Guest contribution by Eric Worrall
Climate ambitions meet modern monetary theory – a blow to any remaining productive sector of New Zealand’s economy.
Ardern says the climate crisis is “life or death” as New Zealand groundbreaking report calls for sweeping change
Climate Commission recommends switching to electric cars, large-scale agricultural reform and an end to household gas dependence
Tess McClure in Christchurch @tessairini
Wed 9 Jun 2021 12.09 AEST
New Zealand has received a new vision to dramatically reduce its greenhouse gas emissions – including reduced animal numbers on farms, no new gas connections for households by 2025 and a dramatic switch to electric cars in the next decade.
The report highlighted ways New Zealand can meet its greenhouse gas reduction commitments by 2050. These include widespread agricultural reform to reduce methane emissions, reduce herd size by 10 to 15%, end imports of internal combustion engines, eliminate new household gas connections and overall fewer car trips. Some of those changes would have to be dramatic changes: To meet its traffic emissions target, New Zealand would need to increase its electric vehicle market share to 50% over the next 10 years. It is now 1-2%.
When publishing the Commission’s recommendation, Ardern said the report was “one of the most important documents I will receive in my time as Prime Minister”.
She also noted that the road ahead would be challenging for New Zealand. “A roadmap doesn’t change the fact that the road will be steep and tough at times,” she said.
Read more: https://www.theguardian.com/world/2021/jun/09/jacinda-ardern-climate-crisis-life-or-death-landmark-report-new-zealand-electric-cars-farms
The full report is available here, but it’s pretty hard. I have failed to congratulate myself, assure the indigenous peoples of respect, and repeatedly claim that the report is objective. The signal-to-noise ratio makes it almost illegible.
If New Zealand intends to follow the report’s recommendations, New Zealand will likely have to raise large sums of money to subsidize lithium electric cars, build new renewable generators, and build or renovate homes so they can survive New Zealand’s brutal winters without fossil fuels. But the Ardern government probably does not consider lack of funds to be a problem. New Zealand Prime Minister Jacinda Ardern openly advocates modern monetary theory.
According to Wikipedia, MMT’s main tenets are for a government to spend its own fiat money:
- Can pay for goods, services, and financial assets without collecting cash in advance of such purchases in the form of taxes or debt securities;
- Cannot be forced to default on debts in their own currency;
- is limited in its money creation and purchases only by inflation, which accelerates once the real resources (labor, capital and natural resources) of the economy are exhausted at full employment;
- Recommends strengthening the automatic stabilizers to control the inflation rate of the demand recovery rather than relying on discretionary tax changes;
- Bond issues are a monetary policy tool, not a financing tool.
The idea seems to be that governments can print money when they run short, limited by the risk of causing hyperinflation or stagflation. President Joe Biden’s advisors are also said to be fans of modern monetary theory.
While the already wealthy do very well in a loose fiscal environment such as that created by practitioners of modern monetary theory, some might suggest that overprinting has a negative impact, as z suggests. But I think the government can always help retirees with some of the newly minted money if they behave well.
There are well-known ways to contain inflation in an easy fiscal environment. For example, the government could radically increase the labor supply and flood the market with labor to counter demand and drive up wages. More workers seeking the same number of jobs make it difficult to request a raise even as the cost of living goes up.