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Norway Svalbard coal mine saved by the same fund promoting coal divestments

The Norway state investment fund has announced that it sold off stock in 73 companies last year, including 27 coal companies, with most of the divestments made because of the companies’ high carbon emissions. In the same time they invested in Svalbard coal mine.

The irony was complete last month, when the government confirmed it was prepared to pump another NOK 649 million (USD 76 million) over the next three years into Gruve 7, part of the Store Norske Spitsbergen Kulkompani on Svalbard. The coal company itself is now wholly owned by the Norwegian state, after it was threatened with bankruptcy last year year because of low coal prices.

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In June, just as the Parliament was winning kudos over its coal divestment order to Norway’s huge wealth fund known as the “Oil Fund,” the trade ministry announced it had spent NOK 385,000 buying out the remaining private shareholders in the Store Norske coal company. Becoming sole owner, Trade Minister Monica Mæland of the Conservative Party said, would “give the state the necessary flexibility” to “evaluate” the problems around the coal company and its future.

Low coal prices and costly production on Svalbard led to a pre-tax loss of NOK 537 million in 2014. Without a crisis loan that also was provided by the state as part of an initial bailout, the coal company would have needed to shut down operations. Instead the company was allowed to launch a restructuring process and remain in business.

Climate vs jobs, again
Given Norwegian politicans’ stated concerns over the carbon emissions generated by coal, their order to dump coal investments elsewhere in the world, and Norway’s attempts to maintain a climate- and environmentally conscious profile, a shutdown of coal operations in the sensitive Arctic would have seemed to be a priority. Instead, the state is keen to keep the coal mines alive, because of the jobs they create in a strategically important area for Norway. It’s simply more important for Norwegian politicians to keep coal operations up and running on Svalbard, in the heart of Arctic territory where Russia also has major interests, than to divest and cut emissions there as well.

“It’s important to maintain activity and settlements on Svalbard,” Mæland stated in a press release last month after the latest Parliament-backed bailout of the coal company. In addition to transferring an immediate NOK 112 million to Store Norske, the government also asked Parliament to approve the forgiveness of a state loan to the coal company for NOK 205 million, and convert it to capital for the troubled operation.

Not even those measures were enough to secure operations through 2016 though. Given the low coal prices, Store Norske will need another NOK 144 million every year for the next three years, from 2017 to 2020, and look set to get it. “We have no guarantee that the situation won’t get worse,” Mæland told news bureau NTB. “As owner of Store Norske, we’re following developments closely and evaluating the situation constantly.”

Oil Fund’s coal-dumping continues
As the coal dust settles and communities on Svalbard continue to use Store Norske’s coal as an energy source, Norway’s Oil Fund is following through on its coal divestments program, which even was hailed in Time Magazine last year as “a major success for the UN-backed fossil-fuel divestment campaign.” The fund has announced that it sold off stock in 73 companies last year, including 27 coal companies, with most of the divestments made because of the companies’ high carbon emissions.

The fund’s chief executive Yngve Slyngstad, who reported more growth for the overall fund on Wednesday despite turbulent markets, told newspaper Aftenposten that the fund had already sold itself out of most of the companies falling under the Parliament’s mandate. They also included 16 power companies that produce electricity with coal and 11 mining companies that extract coal for electricity production.

It’s ironic, then, that the Parliament will keep its own coal mine running. “I think its a great paradox that we sell ourselves out of coal (through the oil fund) at the same time we subsdize our own coal production on Svalbard,” Steinar Juel, chief economist Nordea Markets told Aftenposten as early as last spring. “That seems meaningless to me. I don’t think our strategic settlements on Svalbard demand that we invest in coal extraction.” He thinks it would be better to invest in more tourism, research and educational programs on Svalbard.

Newspaper Dagsavisen has also written about the “hypocrisy” of continuing coal production on Svalbard while pulling out of the international coal industry. For that matter, the oil fund itself was built up through Norway’s huge fossil fuel industry, “and coal, oil and gas are the worst when it comes to emissions.”

Selling off ‘too slowly’
There’s also some criticism that the oil fund’s sell-off isn’t happening quickly enough, while the NOK 50 billion invested in environmentally mandated projects only earned 1.1 percent last year, according to the fund’s annual report. “We have had another year in which the environmental investments have been weaker than the market in general,” Slyngstad told Norwegian Broadcasting (NRK). Other stock investments earned 3.8 percent on average.

The environmentally mandated investments are spread over 220 companies, mostly in businesses providing low-emission energy and alternative fuels, technology geared towards energy efficiency and natural resource management. The final number of companies dumped for climate and environmental reasons was 58. Environmental organization such as Greenpeace, Framtiden i våre hender (FIVH, The Future in Our Hands) and the German NGO urgewald think 122 companies should have been dumped because of the coal divestment order, and that the fund’s sell-off is proceeding too slowly.

“You can almost wonder whether Norges Bank (which oversees the oil fund) has understood what the Parliament decided last year,” Truls Gulowsen of Greenpeace told NRK. He said the fund still has holdings in “big, polluting coal companies.”

Urgewald issued a statement that the “bad news” is that 70 coal corporations remain in the oil fund’s portfolio. “We are happy to see that some extremely dirty companies such as South Africa’s Sasol, China’s Shenhua and Greece’s Public Power Corporation are now no longer in the fund,” said Heffa Schuecking, director of urgewald. “But we also want to point out that Norges Bank has only done a small portion of its homework.”

Parliament’s rules allow some coal holdings
Urgewald is urging the fund to sell out of German utility RWE, which it called “Europe’s biggest CO2 emitter,” and the US utility Duke Energy, which it claims was convicted for water pollution caused by coal ash ponds. Stock in China’s Huaneng, the world’s 3rd largest builder of new coal-fired power plants should also be sold off. “From a climate and water perspective,” urgewald stated, these companies “should have been among the first to go.”

Arild Hermstad of urgewald’s FIVH in Norway added that there was “an urgent need for the fund to accelerate its divestment efforts.” It’s not easy, though, because of the fund’s need to “go into dialogue” with the companies involved and because of rules identifying companies as subject to selloff if 30 percent of their operations or revenues come from coal. Some big companies with large coal operations can nonetheless slip under that 30 percent limit, and coal companies whose high-grade coal used in the metal industry can also be exempt. That could even justify the state’s stake in Store Norske on Svalbard, since 60 percent of its production can be used in metallurgy.

Slyngstad told Aftenposten last month, though, that more divestments will come, even as the same politicians who ordered him to sell keep investing in coal at home.

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