature would substantially increase the GDP!
On Twitter, Sjølie has written, on the premise that nature would suffer more than human beings, supposedly because of our adaptability: “Depending on the definition of course, but it is very, very far from certain that the world will be terrible, even with 3°.”
Bjørn H. Samset, a member of the IPCC and one of Norway's leading climate scientists, tells a completely different story. In his book 2070 he describes the danger of the so-called tipping points as follows:
We may, within the foreseeable future, experience nature changing so quickly and dramatically that it will appear like a complete ragnarok. The speed limit seems to lie at three degrees of global warming - which is exactly what we are currently steering towards by the year 2100.
Given the problems we already see due to climate change, it is dangerous, sloppy, and scary to claim that breaking the temperature target in the Paris Agreement is an economic opportunity. Due to the fact that these individuals have high positions in society – as academics, lecturers, and bureaucrats that form our policies – it gets really scary.
Heterodox economics
Note that climanomics has received harsh critique from inside the economic discourse. One of the critics is Steve Keen (whom I mentioned above as one of the few that foresaw the financial crisis in 2008). Keen is a professor of heterodox economics and the author of the bestselling book Debunking Economics – the Naked Emperor of the Social Sciences.
In The New Economics - a manifesto Keen concludes: “Economics is, therefore, not a science.” The premise for the conclusion is that nothing that happens in the real world, such as the financial crisis, makes economists question their theories and models. In that way, economists differ substantially from scholars in other sciences, such as physics, which has gone through many paradigm shifts when gaps between theory and reality have appeared.
Keen goes even further. He describes economics taught at universities as “a near religious belief in the Neoclassical paradigm, and that will drive you away if you can’t accept it.” To reform mainstream economy will, according to Keen, be “closer to the Reformation of a degenerate religion than a standard scientific revolution.”
Earlier this year, Joan Martinez-Alier, an economics professor specializing in climate injustice, won the prestigious Holberg Prize in Norway. The nomination sparked a debate where established mainstream economists claimed they had never heard of Martinez-Alier - thus demonstrating their tunnel vision.
Timothée Parrique is a fierce opponent of green growth - the mainstream economist’s last straw. Within a limited budget, writes Parrique, one person’s overuse of the limited resource is someone else’s disuse. “The personal freedom to travel the world on a private jet (…) is achieved at the expense of someone else not being able to access their fair share of the global carbon budget.”
An ordinary Norwegian could be compared to the jet owner in the same manner as a poor farmer in Niger could be compared to a Norwegian - there’s a stark difference in wealth. Even still we want to be richer, searching for yet unfound fossil fuels, adding to our already unjust overuse of the atmosphere’s carbon budget.
On his blog, Parrique tears apart the neoclassical idea that all humans are rational beings with one motive: to maximize profit, an idea that completely ignores ideas and beliefs.
Personally, I don’t buy it. If this money-makes-the-world-go-round mentality was unavoidably true, Doctors Without Borders, Extinction Rebellion, or any other not-for-profit initiatives would have never existed.
Ha-Joon Chang, professor at SOAS and author of several text books in economic theory, calls the neoclassical take-over of economic science an “intellectual «monocropping» of economics [that] has narrowed the intellectual gene pool of the subject.”
The Kennedys of climanomics
Another obvious inspiration for the climanomics is the ecomodernist movement. The ecomodernist thinking is summed up nicely in this much-cited statement from the first page of their manifesto.
In this, we affirm one long-standing environmental ideal, that humanity must shrink its impacts on the environment to make more room for nature, while we reject another, that human societies must harmonize with nature to avoid economic and ecological collapse.
The basic idea is that economic growth should continue despite natural boundaries, by inventing new products and sources of energy. The two - nature and human life - are not dependent on one another.
Sjølie’s claim that Norwegian gas will substitute African wood and cow dung echoes the Ecomodernist Manifesto’s idea of decoupling: “Reducing deforestation and indoor air pollution requires the substitution of wood and charcoal with modern energy.”
Sounds good, if it wasn’t so false.
