Keywords

6.1 Introduction

This chapter addresses how public authorities understand climate risks and their consequences for the local economy and industrial fabric. In this chapter, the local level denotes regional authorities and/or municipalities in Norway and how their comprehension of climate risks and consequent uncertainties influences the implementation of proper mitigation and adaptation strategies, which, in turn, affect the economic system in terms of transition risks. The petroleum industry is the backbone of the Norwegian economy; its very existence is challenged in the context of climate urgency: the IPCC has called for a substantial reduction in fossil fuel use and for a faster transition toward a greener economy, if the world wants to meet the targets of the Paris Agreement, adopted in 2015 (IPCC 2022). However, the petroleum industry is vital for developing regional and local communities. In Norway, in the last 50 years, Stavanger Municipality and its region have been the center of this economic development, which has induced the following paradox: on the one side, the revenues from the petroleum industry have provided a good basis for developing new sustainable technologies to support a greener economy. On the other side, these technologies are supported by oil and gas exploitation, which contributes to gas emissions and pollution (Engen and Olsen 2009).

The chapter will explore the following questions:

  • How do local authorities in Stavanger frame climate risks?

  • How can coping with transition risk be sustainable for the local economy?

Our contribution builds on risk science to explore how risks associated with climate change are understood, interpreted and tackled in the context of an inevitable transformation of an economic region, such as Stavanger (see Fig. 6.1). Technological and economic changes are general trends in modern capitalist societies. Examples such as the Ruhr district in Germany or the coal and steel region in Pennsylvania and Ohio in the USA illustrate how economies need to adapt to the market’s demands and environmental requirements. In the case of Norway and Stavanger, international environmental constraints have led to an expansion of investments in renewable energy sources, such as wind and small-scale hydropower (NOU 2018; SSB 2023). This means, foremost, to reveal different kinds of transition risks associated with industrial transformation but also to address this issue in terms of systemic risk. The former implies that substantial changes in the petroleum economy could detach the Stavanger region from the economic engine of Norway, with heavy economic consequences for the local community. In general, this chapter describes a socio-technical system with huge challenges that national and local policymakers must address to cope with climate change. Transition risk management needs more attention regarding the safety implications of what a transition to a greener economy means for such a socio-technical system.

Fig. 6.1
A flow diagram has the following flow, systemic, climate, transition, and technological risks. Climate and transition risks are further divided into physical, regulatory, reputational, and market risks.

Risk types and their relationships according to the documents. Source Author’s own work

Full size image

6.2 Conceptual Considerations

Climate risks are constituted by the wide range of risks associated with climate change (Aven 2020; Lucas 2021). They are often dynamic and unpredictable, since several systems (physical infrastructures, economies, ecosystems, societies, etc.) are impacted at the same time, leading to challenges for risk assessment and management across these systems, due to their different levels of vulnerability and exposure. In this regard, climate risks can be considered systemic risks (Li et al. 2021; Renn et al. 2020; Renn 2016), according to the following five characteristics: they are complex, transboundary and nonlinear; they lead to tipping points, and they produce a gap in perception and regulation (Schweizer 2021). Transition risks concern risks occurring in the process of transitioning to a sustainable economy, when, for example, new disruptive technologies or green finance tools are deployed (Aaheim et al. 2012; Semieniuk et al. 2021). In this case too, we can argue that transition risks are systemic: they concern states, public and private companies and international organizations, which must undergo the political and socio-economic changes needed to respond to climate change and achieve a low-carbon economy.

In Norway, national authorities have promoted the concept of climate risk through a 2018 Norwegian Official Report (NOU), titled Climate risk and the Norwegian economy (NOU 2018). Here, the NOU considers two types of climate risks: physical risk and transition risk. The first relates to the consequences of physical changes in the environment due to climate change. Examples are risks linked to floods, landslides, forest fires, extreme weather, sea level rise, drought, etc. The latter concerns the transition toward a low-emission society and the consequences of climate policy, technological development and associated uncertainties on the Norwegian economic system. Regardless of which understanding of climate risk one employs, physical or transitional, the concept of systemic risk seems the one indicating the most inclusive understanding of risk associated with climate change, by considering interconnectedness and “transboundariness” as central characteristics of climate risks (Challinor et al. 2018; Morsut and Engen 2022).

