Ethics, resource rent, environment and petroleum policy: the case of a small open economy

Abstract

This paper contributes to the understanding of how the environment, ethics, values, and historical contingencies shape public policy. It explains the accomplishment of petroleum resource management in the small open economy of Norway. The study is conducted by mapping policy decisions and the arguments behind them regarding environmental and ethical issues. This is done by studying available governmental and parliamentary papers along with statements from politicians and central governmental officials. The paper also seeks to illuminate some of the decisions by quantitative measures. The paper firstly describes a model of Ricardian resource rent. Secondly, it investigates the set of values that were in place before the petroleum production started in the 1970s, as described in public documents. An important argument was to build a “qualitatively better society” for the benefit of the people. Thirdly, it traces the historical roots of these values by examining historical sources. The main findings are that success lies in understanding the ethics behind the environmental resource rent harvesting of this non-renewable natural resource. The paper concludes that the focus on the natural environment and resource rent management can be attributed to popular values built on historical traditions. According to them, the state and the trust between the state and its citizens played key roles in shaping the policy. The careful policy can be illustrated by the fact that Norway has managed to build one of the largest sovereign funds in the world worth USD 1,200 billion for use by future generations. Only 3% of its value, significantly less than its historical net profit, should be used annually.