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Analysis of the economic impact of climate change typically considers regional or national economies and assesses its impact on
macroeconomic aggregates such as gross domestic product. These studies therefore do not investigate the distributional impacts
of climate change within countries or the impacts on poverty. This Perspective aims to close this gap and provide an assessment
of climate change impacts at the household level to investigate the consequences of climate change for poverty and for poor peo-
ple. It does so by combining assessments of the physical impacts of climate change in various sectors with household surveys. In
particular, it highlights how rapid and inclusive development can reduce the future impact of climate change on poverty.
V
ery few quantified estimates of the impact of climate change a bottom-up approach starting from the impacts of climate change
on poverty have been proposed1,2. The economic impact of at the household level, in the spirit of previous work on food prices
climate change is almost always analysed at aggregated lev- and poverty 18,19. This section summarizes the main findings of this
els3. Studies consider regional or national economies, with various report on the impact of climate change on poverty and poor peo-
sectoral breakdowns, to assess the impact of climate change on ple, but also reports on new results from analyses done after the
macroeconomic aggregates such as gross domestic product (GDP) publication of the report.
or aggregate consumption. Most studies therefore show that poor Findings confirm that poor people may be heavily affected
countries are more vulnerable than rich coutriesnot that poor by climate change even when impacts on the rest of the popula-
people are more vulnerable than rich people412. A few studies have tion remain limited. Many household surveys with self-reported
investigated the implications of such aggregate impacts for house- shocks show that poor people are more often affected by environ-
holds, and have looked at impacts on poverty and poor people13. But mental shocks, that poor people are losing morerelative to their
these studies follow a top-down approach where aggregate impacts wealthwhen they are affected by a shock, and that poor people
are estimated first, and the micro-level consequences for households receive less post-shock support from friends and family, the finan-
are considered second. cial system, and social safety nets. Using Demographic and Health
There are good reasons to start with the impact of climate change Survey (DHS) data and hazard maps, we find that poor people are
on economic growth when investigating the impact on poverty. We more often exposed to floods, droughts, and extreme heat20,21. In
know that aggregate economic growth is fundamental for poverty Nigeria, for instance, the most poor 20% of people are 50% more
reduction: in the past decades, most of the reduction in poverty was likely to be affected by a flood, 130% more likely to be affected by a
achieved by growing the size of economies, not by redistributing drought, and 80% more likely to be affected by a heat wave than the
income14,15. But economic growth is not the only channel through average Nigerian. Case studies in Bangladesh, India, and Honduras
which climate change can affect poverty, and aggregated approaches also suggest that poor people are losing two to three times more
are insufficient. than non-poor people when hit by a flood or storm. Climate-related
First, climate impacts on aggregate economic metricssuch as shocks can keep people in poverty by making it more difficult for
GDPand impacts on poor people may be only weakly correlated. households to accumulate assets, regularly wiping out their stock
Poor people represent an extremely small share of national income of assets, or even creating irreversible impacts on human capital
for instance the income of the poorest 20% of the households in (through health or educational impacts)2228.
Panama represent only 3% of GDPso the impacts of climate change These findings support a bottom-up approach, based on individual
on poor people may have almost no impact on national income. or household-level vulnerability, instead of a macro-level approach.
One can imagine a scenario where only the poorest are affected by To follow such an approach, we use a global database with 92 house-
climate change: in that case, GDP would barely change, but poverty hold surveys that describe the current distribution of income and
may increase nevertheless. Second, the sectors and occupations rep- occupations in 92 countriesthe International Income Distribution
resented in models of national economies may not be the ones that Data Set, created at the World Bank. Then, we use micro-simulation
provide income to many poor people. For instance, non-commercial techniques2932 to project the evolution of these households until
extraction from forest and other ecosystems represents up to 30% of 2030, driven by demographics and socioeconomic changes.
consumption in some poor tropical communities, reducing poverty In our model, the population of each country is represented by
by up to 14% (ref. 16). Such consumptions are not represented in a set of thousands of representative households, described by the
national accounts and macroeconomic models, which cannot capture share of the countrys population they represent (which is referred
the poverty effects of climate change impacts on ecosystems. to as their weight) and their characteristics, namely the number
of people in the household and their age, education level, sector of
The poverty impact of climate change employment, employment status, and income. To model the rep-
In a recent World Bank report (Shock Waves: Managing the Impacts resentative households of the future, we change the income and
of Climate Change on Poverty17) and in 15 associated background weight of each household in the model to reflect macro-economic
papers, we analysed the impacts of climate change on poverty using changes. The households weights are adjusted so that the total
Global Facility for Disaster Reduction and Recovery, World Bank, 1818 H Street NW, MC 6-606, Washington DC 20433, USA. 2Office of the Chief Economist,
1
Sustainable Development Practice Group, World Bank, 1818 H Street NW, MC 6-606, Washington DC 20433, USA. *e-mail: jrozenberg@worldbank.org
Agriculture
Prosperity scenario
(max. impact) Health
Labour productivity
Disasters
Prosperity scenario
(min. impact)
Poverty scenario
(max. impact)
Poverty scenario
(min. impact)
Figure 1 | Number of additional people in extreme poverty in 2030 because of climate change, in the four scenarios. We use two socioeconomic
scenarios poverty and prosperity with different assumptions on population and productivity growth and inequality and two climate impacts
scenarios, with low-impact and high-impact assumptions on climate change physical impacts.