6.3 Findings

Stavanger Municipality is considered the petroleum capital of Norway. At the same time, the Municipality is undergoing significant socio-economic changes in adherence, for instance, with the 2016 National Smart CityFootnote 1 Roadmap (Stavanger Municipality 2023a), the UN’s Development Goals (2023) and the EU Mission for climate-neutral and smart cities by 2030 (European Commission 2023a). Stavanger Municipality is located in Rogaland County in southwestern Norway. In 2020, the islands of Finnøy and Rennesøy were included in the Municipality, which totals approximately 145,000 inhabitants (per September 2022). The merger means that Stavanger Municipality consists, to a greater extent, of forestry and agricultural soil and is, therefore, particularly exposed to climate change. Stavanger Municipality has been coping with climate risks for a long time, through mitigation and adaptation strategies. Climate change mitigation is a task within the Department of Urban Environment and Development (Climate and Environment Unit), while the Unit of Preparedness and Community Development within the Department of Urban and Community Planning deals with climate change adaptation.

To grasp the local understanding of climate risks (see Fig. 6.1), we performed a document analysis of the most recent and relevant documents, which make explicit and implicit references to risks associated with climate change:

  1. (1)

    The Municipal Master Plan consists of a Community Plan (Stavanger Municipality 2020a) and an Area Development Plan (Stavanger Municipality 2023b). Both documents illustrate the Municipality’s strategy until 2034 and 2040 respectively regarding how the city will grow and change.

  2. (2)

    The Climate and Environment Plan 2018–2030 (Stavanger Municipality 2018) proposes mitigation and adaptation measures and actions in several sectors (agriculture, transport, water, etc.) for sustainable development, in interaction with the local community. National and international requirements and expectations to fight climate change are considered, to set guidelines for the Municipality.

  3. (3)

    The Industry and Business Development Strategy 2021–2030 (Stavanger Municipality 2021) describes the strategy for how the local economy (mainly petroleum) needs to adjust to cope with climate change, to ensure a more sustainable business base, to further develop existing industries in a more sustainable direction and to create new industries with high value creation and employability in the region.

  4. (4)

    The Comprehensive Risk and Vulnerability Analysis (HRVA) (Stavanger Municipality 2020b) establishes a common understanding of risks and a common societal safety and preparedness approach, necessary after the 2020 merger. The focus is on major events that can affect the safety and security of the population across sectors.

We added a fifth document, which is an analysis requested by the Norwegian Environment Agency to study physical and transition risks and to assess the local climate risk management in Stavanger, the (5) Report: Analysis of Climate Risk for a Selection of Municipalities (Proactima and The Governance Group 2020).

6.4 Analysis

All five documents recognize that climate change is a fact and a challenge, unfolding now and not some day in the future. Hence, acting now and not tomorrow is a necessity for the Municipality. All five share the same conclusion on which climate risks impact the Municipality: they are mainly physical risks, such as increased temperatures, more extreme weather events (storms) and sea level rise. These cause floods, landslides, lightning strikes and forest fires. The term “systemic risk” is not applied, but there is a shared understanding that climate risks have cascading effects that can be unpredictable, posing a direct danger to life and health and making it more difficult to organize risk and crisis management. Storms and heavy rains impact several economic sectors, while sea level rise erodes agricultural areas and challenges the urban development. As a result of climate change, islands and coastal areas will no longer be habitable. This, in turn, will lead to migration. In this regard, it is likely that Stavanger Municipality will experience the same climate change consequences as those observed in other areas of the world (see the South Pacific islands). In particular, the HRVA (Stavanger Municipality 2020b) underlines those critical infrastructures, like electricity lines and economic services, that are most likely to be susceptible to disruptions as a result of extreme weather. The HRVA (Stavanger Municipality 2020b) also mentions drought, which can induce electricity shortages. All five documents refer to international agreements like the UN’s Development Goals and the Paris Agreement. Despite the high uncertainty related to the local effects of climate change, all five documents propose guidelines, strategies and measures to cope with climate risks.

Quite naturally, the Industry and Business Development Strategy 2021–2030 (Stavanger Municipality 2021) considers mainly transition risks, while the Report: Analysis of Climate Risk for a Selection of Municipalities (Proactima and The Governance Group 2020) is a case in itself, since the Norwegian Environment Agency requested a study on both physical and transition climate risks.

