Treating Iran’s rent economy by launching a carbon market

Green production– Experts and economists believe that one of the effects of the preferred currency in Iran is inflation due to the strengthening of the monetary base due to the need to provide the necessary resources to cover the costs of purchasing basic goods. According to the Central Bank’s economic deputy, in 1399 alone, the increase in net foreign assets of the Central Bank, which was due to the difference between the purchase of preferential and half-currency, was more than the growth of the total monetary base. This means that the central bank has inevitably generated hot money in large volumes to provide currency for the purchase of basic goods, which is one of the most important reasons for rising inflation.

Of course, inflation in Iran has other reasons as well, such as the sharp increase in banks’ debt to the central bank, which in some way goes back to the government’s performance in the method of allocating resources, especially in the form of mandatory allocations.

However, after the assignment of the preferred currency to the government by the parliament in accordance with Budget Law 1401, it was clear that the legal conditions for the elimination of the preferred currency would be prepared and implemented. The stated purpose of doing this was to prevent price disturbances and to violate the relative price mechanism in society.

With the introduction of the preferred currency elimination approach, which culminated in the announcement of new commodity prices, a persuasive policy of public acceptance was implemented. The appendix focused on arguments for increasing class differences, inadequate distribution, declining productivity, increasing imports, increasing smuggling, reducing production, and so on.

Of course, for the people of the street and the market, the most important issue is controlling the double-digit inflation of forty years, which makes their table smaller every day and puts more pressure on their soul and body. From this perspective, the success of the policy of eliminating the preferred currency depends on controlling inflation. It is clear that by reducing the pressure of government spending to provide foreign exchange for the purchase of basic goods on the one hand and strengthening foreign exchange resources resulting from increased exports of energy and related products, including petrochemicals, steel and cement, and at the same time reducing money transfer costs At the international level, the pressure to strengthen the monetary base from the foreign exchange needs of the central bank will be reduced, and this will reduce some of the inflationary pressure.

But there is another important issue that can overshadow the inflationary consequences of economic surgery, and that is nothing but the exchange rate in the 1401 budget.

In the 1401 budget of the whole country, the exchange rate of 23 thousand Tomans has been considered. This rate was seen in the budget of 1399 in the amount of 12900 Tomans. This rate allows the government to receive more rials for oil currencies from the central bank, thus continuing to put pressure on the monetary base. This means neutralizing the expected results of the current economic surgery.

It seems right that companies, institutions and economic entities export their goods and services at a free exchange rate or offer them to the public, and the government should be based on the facts of the audit and the actual profits and losses realized with The issue is to implement monetary and fiscal policies, but this situation, which is the height of the exchange rate, directly puts pressure on the monetary base and adds to the inflationary pressure.

Now the economy is facing an equation in which on the one hand the liquidity pressure is reduced by reducing the cost of supply of basic goods on the government and the central bank, and on the other hand the liquidity pressure is increased by increasing the monetary base resulting from the exchange rate of 23,000 Tomans. Will import monetary base. This could mean that economic surgery could not be expected to reduce inflation.

But what is the solution?

Aware of the forthcoming issue, the government seems to be trying to absorb some of the liquidity created by strengthening the tax system, imposing restrictions on banks’ money-making activities, and issuing government bonds. But the double pressure on liquidity is exacerbating the recession. An economy that has shrunk dramatically over the past decade and effective employment has declined. From this perspective, reducing the amount and circulation of liquidity can have major negative effects on macro variables. From this perspective, the government does not seem to want to create a recession in favor of controlling inflation, especially since domestic production is strengthening its foundations by increasing the exchange rate.

The answer can be found in the creation of a national carbon market mechanism and green production.

The Islamic Republic of Iran, as an energy-oriented country, has a large and deep market in the field of energy. Oil, gas and gas condensate are the most important part of the country’s exports. Other industries, taking advantage of this, offer their products in various fields, including petrochemicals and heavy metal and mineral industries in domestic and foreign markets. Huge sums of resources are generated from this revenue. It is estimated to be worth $ 320 billion.

The 13th government, by planning and activating the national carbon market and setting rates for energy consumption and defining carbon taxes for emissions, will have enormous access to sustainable financial resources, which will facilitate and move towards sustainable development. Reduces government dependence on foreign exchange resources. On the other hand, it leads the economy to increase productivity.

With the launch of the carbon market and the modeling of green production, consumption is reduced, productivity is enhanced and sustainable employment is created. In this way, the areas of increasing inflationary pressure are significantly weakened.

Remember that green business strategies based on the principle of environmental sustainability are the key to a competitive advantage in the coming decades.