Instead of hurling climate policies on the bonfire to switch the focus to ‘bread and butter’ issues, the government should be looking at solutions that bust inflation and emissions all at once. Gareth Hughes has a few suggestions.
How come it’s the environment that always loses out to the economy? In New Zealand politics, poor old Mother Nature is like the unathletic kid who gets picked last for a sports team. Immediately after unprecedented flooding in Auckland and a devastating cyclone, it was climate change policies thrown on the government’s policy bonfire.
In what was presented as a binary choice, the climate was sacrificed in the name of taming inflation. But what if, instead of trading one off for the other, we reconsidered the symbiotic relationship between the economy and the environment? We would then have the opportunity to explore solutions that tackled both.
New prime minister Chris Hipkins cancelled a number of climate policies as part of his “bread and butter” drive to focus on inflation. The goal was to free up the government’s limited funds and limited attention.
So in response, the clean car upgrade, to help low- and middle-income families replace polluting vehicles, was put in the compactor; a clean car-leasing scheme was cancelled; the biofuels mandate was burned; a bottle-deposit scheme was put on ice; and Auckland light rail, like most of our scheduled bus services, was delayed (again).
The fact is that the impacts of climate change are already pushing up the cost of food, insurance and rebuilding our towns and cities from extreme weather. What would an emissions-busting inflation response look like? Here are five ideas to tackle both climate change and the cost of living crisis.
1. Pass an Aotearoa inflation reduction act
In the US this law, passed in 2022, set out to reduce inflation and halve Americans’ energy costs by directly tackling climate change. $US400 billion in federal funding went to clean energy projects, allowing Joe Biden to impersonate Oprah Winfrey and say to American consumers and companies: “You get a solar panel! You get a tax incentive! You get a grant!”
It may seem counterintuitive – wouldn’t a massive investment like this actually add to inflation? No. Clean energy is the cheapest form of energy available and, paired with using existing energy more efficiently, it’s a net positive. It’s a win for the climate and a win for reducing costs.
In Aotearoa, our own version of an inflation reduction act could provide zero-interest loans for installing solar panels on roofs and insulate 600,000 under-insulated homes to reduce power bills. The act could establish a new fund to jump-start community-owned wind or solar projects where the profits and benefits stay local. It could fund marae to be the cleaner, cheaper energy hub of their communities. It could provide household energy audits and literally give away free LED light bulbs to households.
Local lines companies have already done this in a few regions, and Ecobulb estimated that if the government gave five lightbulbs to 70% of New Zealand homes it would cost $26 million, but save New Zealanders $105 million every single year.
2. Reduce transport costs and emissions
Imported fuel costs have been a big part of our inflation story and a real drain on New Zealanders’ bank accounts. The clean car discount has been one of the big climate successes under this government but many of the beneficiaries have been those already wealthy enough to purchase a Tesla. Meanwhile, low-income households are stuck driving expensive, inefficient vehicles oftentimes – thanks to our public transport shambles – for further distances.
Electric vehicles shouldn’t just be for the wealthy. The government should reinstate the clean car upgrade and like it could do with solar panels, offer a zero-interest loan where the fuel savings finance the borrowing.
And we shouldn’t just fixate on cars. There’s a host of incentives we could borrow from offshore to support electric bike uptake, which Tommy de Silva points to in this article for The Spinoff. Better yet, take a lane or two off the Auckland Harbour Bridge and other major roads for walkers and cyclists to use right now.
Half-price public transport fares were a great response to the cost of living crisis but are set to end on June 30. Only costing 10% of the fuel subsidies, the government could make half-priced fares permanent.
A Waka Kotahi report found cheaper fares didn’t increase patronage; but ask anyone who has been on a bus in the last year and they’d tell you the bus not turning up was the biggest barrier to usage.
To its credit, the government has put in place steps to address the driver shortages and the next step needs to be expanding bus and rail services, especially between our town and cities, which, alongside permanent half-price fares, would save cash and carbon.
3. Crack down on prices and profits
Majority state-owned power companies have been posting massive profit increases while increasing prices. Last year Meridian, Genesis and Mercury made a combined annual net profit of $1.35 billion. Our high level of renewable electricity should be our superpower in reducing emissions and there is no reason why the government couldn’t directly lower power costs for consumers, and/or request a nominal dividend from its power companies or transmission provider Transpower, to encourage greater electrification.
