If interests rates go up, is it good for climate change by causing people not to buy unnecessary items?

This is a fascinating question! There are many aspects that need to be considered in thinking about, and responding to this question. Firstly, there is the issue of consumption, or over-consumption. With consumption, firstly, we need to recognise the distinction between ‘needs’ and ‘wants’. Needs such as shelter, clothing, food are essential for human survival and wellbeing, i.e., they are ‘necessary’ for survival. Many of these essential needs are even recognised under global agreements such as the Universal Declaration of Human Rights of 1948. Then there are the wants. These relate to our desires, and can change over time and external influences such as advertising. Wants are also necessary when they help improve our quality of life, over and beyond survival. But wants can also be endless, just as human creativity and imagination to imagine wants is endless. This is the territory we are in when we talk about ‘unnecessary items’.

Now to the second aspect of this question – with both needs and wants, and especially with wants, the issue with them is when they have a material footprint that then negatively impacts our climate. Let us pause here to note that there are also other negative impacts such as to biodiversity and social justice. So in other words, we can still enjoy an unlimited amount of seemingly ‘unnecessary items’ if they do not have a material footprint, e.g. playing Uno all day! However, it is quite another matter if the things that we do in order to enhance our perceived quality of life have a material footprint, e.g. buying a new sofa because it looks a little nicer than the older one. In this case, the harvesting, processing, manufacturing, packaging and transport of the new sofa all have contributed to greenhouse gas (GHG) emissions that add to our historic global GHG concentrations in the atmosphere to the extent that it now threatens our quality of life, and survival for some. The irony of it all!  

Finally, on to interest rates, there is a broader question whether raising the interest rates is an effective way to address inflation, especially when the inflation might be caused more by supply-side issues rather than demand-side factors. Leaving that aside, what rising interest rates are expected to do is to reduce our purchasing power as we now are paying more on our loans and mortgages, and have lesser money to spend on other things, especially on satisfying wants (e.g. not buying a new sofa, as opposed to paying for needs, such as housing, food etc.). Therefore, as we tend to buy fewer sofas (and other such wants/desires), we are requiring fewer sofas to be made, and in effect, reducing the carbon pollution from the sofa industry. However, there are several considerations here that would mean that: a) the net effect on climate change is not going to be significant enough (as happened with COVID19, where despite fewer people flying overseas for holidays, emissions still did not reduce to sustainable levels); b) the regressive nature of interest rate rises and associated ‘austerity’ in the tightening of budgets for households might have poor social outcomes, and in turn, poor outcomes for social, democratic and climate welfare in the long run (see what happens to countries around the world where people are unable to pay for essentials).

In conclusion, the answer to the question is: No, as it is neither sufficient in terms of reducing GHG emissions nor is it a socially progressive approach.