Budget 2023

Sustainable economies need bold Budgets, not business as usual

Michael Worth
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The Budget is an exercise in resource allocation – trying to divvy out a limited pool of money across an almost endless list of New Zealand’s needs and wants. Nearly infinite demand but restricted resources: it’s the underlying challenge for all economics. But with some creative thinking and ideas, Budget 2023 can deliver meaningful outcomes for people and the planet.

Using tax as a tool to achieve a circular economy

In our 2022 report The Circular Revolution, we called for taxation measures to penalise high emitters and those contributing the most to landfill. Environmental taxes are effective and used widely across the globe to encourage the shift to a more circular economy – one where we redesign, reuse and recycle wherever possible. 

One approach has been proposed by The Ex’Tax Project, which puts forward the idea of a ‘taxshift’. Put simply, it wants to tax pollution, not people. It says moving the tax burden from labour to pollution and resource use would be fairer for everyone. Having run the numbers, the Ex’Tax group forecasts the shift would be budget-neutral, while boosting EU GDP by 1.6% and employment levels by 3%, alongside a fall in carbon emissions of 7.1%. Meanwhile, those on the lowest two income quintiles grow their real income by 4% and those on the highest three income quintiles are up by 1%.

It’s pretty compelling reading and it demonstrates creative thinking and the right taxation could have benefits for everyone: Sustainability, higher incomes, less pollution and a more resilient economy. It would be fantastic to see some of that thinking in Budget 2023. 

A trading platform where you can sell your energy rations 

We can only generate so much power, and yet our demand for energy is seemingly bottomless. How do we divvy out power so that it’s fair? I believe we need an energy trading platform – and New Zealand is the perfect place to lead the world in creating and launching one. 

The idea of tradable energy quotas (TEQs) has been around for decades. Each individual and business gets their own fossil fuel ‘ration’, a bit like a digital currency. When you buy fossil fuels, you pay in cash and you also spend some of your TEQ budget. If you are a low user of fossil fuels, you can sell them to someone else over the platform. As researcher and activist Deirdre Kent puts it: “Buying and selling is as easy as topping up a mobile phone or Snapper or HOP card for bus trips.”

Energy is perhaps the most valuable physical resource we have, and we should be allocating it as equitably as possible. Why shouldn’t you be rewarded if you aren’t using fossil fuels? And, if a billionaire wants to buy a private jet and keep filling it with fuel, they can pay the rest of us for the privilege. 

New Zealand is ideally placed to launch a TEQ platform. We have a small economy that can lead the way on this type of tech, we have had digital payment platforms for decades and with open banking we could deliver rapidly a platform that securely integrates with your banking apps. 

A TEQ platform would disincentivise fossil fuel use and incentivise zero-emissions transport. This is vital, because we’re stuck in a vicious cycle of continuously using more energy to create more energy generation, and always losing efficiency. It doesn’t matter how many wind farms we build or how many batteries we invent, using less energy would have enormous advantages for our economy and our environment. Often the most sustainable choice is making better use of what you already have.

I would love to see Grant Robertson announce a TEQ scheme in the Budget as it would massively accelerate New Zealand’s ability to reach our ‘net zero by 2050’ carbon emissions target. 

Making money for green projects, not houses

I’d also like to see the Government thinking about how money is created. Broad money creation occurs through bank lending, almost always for houses. We’re effectively creating money simply to churn it into a damaging cycle of ever-higher house prices, notwithstanding the odd dip like we’re experiencing now. Instead, why not create money in the first instance for lending to green projects, before that money goes into circulation to buy houses? It’s a big idea, but the flow of money is the lifeblood of the economy, and making it serve a green purpose first could transform sustainability in Aotearoa.

Ask your kids what the Budget priorities should be

I know asking for major tax changes and spending when we’re potentially heading for an economic downturn is unrealistic. But why should it be? Taking a short-sighted approach to national spending is sacrificing the future of our country and our children. We don’t need to see sustainability choices as a ‘nice to have if you can afford it’ option. That’s a false choice. Ask your children how they would like to see our money being spent, and they’ll tell you this isn’t a choice, it’s an imperative.