120
Climate change impact scenario
People living in extreme poverty by 2030 due to climate change
Low
100
High
80
(million)
60
40
20
Figure 2 | Climate change impacts through each of the five channels, sampled from 1,200 scenarios in 92 countries. Each cell shows the number of
scenarios with a given income of the poor in the baseline in 2030 and a given impact of climate change on the impact of the poor.
assumptions and in particular on poor peoples income (the poorer people are particularly bad (for instance, larger than 5% of their
the people, the more they lose as a fraction of total consumption income) are mostly scenarios in which poor people would be poor
when food prices increase). This finding has concrete implications: in 2030 even in the absence of climate change. It shows very clearly
in a risk-based framework where bad scenarios are particularly that climate changeat least by 2030is a poverty multiplier: it
important, it means that knowing more about possible bad out- makes poor people poorer, and it increase the poverty headcount.
comes for agriculture pricesand how to avoid themshould be In terms of interventions, it means that policies that reduce pov-
apriority. erty in the scenario without climate change also reduce the impact
The initial study showed that rapid development is a good way of climate change. In other terms, poverty reduction, if well done,
of reducing the impact of climate change, at least up to 2030. The is adaptation.
new scenarios also confirm this finding and the idea that lifting
people out of poverty as soon as possible would reduce the future Comparison with previous approaches
impacts of climate change on poverty. Figure3 shows the impact This bottom-up approach also allows us to assess aggregated
of climate change on the income of the poor (here, the bottom impacts by summing up the individual-household impacts
20% in terms of income or consumption in each country) versus resulting in what we call national private household income losses,
the income of the poor in the reference scenario (without climate as a proxy for the gross national income (GNI). Some high-income
change) in 2030. Each cell shows the number of scenarios with a households may be missing from the surveys so we do not capture
given income of the poor in the reference scenario in 2030 and a 100% of the national private households. This calculation only
given impact of climate change on the income of the poor. It also accounts for a subset of all economic impacts, since it focuses on
shows that the scenarios where climate change impacts on poor households, and provides an estimate that is largely independent of
20
8
4
in 2030 (%)
10
2
0
5
0
4
Figure 3 | Income loss caused by climate change for the poorest 20%, as Figure 4 | National private household income losses (%) due to climate
a function of income of the bottom 20% in the baseline in 1,200 baseline change in 2030, in 1,200 baseline scenarios in 92 countries. PPP,
scenarios in 92 countries. PPP, purchasing power parity. purchasing power parity.
existing assessments which are based on economy-wide data and the richest households who especially in poor countries sometimes
focused on macroeconomic impacts. Figure4 provides the relation- represent a large share of the economy.
ship between current (2015) GNI per capita (on the x-axis) and pri- These weaknesses mean that the bottom-up approach is not
vate household income loss (as a percentage of private household meant to replace a top-down approach based on macroeconomic
income). It shows that countries that are poor today are likely to lose models (computable general equilibrium models or others). But it
more from climate change in terms of private household income in provides an important complementary view, based on independent
the futureas already flagged in the literature4,6,8,45. data sources and methodology, focussing on the impact at the indi-
Estimated aggregate losses tend to be higher than most existing vidual and household scale. This view is made particularly impor-
estimates of aggregated economic impactseven though it is diffi- tant by the fact that climate change is expected to affect the poor
cult to provide a quantified comparison because we do not have esti- disproportionally and that the impact on poverty may be more wor-
mates for developed countries. However, our results are consistent risome than the impact on aggregate GDP (a point also raised in the
with previous research in that they are highly heterogeneous across IPCC fifth assessment report1).
countries, with higher aggregate impacts in poor countries. Impacts Here, we find that impacts on the poor are likely to be larger than
are highly dependent on reference assumptions, with significantly the average impact, even within countries. Figure5 plots the income
higher impacts when the population is poorer in the reference sce- losses at the aggregate level (x-axis) and for the bottom 40%, that is,
nario, with lower productivity, higher share of the budget dedicated the 40% of households with the lowest income in the country (this
to food, less access to basic infrastructure (which affects exposure metric builds on the shared prosperity metric used by the World
to diarrhoea) and more people working in low-productivity agri- Bank47). The figure mixes results for all developing countries in our
culture. There are positive impacts on some countries and some database, and for all baseline scenarios. It is, however, incomplete,
scenarios, largely linked to reduced exposure to disease (especially as we are missing results for developed countries. Acknowledging
where malaria is expected to become less prevalent 46) and impacts this limitation, we find that the impacts on the bottom 40% are 70%
on agricultural revenues where they are positive. larger than those on the average population. As stressed elsewhere,
These results are based on a very different approach compared the fact that climate change worsens existing inequalities creates
to previous estimates, with different strengths and weaknesses to an additional rationale to reduce emissions and stabilize climate
other methodologies. The main strength of our approach is a bet- change at a low level48.
ter accounting of the situation and vulnerability of households, and
the use of household survey data (instead of national accounts) that Implications for future research
may better represent household sources of income, especially for Our exploration of micro-level vulnerability remains very simple
the poorest households who represent a very small share of aggre- and opens avenues for future research along multiple dimensions.
gate economic output and consumption. The main weakness is the First, our analysis should be completed by an assessment of the
absence of an internally consistent macro-economic framework impacts that climate change mitigation actions can have on the poor
with interactions across sectors (for instance, if agricultural output through energy and food prices and other impacts on livelihoods. In
is significantly reduced, it has no impact on the non-agricultural sec- the short to medium term, this impact is likely to be more detrimen-
tor or ability to invest in other activities). Our bottom-up approach tal to the poor than the impacts of climate change if not corrected by
also misses some of the role of investment and international trade, redistribution policies and social protection.
as it is only taken into account in food prices scenarios, and there Second, as we already mentioned, a better and more exhaustive
are concerns on the quality of household survey data, especially for representation of the channels through which climate change affects