Norway’s Historical Experience with Taxing & Regulating the Exploitation of Its Natural Resources

Taxing the riches of nature: sharing in the prosperity from national resources

Good morning, everyone!

It is an honor for me to speak to you today, about taxing the riches of nature and sharing the prosperity from natural resources.

Natural resources have generated massive wealth in many countries, but with wealth comes challenges.

I believe the Norwegian experience is relevant across borders. I hope it will inspire those of you interested in how smart tax policies can do good for society.

It is no coincidence that I wanted to come here to give this Henry George lecture. I am a farmer and politician, and I have been inspired by Henry George’s ideas for a long time.

Henry George inspired a group of thinkers, intellectuals and cultural leaders in the Norwegian society in the beginning of the 20^th century.

In fact, his main book Progress and Poverty from 1879 was translated into Norwegian just a few years after its release, and several Henry George clubs were established in Norway.

In many areas, these Norwegian thinkers became revolutionary. Their impact on the debate about natural resources later went on to shape my country’s history.

These thinkers inspired me to introduce new taxes on natural resources in the fall of 2022.

This created a lot of debate in Norway, and I was heavily criticized by the political opposition, the industries, and many others.

But as finance minister, I was convinced that it was the right thing to do.

So, I’m still a fan of Henry George, even though he is partly to blame for one of the toughest political fights of my life!

Henry George, Progress and Poverty

As you all know, Henry George is best remembered for his ideas about tax on the extra income from natural resources the so-called “land rent”, or more generally the “resource rent”.

He witnessed the massive speculation and property price increases in San Francisco before the first railroad across the continent was completed.

The railroad companies harvested a lot of these profits.

George argued that the increased land value from the railroad should benefit everyone, not just the few who controlled the land and profited from it.

Henry George was a self-taught economist journalist, and politician. He wanted to apply his ideas to society to improve wealth distribution.

Building a nation

Let me give you a quick intro to Norwegian history.

We have a few things in common with you Americans. In the beginning of the 20^th century, we gained our independence after many years under Danish and Swedish rule. Norway as a nation had to be rebuilt.

Equality was an important value at the time, and still is. Our constitution was written down in 1814, inspired by the American Declaration of Independence.

In it, we got rid of our nobility, and ensured sovereignty of the people. The colors of our flag – red, white, and blue – were inspired by the colors of the American and the French flags to symbolize liberty.

It was a time of strong industrial development in Norway, and a crucial time for securing income for the new, independent nation.

But Norway did not control our most important resource – the waterfalls. Foreign, private owners were common.

Thinkers and cultural leaders of the time, as well as influential politicians like Johan Castberg, were inspired by Henry George’s ideas. Could our natural resources benefit everyone, not just a few private owners?

This question has been asked again and again through Norwegian history.

For the next part of this lecture, I will talk about the important measures taken by generations of Norwegian politicians before me.

Their choices have shaped my nation and laid the groundwork for the choices I have made as finance minister.

Let me take you on a journey through these important events.

It all started with water: The story of hydropower.

Hydropower. In Norwegian we have called it white gold.

Water is a fantastic resource.

It creates huge amounts of clean and renewable energy in Norway.

We are really lucky. Due to our mountains - our rivers flow through lots of waterfalls.

These are sources of energy that can be used.

The question is – who does the waterfalls belong to? And who owns the right to earn money from them?

During the last half of the 19^th century, investors started buying up land with waterfalls in Norway. The waterfalls they bought, could generate power to drive heavy industry.

There was not much capital in Norway at that time.

In 1906, three quarters of the waterfalls which were developed for industry, had foreign owners.

Our white gold was not under national control.

We risked that all the resource rent from the hydropower produced by the Norwegian waterfalls was being channeled out of the country, and not for the benefit of the Norwegian people.  

Could that be changed?

It is no surprise that these questions caused tough political fights back then. Like they do today.

Some politicians believed that Norway needed to get control over its own natural resources, and the value generated from using the resources.

