Norway may be just a week away from adopting a lucrative COVID-19 tax relief package for its fossil industry that would artificially boost the profitability of key oilfields and likely expand the country’s footprint in sensitive Arctic lands.
The government’s finance committee was expected to announce a recommendation today, with final approval scheduled for June 12, World Wildlife Fund-Norway said in a release yesterday.
“The suggested changes include faster depreciation and an additional uplift to an already generous tax regime” for oil investments, and would remain in effect until 2027, WWF says.
“The Norwegian Ministry of Finance and several of Norway’s leading economists have warned against the changes, saying they will provoke investments in fields that would otherwise be unprofitable,” the organization adds. “The new tax regime is also likely to increase and extend activity into vulnerable territories in the Arctic.”
WWF-Norway “has long been critical of the Norwegian oil tax system for being too investment friendly,” said Senior Policy Advisor Ragnhild Elisabeth Waagard. Now, “the Conservative Party and the Labour Party hold the key to how the oil tax regime will favour oil companies for the next decade, and they are now in the final negotiations.”
While Norwegian fossils pay a 78% tax rate on their profits, WWF says government tax measures end up covering 88% of their project investment costs. The changes expected from the finance committee “will lead to an even more investment-friendly tax regime, leading to opening of oil and gas fields that are not profitable with today’s oil price,” the organization states. “This will keep Norway locked into the oil era at least a decade longer than what would be the reality with market signals and a neutral tax system.”
The country “can’t play it both ways: being seen as a global climate champion but then abandoning this role when it comes to its fossil fuel industry,” Waagard said. She urged finance committee members to vote down the tax package and “ensure Norway’s COVID-19 recovery packages help advance our efforts to tackle the climate crisis”.