We could also follow the United Kingdom and put in place an excess profit tax on oil companies, which have been posting their own obscene profits, then use that revenue to fund clean alternatives.
Moving from heating to eating, food prices have risen at their fastest annual rate in 32 years. If we can remove petrol and diesel taxes to respond to inflation, why can’t we remove GST from food as well?
Tax experts have warned that more expansive GST exemptions could be complex and costly to administer, but a quick-win solution would be to remove GST just from fruit and vegetables.
One of the most effective things an individual or family can do to reduce their personal impact is to eat less meat and dairy. That’s pretty hard at the moment, with fruit and vegetable prices up 23% over the last year. Removing GST from fruit and vegetables is one easy, low-carbon way to reduce costs.
4. Fix the broken Emissions Trading Scheme and share the love
The Emissions Trading Scheme (ETS) has been the major tool successive governments have used to battle climate change, but it has always been forced to fight with one arm tied behind its back. This is by design to reduce its impact.
Late last year the cabinet rejected the advice of the independent Climate Change Commission and the climate minister to increase its effectiveness, which led to a collapse in market confidence and the ETS auction spectacularly failing.
The ETS needs to be fixed and the carbon price set higher so it can encourage a low-carbon transition, but governments have been wary of raising power and fuel prices.
A win-win solution would be to directly recycle ETS revenue back to low-income households instead of the government using it to fund pet projects. It could be designed in such a way that those families who actually need more energy won’t be worse off, but those who can reduce their emissions could be better off.
5. Reduce energy and resource use to bring the economy back into balance with the living world
My four big ideas up to this point have all been possible, practical and in many cases already successfully working overseas. Voluntarily using less energy and resources is the hardest and most challenging idea.
We have come to expect limitless growth. You can see it in fast fashion, planned obsolescence and the real pain that happens in our communities when we stumble on the economic growth treadmill.
Economists say we need to reduce demand to reduce inflation, but currently the pain to do so is borne by low- and middle-income households. The wealthy need to share the common burden through a wealth tax or increased top rate.
At a time when we are being slammed by extreme weather events and homelessness, it is ridiculous that the wealthy can helicopter between numerous homes to one of Waiheke’s 60 private helipads. Some New Zealanders need more, some need to use a lot less.
Using less is not about living in caves wearing hairshirts. I’m talking about holidaying locally rather than jetting overseas every year, repairing clothes and devices rather than replacing them and finding happiness outside of just more and more stuff.
This is going to take investing in people, in community and in civic infrastructure like parks and art galleries, repair sheds and tool libraries.
It’s impossible to have infinite economic growth on a finite planet or for all eight billion of us to lead the luxurious lives of billionaires – we can, however, ensure all of our needs are met and still achieve what George Monbiot calls “public luxury”.
There are five big ideas to tackle climate change and the cost of living. My goal is to urge politicians to reject this false binary choice between emissions and inflation – we can address both.
We can’t afford to focus only on the immediate, ignoring longer-term systemic crises. We saw over the course of the Covid pandemic how fast and effective the state could act to provide food and shelter and safety. In this turbulent time of “polycrisis”, we need to think creatively and find solutions that deal with multiple simultaneous problems.
My other hope is that the government will be more hands-on in tackling inflation. There are plenty of levers it could pull that it currently chooses not to. Responsibility is outsourced to the Reserve Bank, whose prescription is higher borrowing costs, higher unemployment and a likely recession. I’m worried that this bitter medicine harms the patient it is trying to save.
If the government acted smartly it could reduce costs, inflationary pressures and carbon all at the same time, reducing the severity of the Reserve Bank’s response.
Climate change and cost of living crises are symptoms of the way our current economic system operates. It’s a product of design and can therefore be redesigned. The great challenge of our age is to lay down new economic tracks to deliver the means for people to live a good life on a healthy planet.
Gareth Hughes is country lead for the Wellbeing Economy Alliance Aotearoa and chairperson of SAFE. He is a former Green MP.