Future investment decisions in the energy and ocean economies: Impacts on Norway’s economic, environmental, and social sustainability

The main purpose of the research project is to analyze factors that impact value added, export revenues and employment of energy and ocean resource sectors, and how design of policies influencing investments contribute to economic welfare in Norway. A particular focus will be on the offshore petroleum sector due to its economic importance for the Norwegian economy.

Which tax system ensures the most socially optimal investments in the marine and energy industries? This is an important question to ask about the challenges Norway is facing. Three central challenges are:

• to ensure value creation and trade balance in line with a gradual reduction in activity in the petroleum sector
• to support gradual diversification towards new, non-fossil industries
• to maintain settlement and economic activity outside the large urban regions

The marine and energy industries annually represent 40-60% of the total business investments in Norway. Investments are, together with natural resources, labor and innovation, a key driver of economic growth.

Investments are also important in the green shift, it will require huge investments in, for example, offshore wind, hydrogen, CO2 storage, batteries.

Historically, investments in the marine and energy industries have been very important for maintaining decentralized employment.

Investment decisions are influenced by the tax system, companies make investment decisions based on the expected present value of the investments after tax. A correctly designed tax system tries to finance society's needs in the most efficient way possible, i.e. with the lowest possible loss of efficiency in the form of too high or too low investments.

In this project, we are therefore investigating which tax system ensures the most economically optimal investments in the marine and energy industries?

What is the optimal combination of:

• neutral taxes that do not lead to socio-economic efficiency losses / welfare losses
• distortive taxes that should lead to better resource utilization (e.g. environmental taxes)

The project, which will be a mixture of theoretical studies, numerical modeling and case studies, consists of five work packages:

1. Investment behavior in light of various forms of market failure
2. Investment behavior in light of different forms of taxation
3. Case: The "oil tax package's" effects on investments and the economy
4. Spillover effects of investments in the marine and energy industries
5. Agglomeration effects and ripple effects of investments in the marine and energy industries