According to the Industry and Business Development Strategy (Stavanger Municipality 2021), the Municipality needs to take into account the increasing socio-economic costs related to national and international requirements to achieve a low-emission society. The Strategy underlines that the local industrial development toward the green shift inevitably bears transition risks. The transformation of the petroleum industry will challenge the local economy. At the same time, the transformation of activities associated with the petroleum industry will affect other related industries that operate within this sector, such as the supply and service businesses. In turn, this will lead to substantial demographic changes for the economic and social structure of the Municipality. Accordingly, Stavanger Municipality will deal with challenges in terms of higher unemployment rates, development of new skills, education and so on. In the long term, new business activities must replace companies working for the petroleum industry, for instance, different types of service companies, to be able to maintain employment (Proactima and The Governance Group 2020).

On the one side, it is clear that international obligations (see the Paris Agreement) and increased political pressure require a transformation toward a greener and more sustainable local economy to cope with physical risks. This means that the more Stavanger Municipality addresses these risks, the more the Municipality will experience an increase in transition risks, with the associated economic consequences. On the other side, Stavanger Municipality (and Norway as such) expects a decrease in investments in the petroleum industry (SSB 2023). The Industry and Business Development Strategy (Stavanger Municipality 2021) seeks to address this dilemma by proposing to use the know-how accumulated over 50 years of technological development within the petroleum industry, combined with the long tradition in power production and mechanical industry, to develop new and innovative technologies that support the green shift and sustainable development. Thus, among other things, a way to tackle this challenge rests in developing Stavanger Municipality as a Smart City, by promoting new technologies to enhance the green shift.

Indeed, some of the actions proposed by both the documents forming the Municipal Plan (Stavanger Municipality 2020a, 2023b) carry some features of a Smart City. Besides promoting a path of sustainable growth and development, by facilitating a short-traveled everyday life, making it easier to walk, cycle and travel by public transport and adopting nature-based solutions, the two documents aim at strengthening cooperation with business and research, to develop smart solutions, and facilitating renewable energy solutions, to be in the forefront of the development of new and sustainable technological solutions. The documents contain references to the economy of the Municipality being mainly driven by the petroleum industry, and the ambition here is to reduce 80% of the greenhouse gas emissions by 2030 and become fossil-free by 2040. However, how to reach this ambitious goal in practice and which socio-economic costs the Municipality will endure are not explained. Some answers can be found in the Climate and Environment Plan 2018–2030 (UN’s Development Goals 2023). The document is built around local climate-related challenges, goals and concrete responses needed to tackle climate change until 2030. The focus is on how to reduce emissions of greenhouse gases from road traffic, cruise tourism and energy use in buildings, industry and plants. Around 52% of greenhouse gas emissions in Stavanger come from road traffic, with around 11% from stationary energy, i.e., energy used for purposes other than transport. Hence, the document proposes solutions to drastically reduce emissions related to road traffic, by promoting an urban development coordinated with the transport policy. One of the responses consists of the electrification of the transport sector and new renewable and smart energy solutions in the context of the Stavanger Smart City initiative. However, these measures for reducing greenhouse gas emissions carry transition risks, which are not identified or assessed.

The Report: Analysis of Climate Risk for a Selection of Municipalities (Proactima and The Governance Group 2020) is a very useful document for understanding the physical risk and transition risk for Stavanger Municipality. The 2020 Comprehensive Risk and Vulnerability Analysis (HRVA) (Stavanger Municipality 2020b) has been employed here, as it has already identified physical climate risks, but the Report offers a more nuanced definition, by distinguishing acute from chronic physical climate risk according to the speed of development of the climate risk. Acute physical risk concerns, for instance, extreme weather, while chronic physical risk refers to long-term changes in weather patterns that can lead to, for example, sea level rise. Another way to describe physical climate risk is in terms of climate change’s direct and indirect effects, taking into consideration the proximity of the risk. Examples of direct effects are increased costs for prevention of infrastructures or their maintenance and repair. Indirect effects occur when physical climate risk originates elsewhere but has cascading effects in the Municipality. For instance, the rise in temperatures provokes the melting of the Arctic, with a sea level rise that will touch the coastal line of Stavanger Municipality.

