ShockWaves 106201 Managing the Impacts of Climate Change on Poverty Note 1/3 Policy Note Policy 1/3 Good Development to Manage the Impacts of Climate Change on Poverty Climate change and poverty are inextricably linked. Climate change threatens poverty eradication. But future impacts on poverty are determined by policy choices: rapid, inclusive, and climate-informed development can prevent most short-term impacts of climate change on poverty, while a failure to adopt good development policies could mean more than 100 million additional people are pushed into poverty by 2030. And only immediate emissions-reduction policies can prevent climate change from threatening longer-term poverty eradication. Well-designed policies and international support can ensure miti- gation does not threaten progress on poverty reduction. This is Policy Note 1 (of 3) drawn from Shock Waves: Managing the Impacts of Climate Change on Poverty (2016) by Stephane Hallegatte, Mook Bangalore, Laura Bonzanigo, Marianne Fay, Tamaro Kane, Ulf Narloch, Julie Rozenberg, David Treguer, and Adrien Vogt-Schilb. Climate Change and Development Series. Washington, DC: World Bank. It provides an overview of the report. Policy Note 2 lays out sectoral policy recommendations, and Policy Note 3 discusses the cross-cutting theme of social protection. Poor people and poor countries are the most exposed and vulner- can be pulled into poverty if floods destroy a microenterprise or able to climate-related shocks—natural disasters that destroy live- a drought decimates a herd. Such events can erase decades of hard lihoods; waterborne diseases that become more prevalent during work and asset accumulation and leave irreversible human and heat waves, floods, or droughts; or crop failures from reduced physical losses. Changes in climate conditions caused by higher rainfall and spikes in food prices after extreme weather events. concentrations of greenhouse gases (GHGs) in the atmosphere can worsen these shocks and slow down poverty reduction. To end poverty, climate change and its effects on poor people will need to be factored into poverty-reduction policies. Even Poverty must also be taken into account when designing people who are not poor but who live just above the poverty line emissions-reduction policies. The international community’s goal ­ Figure 1  When disasters hit in the past, poor people were more likely to be affected (panel a) and poor people always lost relatively more than nonpoor people (panel b) a. Exposure b. Vulnerability 100 100 households (% of annual income) Assets or income lost for affected Surveyed households affected by natural disaster (% of total) 80 80 60 60 40 40 20 20 0 0 1 2 3 as i lad 1 at 2 Gu a na Ho iti as rth as a r d i l gu or Vi a m ba ba n S pa al No e E ny alp Af t an h, h, h, ng sh, Gu sh, Ha ur na Te lvad ur M ica ya em um um Sa Ne es es es dl Ke nd nd cig et Ba ade e ad ad ad M a Ho gl gl gl gl n n n n Ba Ba Ba Ba id M Poor Nonpoor Source: See Chapter 3 of the book for a full list of sources. 1 is to maintain climate change below a 2°C increase in global tem- Climate change will worsen these climatic shocks and extreme perature above preindustrial levels. This can remove the long-term events, making it even harder to sustainably eradicate poverty. threat that climate change creates for poverty eradication. But it will require deep structural changes in the world economy— Without good, climate-informed development, changes that will impact the conditions under which poor people climate change could force 100 million more succeed or fail to escape poverty. people into extreme poverty by 2030 Ending poverty and stabilizing climate change will be two unprecedented global achievements and two major steps toward Even the limited changes in climatic conditions we expect in sustainable development. But they cannot be considered in the near future could have a large effect on extreme poverty: isolation. To be socially and politically acceptable, emissions-reduc- ­ our analysis finds that climate change could push more than tion policies need to be designed to protect, and even benefit, poor 100 ­million more people into poverty by 2030. Between now and people. And to eradicate poverty in a sustainable way, poverty-reduc- 2030, emissions-reduction policies can do little to alter the tion policies should contribute to the stabilization of climate change. amount of global warming. But policies can reduce vulnerability For instance, using fiscal resources from fossil fuel subsidy removal to climate change through a combination of targeted adaptation to improve social protection can reduce both poverty and carbon investments and improved socioeconomic conditions. emissions. We use two scenarios to measure how development can reduce This policy note (and the report it is based on) brings together the magnitude of future climate change impacts by 2030. Map 1 these two objectives—ending poverty and stabilizing climate shows how a world with slow and unequal growth—our poverty change—and explores how they can more easily be achieved if con- scenario—is more vulnerable to climate change than a prosperous sidered together. It examines the potential impact of climate change one, because it has more people living in or close to poverty and and climate policies on poverty reduction. It also provides guidance thus vulnerable to any shock, more farmers who are vulnerable to on how to create a “win-win” situation, so that climate change poli- reductions in yields, and less social protection and access to health cies contribute to poverty reduction and poverty-reduction policies care. Good development (development that is rapid, inclusive, contribute to climate change mitigation and resilience building. and climate informed as in our prosperity scenario) can prevent most—but not all—of the impacts of climate change on poverty by 2030. In either scenario, the hotspots where most impacts are Climate-related shocks and stresses, already expected are Sub-Saharan Africa and South Asia. an obstacle to poverty reduction, will worsen with climate change