Others thought this was madness: That it would scare away investors and much-needed capital.

An active political debate ended with victory for the ones who argued in favor of national control of important natural resources.

We secured national control of the assets and later taxed the income from them, to benefit the whole Norwegian people.

First, municipalities earned income from hydropower through ownership and special arrangements. In 1997 the tax system for hydropower was reformed, and a resource rent tax on hydropower was introduced.

Today, the total marginal tax rate on hydropower is 67 per cent due to the resource rent tax. In comparison the general corporate income tax rate for most other business activities is 22 per cent.

This is how we managed the riches from the waterfalls. And were inspired to follow the same direction 70 years later, when we found oil in the North Sea.

From water to petroleum

This picture is of Troll A.

It’s a gas production platform in the waters off the coast of Norway.

The world’s tallest movable man-made structure. As you can see - taller than the Eiffel tower and the great Empire State Building.

It’s also a symbol of how huge the Norwegian oil industry has become.

Our experience with hydropower, inspired by the thinking of Henry George, formed Norway’s approach to managing the newly discovered oil riches.

We do this through public ownership and the tax system, including resource rent tax.

We found oil in 1969. Soon after, the parliament decided that a large share of the profits from oil should go to the Norwegian people – society as a whole. At the heart of this was national control and the tax system.

Statoil, now Equinor, was established in 1972, with the Norwegian state as sole owner. Later The Norwegian state’s participating interest was split in two:
one part linked to Statoil and the other to the State’s Direct Financial Interest in the petroleum industry – an ownership body.

In 1975 the petroleum taxation system was introduced, with a resource rent tax on top of the ordinary corporate tax.

Today the petroleum industry pays a total marginal tax rate of 78 per cent on their extraordinary profits from petroleum extraction.

It is important to say – public control does not exclude private stakeholders and business. Norway depends on skills and innovation in the private sector.

But while the industry needs to make a profit, it must share the income from extracting oil and gas with the Norwegian people.

The understanding we have developed over time is that the oil wealth belongs to the whole of the Norwegian people, not just a powerful few.

And not just today’s Norwegian people, but also future generations.

The Government Pension Fund Global

The Norwegian State Petroleum Fund was set up in 1990. This was a fund to secure our future pensions. Therefore, it was later renamed the Government Pension Fund Global.

Today, deposits from oil and gas production account for less than half the funds value. Most of it has been earned by investing in equities, fixed income, real estate and renewable energy infrastructure all around the world.

The fund is unique because the Norwegian people are the shareholders. The goal is to create the highest possible return on their behalf, while still investing responsibly.

Right now, the value of the fund is close to 1.7 trillion dollars, more than four times the GDP of mainland Norway.

We own 1.5 percent of all listed stocks in the world, and we are among the 10 biggest owners in most large companies worldwide.

The profits from this fund help us provide good public services today, and in the future.

In 2001 we introduced a fiscal rule on how to spend the income from petroleum in a prudent way.

The fiscal rule means we can use some of the money in the annual government budgets – but over time no more than 3 per cent of the fund's value each year. That is the expected real return of the Fund.

The basic idea is – firstly – that we should gradually phase in the income from oil and gas into the economy in a responsible way. And – secondly – we should keep the capital in the fund for the generations that come after us.

In this way all our children and grandchildren will also enjoy the wealth ​​we generate from the petroleum assets. 

In some sense, the fund makes a non-renewable resource in to a renewable one.

So, the blueprint for how we manage valuable resources in Norway today goes back more than 100 years, all the way to Henry George.

Recently, my government took this tradition and applied it to the aquaculture industry.

The new resource rent taxes: Aquaculture

Norway has some of the best climatic conditions for salmon farming in the world.

At the same time, the aquaculture industry utilises fjords and sea-areas that belong to society.

Aquaculture licenses are issued by the Government and provide a protected right to operate indefinitely. The average returns generated in this sector during the last decade have been 3-4 times higher than in manufacturing.

