As global leaders try to tackle the thorny issues of curbing greenhouse gas emissions, the prime minister of resource-rich Norway told CNBC how the country can diversify away from oil, gas and coal.
"We are doing very, very intensive work on the diversification of our economy because the lower investments and lower oil price leads to that. But… we also knew that, at one time, we would have less oil and gas to develop and it would be more costly," Prime Minister Erna Solberg told CNBC Monday on the sidelines of the United Nations climate change conference, also known as COP21. "This increases the importance of transforming our economy," she added.
COP21 talks, which are being attended by over 130 global heads of state as well as business leaders and public bodies, are aimed at getting a global agreement on reducing greenhouse gas emissions and on keeping global warming below 2 degrees Celsius. There has been widespread disagreement over the years over who should cut emissions and by how much, however.
Many see the talks as a last-ditch effort to save the planet. On Monday, Pope Francis said the climate situation was "borderline suicide," according to media reports, and that it was "now or never" for leaders to come up with a solution.
With a possible end to the fossil fuel era in sight, countries like Norway which is rich in oil, gas and coal, face a very different outlook. Norway has been able to amass a huge 7.4 trillion Norwegian crown ($851 billion) sovereign wealth fund through the revenues from its oil and gas sales. Norway is the largest oil-exporting nation in Europe and supplies around 20 percent of Western Europe's gas needs, according to the government. As of December 1, the fund invests in 9,000 companies and has investments in 75 countries.
The sharp decline in oil prices, which have more than halved since summer 2014, has weighed on the fund, however, and has put into sharp relief the need to diversify the Norwegian economy away from energy. With environment concerns gaining traction, too, Norway's prime minister said there would be assets that the county "will never be able to develop."
"I think everyone in Norway knows that we will have to have a little less of our economy linked to oil and gas and a little more focused on different areas because that is more sustainable." While Solberg thought it was not realistic to envisage a future entirely without fossil fuels, she recognized the importance of restricting the use of coal.
"What we would have liked to have seen was a price on carbon but we will not reach this in Paris but this is an important issue to discuss. We are taxing our oil production quite heavily and we have a CO2 tax now which means we are among the cleanest producers in the world because we are taxing the externalities of the production."
- By CNBC's Holly Ellyatt, follow her on Twitter .