Climate Change Commission Chairman Rod Carr on tackling climate change, inflation, and what we need from government fiscal policy & RBNZ monetary policy
By Gareth Vaughan
Climate Change Commission Chairman Rod Carr says he's optimistic about New Zealand's transition towards a zero carbon future despite the massive challenges we face, including from inflation.
Carr spoke to interest.co.nz in an episode of the Of Interest Podcast.
In the podcast he discusses the impact on inflation from moves to combat climate change, and from climate change itself, and what can be done to mitigate it. This includes so-called "fossilflation," "greenflation," and "climateflation."
In a world that now has high consumer price inflation I ask Carr whether he's concerned this may slowdown efforts to combat climate change. For example, by reducing petrol excise duty and road user charges to give consumers some relief from high petrol prices while we are trying to wean ourselves off fossil fuels, does the Government risk countering measures such as clean car rebates and cash for clunkers to encourage the take-up of electric vehicles?
We also discuss the big global electrification push and what this is doing to demand for key mined metals and minerals required in the green transition such as copper, lithium and cobalt.
Then there's the rising number of severe weather events, and the impact this has on food product, supply and prices.
"I would not underestimate the challenge that humanity faces in decarbonising our livelihoods and lifestyles. The fossil fuel technology that has been developed and deployed largely since the middle of the 19th century is incredibly powerful as a source of energy. And we have embedded that in our civilisation, in the way we earn our livings, and how we live our lives. And that transition is going to be costly. And that transition needs to be done with urgency. And the consequence is that relative prices will change. The price of high emission lifestyles will rise, and the vulnerability of high emission livelihoods will increase," Carr says.
"The major cause of the consumer price inflation we see today is not climate change or our response to it. The amount of pricing of carbon emissions in the global economy is modest and has only risen slightly over the last decade. The real challenge is that in our response first to the global financial crisis in 2008, and then more recently to the pandemic in 2020, the world's central banks, supported by the world's governments, have created an enormous amount of very low cost credit. And it is that abundance of low cost credit that has put pressure on the demand side of consumer pricing, while the pandemic itself has constrained supply. And that has been compounded in some product supplies, particularly in agriculture products, by the war in Ukraine. So don't over interpret climate as the driver of the current decades high levels of consumer price inflation."
Carr is also a former Chairman, Deputy Governor and Acting Governor of the Reserve Bank. So what does all this mean for fiscal policy, or the Government using spending and tax policies to influence the economy, and the Reserve Bank's efforts to use monetary policy to maintain price stability and support maximum sustainable employment?
Carr says he remains optimistic about the transition to a zero carbon future because there are "very real opportunities" for NZ in this transition. NZ farmers, he says, must face the challenge of showing and leading the world how to create protein and carbohydrates with year-on-year reductions in environmental impact.
"And that if we can understand those opportunities that make for a better, cleaner, greener and healthier society for all New Zealanders by 2050, where we reduce gross emissions from how we earn our livings and how we live our lives, we will see that as an opportunity not a threat. We will see fiscal policy as an investment not a cost, we will see the new jobs that are created as being more sustainable and less vulnerable than the old tasks which we are no longer fulfilling," says Carr.
"And I think that's what the optimism comes from, is from the opportunity that is real. New Zealand is not soldiering alone on this campaign. The world recognises the challenge. Other countries are already seeing and seizing the opportunities. We see it in the way in which the UK has developed offshore wind which it now sells to the world, we see it in Norway that has developed some of the most advanced infrastructure for supporting electrification which it now sells to the world, we see it in China in its advances in the solar panel technology where it is now the world's largest global manufacturer of solar arrays. So there are opportunities here to be not as I said at the bleeding edge, but now that the die is cast , seeing and seizing the opportunities that must be developed to create the more sustainable, low emissions future within the next 30 years."