In 2022, my government decided it was time to propose a resource rent tax on the aquaculture industry. We knew it would be a tough debate, and it was.

But just like politicians before us did with hydropower and petroleum, we knew this was the right decision.

From 2023, we introduced a 25 per cent resource rent tax on aquaculture.

This was to make sure that society as a whole receives a fair share of the extraordinary profits from utilising our valuable fjords and sea areas.

A key element of the proposal is that the local communities which make areas available for the industry should be guaranteed a fair share of the resource rent.

In 2024 we also introduced a resource rent tax on onshore wind power, as Norway also has some of the best wind resources in Europe.

Another tough public debate, with powerful interests. But once again, we knew this had to be done.

The Norwegian tradition – and future – of redistribution

Let’s go back to where we started today.

In this lecture, I wanted to draw a parallel between Henry George’s 19^th century ideas of equality, and modern-day tax policies.

The story of my nation has been greatly shaped by our natural resources and the opportunity to share their values with society as a whole – not just a lucky few.

This has made it possible for us to provide quality welfare services to our citizens.

Free healthcare, free education and a safety net for those who are less fortunate in life.

This has led to a generally low level of inequality in Norway.

The Norwegian government also enjoys a high level of trust compared to other countries. I believe that is related to low inequality.

I often say that trust is the core of the Norwegian success story.

But trust is not given, it is earned.

We have been lucky that the people in power have chosen to put society first. As politicians today our job is to preserve and protect this principle in the years to come.

As society changes and new sources of resource rent have been created - the government must also adapt and react.

I believe this also reflects Henry George’s ideals. In his collection of essays Social Problems, he argued that more government is likely needed as we keep developing economically.

In the same piece of work he also argued that:

“To prevent government from becoming corrupt and tyrannous, its organizations and methods should be as simple as possible, its functions be restricted to those necessary to the common welfare, and in all its parts it should be kept as close to the people and as directly within their control as may be.”

We will keep working to create policies that strike a good balance between government intervention, improving equality within our society - and staying close to the will of the people.

We are near the end of this lecture.

I have talked about how old American economic theory has been applied to the best of my nation time after time.

But before I finish, I want you to join me in looking forward.

Let’s do a thought experiment: What if Henry George had been alive today?

Your data: whose profit?

In the late nineteenth century when the railroad was expanding westwards in the US, Henry George was interested in the extraordinary income that could be generated from the extra value of central land.

How would he view digital platforms and large-scale AI models? Could we consider it as something like digital railroads?

Thousands, millions, billions of people come together on digital platforms every day.

A few, large companies earn super profits by building and maintaining this digital infrastructure. They depend on our data to generate profits, including our thoughts, emotions, and interactions.

In the past years we have seen the power of large-scale AI models. But we have yet to see the full effect this will have on society.

Imagine the potential of AI to generate even more income from our data. Their business models work because of data from you and me – and our common human history.

Of course, the businesses who invest time, knowledge, capital - and take risks, should get appropriate returns for their efforts. 

But shouldn’t we - at the same time - think that the value generated by using our data, should also give back to the global community and the states these companies operate in? And if so, how could we do that?

I don’t have all the answers.

But there is no better place to talk about these challenges than here at a university.

I want to invite you students, the thinkers of tomorrow, to discuss these challenges. And reflect upon the possible solutions.

Don’t shy away from finding the answers in your textbooks, even the old ones.

No person, or country can answer it alone.

That is why 147 countries in the Inclusive Framework are cooperating to meet the challenges of taxing the digital economy. To make sure that taxation is fair, both for business citizens and governments.

This has already resulted in agreement on a global minimum tax on corporate profits - and we are in the final stages of agreeing on reallocating parts of super profits to market states.

This is important work.

The thoughts I have shared with you today, I have also shared when attending G20 meetings this year, where we discuss the international work against inequality.

We need to continue working together internationally.

Common challenges call for common solutions.

 

Thank you!