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    An overview of the Mongstad oil refinery in western Norway, the most polluting of the country (file)

    Norway's Top Central Banker Warns Against Quitting Fossil Fuels Too Soon

    © AFP 2019 / PIERRE-HENRY DESHAYES
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    Governor of Norway's central bank Oystein Olsen is warning against aggressive environmental policies to curb the use of fossil fuels, saying excessive efforts to counter climate change could hurt economic growth, particularly, in oil-producing countries.

    Kristian Rouz — Governor of the Norges Bank Oystein Olsen says Norway must not crackdown on the production and exports of oil and natural gas too early, despite the mounting calls for a greater use of renewable energy. Olsen says quitting fossil fuels could significantly undermine the prosperity and well-being of Norwegian citizens, as oil remains the main source of Norway's economic growth.

    In his annual address, as head of Norway's central bank, Olsen acknowledged the risks posed by climate change. He said the Norwegian government's effort to enforce environmental policies in the energy and manufacturing sectors could advance the transformation of the national economy into a high-tech engine of growth.

    However, Olsen said, it is too early to completely retire fossil fuels.

    "We may benefit from this industry for many years to come, because the world will continue to demand a lot of oil and gas", Olsen told reporters Thursday.

    The central banker said over 10 percent of Norway's 5.4-million population is employed in the oil sector or related areas. He suggested hard-line environmental policies would hurt these workers, as well as undermine consumer sentiment, and negatively reflect of the overall economic growth.

    Olsen said Norway could greatly benefit from the ongoing gradual recovery in international oil prices, suggesting that the nation's rising oil revenues could be a major driver of domestic and international investment.

    "The oil price has recovered to a reasonable level, new projects are profitable, and I warn against making the period when we have the oil and gas industry as an engine and profitable source of income even shorter than necessary", the central banker said.

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    Olsen's remarks generally fall in line with sentiments expressed by top policymakers in other major oil-producing countries. US President Donald Trump has repeatedly praised the expansion in US drilling and refining, saying oil industry still has a great potential to drive a broader economic expansion.

    In Saudi Arabia, the government has recently moved to use its oil money for major investment projects at home and overseas, which will generate lucrative returns for decades to come.

    For his part, Olsen said he is not opposed to prudent environmental regulations of the use of fossil fuels, but anything beyond regulation could be excessive and harmful — regardless of climate change.

    "If global measures are introduced to limit warming, by putting a price tag on emissions and developing technology, it would curb fossil fuel prices. I'm careful to emphasise that the oil industry should develop based on considerations of what's profitable", Olsen said.

    "I'm warning against actively forcing a downsizing beyond that", he stressed.

    Olsen, who also manages Norway's $1-trillion state-run sovereign wealth fund, said the oil industry is poised to expand in the coming years, generating greater tax revenues for the state budget, and employing tens of thousands more workers. In Norway, the oil industry resumed hiring workers and attracting cash last year — for the first time since the 2014 crash in crude prices.

    Meanwhile, oil technology is becoming increasingly cleaner, while European emissions standards have greatly reduced the footprint of oil to the environment over the past few years.

    The central banker also dismissed the government's proposal that Norway's sovereign wealth fund sell off its holdings of oil and natural gas stocks. Olsen said these assets are poised to appreciate in the coming years, and selling in the middle of an ascending trend would be unwise.

    "To take a role where the oil fund is to be used as a means of fighting global warming, then I think it has gone too far", Olsen said.

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    Additionally, Olsen warned the Norwegian government against isolationism in foreign affairs — particularly, economic isolationism. He said Norway is a relatively small economy that is not entirely self-sufficient and has to import a lot of goods, which suggests that "we need other countries — more than they need us", according to Olsen.

    The central banker urged closer ties with the EU amid the ongoing Brexit tensions, while the ongoing slowdown in global economic growth and international trade woes could be address trough reform and a quicker adaptation to the changing conditions, Olsen said.

    The policymaker highlighted the rising prominence of bilateral and multilateral economic agreements, such as trade and investment deals, saying such accords could greatly contribute to global economic expansion and technological development.

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    tax, oil and gas, fossil fuels, Brexit, Central Bank, Norway
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