So future impacts of climate change on poverty are determined by policy choices: rapid and inclusive development that includes Climate is involved in most of the shocks that keep or bring social safety nets and universal health coverage will make poor people households into poverty. Poor people are more affected by natu- less vulnerable. But development also needs to be climate informed, ral disasters than wealthier people; this is because they are gener- with investments and development patterns accounting for what we ally more exposed and invariably lose much more in relative know about future climate conditions so they do not create new vul- terms (figure 1). As a result, natural disasters are followed by nerabilities. And it needs to be accompanied by targeted adaptation, increases in poverty. Poor people are also more severely impacted such as upgrades in flood defenses or more heat-tolerant crops. by diarrhea, malaria, and other climate-related health shocks. They are usually not covered by health insurance, and health expenditures can force them to liquidate their assets. And it is Immediate mitigation is needed to remove poor people, with their greater dependence on agricultural the threat climate change represents for income and a larger share of their budget allocated to food, who long-term poverty eradication feel the greatest impact from crop losses or food price hikes Our ability to manage increasing climate change impacts is limited. caused by droughts and other extreme climate events. Without emissions-reduction policies, impacts could be cata- Making things worse, poor people have less of a safety net to fall strophic in the long term (after 2050). In Europe, the summer 2003 back upon. They own fewer assets, hold less savings, and have less heat wave, which led to more than 70,000 deaths, could become an access to financial support from family, community, the financial “average” summer at the end of this century—meaning that, by system, and even social safety nets to prevent, cope, and adapt. The 2100, every other summer would be warmer than the 2003 one. result is that poor people are disproportionally impacted. Climate change is also expected to reduce crop yields and increase 2 Map 1  Policies that promote good development can reduce the impact of climate change on poverty by 2030 (Increase in number of extreme poor people due to climate change (% of total population)) a. Prosperity scenario Less than 0.01% 0.01% to 2% 2% to 6% 6% to 10% No data b. Poverty scenario Less than 0.01% 0.01% to 2% 2% to 6% 6% to 10% No data Source: World Bank (IBRD 41903 and IBRD 41904, September 2015). See chapter 6 of the book for full details. 3 Figure 2  Climate change can significantly reduce food availability in poor regions a. Sub-Saharan Africa b. South Asia 90 90 Daily calories per capita availability Daily calories per capita availability relative to developed countries relative to developed countries 80 80 in 2015 (%) in 2015 (%) 70 70 60 60 2000 2030 2050 2080 2000 2030 2050 2080 No climate change Low emissions High emissions High emissions without CO 2 fertilization Source: See chapter 2 of the book. agricultural prices, making it more difficult to ensure food security Figure 3 Revenues from a domestic carbon tax in regions like Sub-Saharan Africa and South Asia, even with more could help increase social assistance trade and technological improvement (figure 2). And unabated cli- mate change creates long-term risks to development and well- 250 being that are still difficult to quantify. The need for climate Revenues from a carbon tax, as a percentage of current social stabilization arises from a risk management approach that accounts 200 for threats that are created by long-term impacts and the fact that 150 assistance GHG emissions lock us into irreversible warming. 100 To keep long-term impacts on poverty in check, global tem- peratures need to be stabilized at a safe level—which implies that 50 net global carbon emissions be brought down to zero before 2100. 0 Such an ambitious goal requires governments to act now to imple- 5 10 20 30 ment emissions-reduction policies. These policies will benefit US$/tCO2 poor people over the long term, thanks to avoided climate change Low income Lower-middle income impacts, and can be designed not to slow poverty reduction over Upper-middle income High income the short term. Note: tCO2 = tons of carbon dioxide. All countries should pursue emissions-reduction options that provide local and immediate benefits (such as less pollution, better assistance or other investments (such as access to improved drink- health, improved energy access and efficiency, reduced energy ing water, sanitation, or modern energy) that benefit poor people. expenditures, and higher agricultural productivity). But to stay on a But in some poor countries domestic resources will be insuffi- pathway compatible with the complete decarbonization of the econ- cient to protect poor people, and support from the international omy before 2100, countries will have to do more than implement community is essential. This is particularly true for investments that “win-win” options, sometimes facing net costs and trade-offs. involve high immediate costs but are urgently needed to prevent Fortunately, most governments can protect the poorest using irreversibility and lock-ins into carbon-intensive patterns (such as new redistributive policies or strengthening their existing social for urban transport, energy infrastructure, or deforestation). protection system, potentially using the resources raised by climate The changing climate as well as policies to mitigate climate policies. In most countries, the resources that could be raised by a change both impact poverty. The best way forward is to design carbon tax (or a reform of energy subsidies) are significant com- and implement solutions to reduce poverty and stabilize climate pared with current social assistance transfers (figure 3). Even a low change as an integrated strategy. carbon tax would make it possible to significantly scale up social SKU 32967 4