What's striking is that in this globally competitive landscape for offshore exploration investment, Canada, and specifically Newfoundland and Labrador—and soon, I hope, Nova Scotia, with its licensing rounds—stand almost alone in applying a carbon price to a resource that we collectively and overwhelmingly export and rely on for economic security.
If we look at our comparators, we find only a narrow subset of OECD countries—Norway, the U.K. and Australia—in a similar situation, but this comparison quickly breaks down. The U.K. has effectively stepped away from exploration. It's no longer a meaningful competitor. Also, an Australian system introduced recently, in 2023, is largely oriented towards LNG and natural gas. Meanwhile, jurisdictions that are the most active and most successful in attracting offshore oil exploration—the United States, Guyana, Suriname, Brazil, Namibia, Malaysia, India, and Indonesia—apply no carbon price at all.
The question becomes, how do we remain competitive in that environment?
To answer that, it's worth looking a little more closely at Norway. If you want to understand effective energy policy, Norway is one of the few places to study it seriously. It is not perfect, by any means, but it has built a durable model, one that maximizes the long-term value of its natural resources while maintaining strong environmental and societal support. It is a model that Canada should be learning from, not ignoring.
Norway's carbon pricing system is particularly relevant because it applies directly to upstream oil and gas, as it does here. Norway uses two overlapping mechanisms: a CO2 tax in place since 1991 and participation in the EU emissions trading system. These apply directly to offshore fuel, combustion flaring, diesel use, gas turbines and so on and are charged on the per tonne basis of CO2 emitted. The resulting cost is amongst the highest in the world, often in the range of $80 to $150 U.S. per tonne, but here's a crucial point: These costs are treated as operating expenses and are deductible within Norway's petroleum system. With a marginal tax rate of 78%, the state effectively shares a large part of that carbon cost.
Yes, the carbon price was real and significant, but so was the fiscal offset. The result is that Norwegian producers face a meaningful and predictable carbon cost, particularly in operations, but within a system that has been deliberately designed to preserve investment attractiveness.
At first glance, Norway appears contradictory: high carbon prices alongside strong exploration activity. By comparison, Norway had 50 exploration wells last year offshore and Canada had zero, but this is not by accident. It is by design. Norway operates two parallel policy tracks serving different objectives. It seeks to de-risk the front end on investment, but discipline the back end on operations.
With regard to the front end, Norway aggressively reduces exploration risks with 78% marginal tax paired with refunds of approximately 78% of exploration costs, with the immediate expensing and investing of incentives. If a well is dry, companies recover most of those costs. If it's successful, of course, they retain a meaningful upside. Critically, new entrants, even those with no taxable income in Norway, receive cash refunds from the government in the next fiscal year. This dramatically lowers the risk-adjusted cost of exploration and keeps drilling activity strong, even for smaller players.
In the back end, once production begins, the system now tightens. Hydrocarbon pricing applies to all oil production, from the very first tonne. A combined CO2 tax and EU ETS exposure provides strong incentives for electrification, efficiency and low-emissions design. In other words, Norway does not discourage exploration—it shapes it.
Carbon pricing does not suppress investment. It disciplines how projects are developed and operated. It creates a culture of investment in Norway. The result is that Norway continues to attract significant exploration investments, not despite its carbon pricing system, but alongside it, because the exploration risk is materially reduced.
The carbon regime is predictable and fully integrated into project economics, and the overall fiscal system delivers competitive, risk-adjusted returns. High carbon prices alone would deter investment, but Norway does not rely on carbon pricing alone. It deploys a complete and balanced system.
Canada, by contrast, appears largely indifferent to investment attraction. Our approach is fragmented. We focus heavily on regulating and taxing existing production, the back end of the value chain, while paying insufficient attention to the front end.
Thank you.