In addition, the Report (Proactima and The Governance Group 2020) seeks to offer an encompassing definition of transition risks by deepening the meaning: there are transition risks associated with municipal sectors and functions and others associated with business (mainly the petroleum industry) and their consequences for the Municipality. On the one side, political changes, new regulatory requirements and new technologies to fight climate change have a cost for the Municipality, which, for instance, has to improve the water and sewage system or make the transport system more sustainable. In the Comprehensive Risk and Vulnerability Analysis (HRVA) (Stavanger Municipality 2020b), the same sectors subject to these transition risks are also impacted by physical climate risks. On the other side, transition risks concern mainly the petroleum industry, which has to reconsider business activities, follow more sustainable and greener standards and meet the international obligations about emissions and the green shift. As it is, today, the industry with the highest employment rate and highest wages, transition risk has the biggest impact on the petroleum industry, with effects on the whole supply chain and Stavanger Municipality as well, with fewer high tax-paying residents, for instance. Higher capital costs and higher production prices to address the green shift could exert significant pressure on the petroleum industry, which will have a significantly reduced place in a low-emission society. The Report (Proactima and The Governance Group 2020) calls for faster transformation of the industry along the lines proposed by the Industry and Business Development Strategy 2021–2030 (Stavanger Municipality 2021).

Another way proposed by the Report (Proactima and The Governance Group 2020) to define transition risks is to consider which societal sector is impacted: there are, thus, a regulatory risk, a technological risk, a market risk and a reputational risk. The first one concerns regulations that can bear unforeseen risks: for instance, an increase in the carbon tax, decided by an EU regulation, can hamper competition, since companies with fewer resources may struggle to implement the carbon tax. The second relates to a sector’s use of new technologies, which can lead to unforeseen vulnerabilities by increasing the interdependence of the power supply, for instance. The third one refers to impacts on the market, as some companies are able to make investments, whereas others are not. Finally, reputational risk refers to the possibility that companies or sectors may not be willing to follow the rules regarding transition toward a low-emission society, boycotting the process.

Figure 6.1 summarizes the understanding of various types of risks applied in the documents and the relationships between these risks.

6.5 Final Remarks

By focusing on Stavanger Municipality, this chapter sheds light on how different types of risks related to climate are understood in official policy documents and how strategies are developed to cope with these risks. Based on the content of these documents, we argue that Stavanger Municipality is aware of both the physical climate risks and the transition risks that need to be addressed to reach the goal of a low-emission society. However, it does not seem that Stavanger Municipality sufficiently realizes that climate risks and transition risks are systemic risks. Nonetheless, the Smart Cities concept has been adopted by Stavanger Municipality as a strategy to combine technologies, the mobilization of citizens and business activities to work together to achieve a more sustainable way of living. In this sense, it is, however, reasonable to suggest that Stavanger Municipality, to some extent, has understood the complexity and interconnectedness of climate risks but needs to fully acknowledge this by analyzing risks as complex, transboundary and nonlinear, leading to tipping points and producing gaps in perception and regulation.

In taking Smart City as a response to systemic risks, this response could integrate the following modus operandi: a long-term and comprehensive strategy, whereby the Smart City approach is encompassed in both urban and economic development; drawing upon available technologies to increase cooperation and sharing of knowledge across sectors; the formulation of cross-sectoral risk and vulnerability analyses and planning; inclusive processes where the needs of citizens and local communities are at the core of decision-making; more efficient and sustainable use of resources to improve the quality of life of citizens; and, at the same time, contribute to economic development that does not damage the environment and climate, through the smart use of technology. But, most of all, Stavanger Municipality needs a substantial transformation of its main industry, consisting of the redesigning of prevalent system structures and the rebranding of the Municipality from oil to energy capital. This approach is sustained by the introduction of new practices, complying with climate change considerations, without interrupting important systemic functions and services.

This transformation is the ultimate challenge, due to the paradox that it carries: on the one side, it is the petroleum industry that provides the basis for new sustainable technologies to support a greener economy. On the other side, oil and gas exploitation needs to continue, to benefit from these revenues, but this goes against the international requirements for a substantial reduction in fossil fuel use. Then, Stavanger Municipality uses these new technologies to cope with physical climate risks to be greener and more sustainable, but at the same time this impacts the petroleum industry, increasing transition risks. However, the goal of Norwegian petroleum politics is not to dismantle the entire petroleum industry, but to restructure the sector toward more climate-friendly technology, such as carbon capture, electrification of the petroleum platforms and financial support to develop renewable energy.

To conclude, the climate and transition risk approach of Stavanger Municipality is characterized by adaptation, rather than a systemic risk policy that would mean a dramatic transformation of the entire petroleum socio-technical system. Still relying on the knowledge, technology and innovation capacity of the petroleum industry is a form of adaptive strategy that may appear slow and incremental. Such an adaptive strategy can, in the longer run, become a real existential threat for society in general and suggests that the transition risk understanding of Stavanger Municipality is concealing, rather than revealing and enlightening, when it comes to climate change threats.