This infamous logic of separating nature and human life, claiming that technological innovation is the best way to cope with climate change, sounds like a ‘hallelujah’ to believers in economic growth. The ecomodernists’ blindness to planetary boundaries and limits of the Earth’s resources is just another “theory” justifying the rich becoming even richer - the main reason for our regrettable situation today.
Sad to say, this thinking is an important contributor to the false hope that Carbon Capture and Storage (CCS) will save us - an unjustified hope delaying real emission reduction. A good example is the full stop at the Klemetsrud plant, Oslo’s prestigious CCS project. Exploding costs could mean the plant will never open, a year’s delay is guaranteed.
When time is of the essence, delay is all we get.
It seems clear that ecomodernism first and foremost is a justification of Western society’s accumulation of wealth.
According to the ecomodernists, however, mankind will prosper if it forgets the idea of its dependence on nature.
Ted Nordhaus, one of the originators of the Ecomodernism Manifesto, is the son of Robert Nordhaus from the United States Department of Energy, and William Nordhaus's nephew. He resembles a young Kennedy to the climanomics.
The myth of the Global South - debunked
Since I have been bombarded with seemingly factual information on Twitter in recent days, I have investigated the claim that the Global South is dependent on fossil energy from the West for an increased standard of living.
I came across extensive work done by the people behind the We are Drilled podcast. They investigate the so-called moral argument: Whether the Global North is obligated to help the Global South with fossil energy. The article is well-supported by research.
We are Drilled points out a paradox: In the early stages of international climate summits and cooperation, the Global North demanded that all countries should have the same obligations for emission reductions. In recent years, as emissions at home have fallen, the same countries have called for looser reins in the Global South.
This is a logic similar to the tobacco industry when Western countries cracked down on smoking: they shifted their focus to less developed parts of the world to create a new market.
In We are Drilled's article, the myth that ending fossil fuels will prevent an increase in the standard of living in the Global South - which is the basis of the climanomics argument - is debunked.
The fossil fuel industry is turning to the Global South as its last customer. There, the industry is pushing for long-term infrastructure there that will lock in coal, oil, and gas use for decades to come, not only ensuring that Global South citizens will continue to pay too much for energy, but also that they will be late to the energy transition, left stuck with the most stranded oil and gas assets while the rest of the world moves on.
GDP - the measure of all things
Finally, I do not agree that the field of economics has sufficient breadth and depth to capture the complexity of the situation we are facing. When the opportunity for economic growth relativizes all other problems that follow climate change, it is simply too poor a discourse to make any sense of today.
In my opinion, this is (exactly) the shallow, cynic, and strictly numerical worldview that Sjølie advocates when he in his column writes:
Climate change will undoubtedly have some dramatic individual consequences, such as more extreme weather. However, we are most concerned with the overall consequences for human welfare across the globe. The best indicator to measure that is GDP.
To me, knowing that I live in a time where the actions we take today are sealing the fate of future generations, is also a crucial aspect – not an economic, but a moral aspect of climate change. I am saddened to see how much nature has changed only in my lifetime. Some 40 years ago, I grew up with beaches full of blue mussels, with eider ducks everywhere. And even though the energetic bird song of spring still is a big joy to me, I know that I heard and saw many more birds when I was a child than my children experience today.
I think it is terrible to know that with a warming of only 1.1-1.3 degrees Celsius, as we have today, parts of Spain are already turning into deserts, and we are seeing heatwaves in such surprising places as Canada. The list could be much longer.
At the very least, climanomics should be honest enough to say outright that they want us to continue pumping oil and gas to ensure our material wealth - in the West.
Climanomics such as Sjølie’s will ensure that we - meaning the ones between us that are already rich - become even richer. But for me as a resident of one of the world's wealthiest countries, that is not a purpose that surpasses all other aspects of society.
As a final remark, I find this quote from Kim Stanley Robinson suitable.
Economics is a quantified ethics, or a power of politics disguised as science. So it’s an instrument of power to run some numbers and say do this because it makes economic sense.
It is beyond doubt that Norway is a country with enormous self-interest in delaying the necessary change to adapt to climate change. One could hope, therefore, that the climanomics foothold is stronger here than elsewhere. Sad to say, however, I fear it isn’t so at all.