Managing the Impacts of Climate Change on Poverty- World Bank Report

Ending poverty and addressing climate change are the two defining issues of our time. Both are essential to achieving sustainable global development. But they cannot be considered in isolation.

Climate change threatens the objective of sustainably eradicating poverty. Poor people and poor countries are exposed and vulnerable to all types of climate-related shocks, natural disasters that destroy assets and livelihoods; waterborne diseases and pests that become more prevalent during heat waves, floods, or droughts; crop failure from reduced rainfall; and spikes in food prices that follow extreme weather events.

According to World Bank Group Report on Managing the Impacts of Climate Change on Poverty, Climate related shocks also affect those who are not poor but remain vulnerable and can drag them into poverty, for example, when a flood destroys a microenterprise, a drought decimates a herd, or contaminated water makes a child sick. Such events can erase decades of hard work and asset accumulation and leave people with irreversible health consequences. Changes in climate conditions caused by increasing concentrations of greenhouse gases (GHGs) in the atmosphere can worsen these shocks and slow down poverty reduction.

Ending poverty will not be possible if climate change and its effects on poor people are not accounted for and managed in development and poverty-reduction policies. But neither can the climate be stabilized without acknowledging that ending poverty is an utmost priority.

The report states that the goal of maintaining climate change below a 2°C increase in global temperature above pre-industrial levels, the very goal the international community has committed to will require deep structural changes in the world economy. These changes will affect the conditions under which poor people succeed or fail to escape poverty.

Emissions-reduction policies can increase energy and food prices, which represent a large share of poor people’s expenditures. But these same policies can be designed to protect, and even benefit, poor people, for instance, by using fiscal resources from environmental taxes to improve social protection.

Ending poverty and stabilizing climate change will be two unprecedented global achievements and two major steps toward sustainable development, that is, development that balances the economic, social, and environmental considerations. But these two objectives cannot be considered in isolation: they need to be jointly tackled through an integrated strategy.

Poverty reduction is not a one-way transition out of poverty: many people exit or fall back into poverty every year. The fact that, in practice, the net flow out of poverty is much smaller than the gross flows in and out of poverty means that a relatively small change in the gross flows in and out of poverty can significantly affect net flows and overall poverty dynamics.

Today, climate conditions or climate events are already involved in many cases where households fall into poverty. They include price shocks that can be linked to lower agricultural production; natural disasters that destroy poor people’s assets and affect health and education; and health shocks (such as death and illness) that are influenced by climate and environmental conditions (like higher rainfall and more malaria outbreaks, or higher temperatures and more frequent diarrhea).

In addition, climate risks affect the behavior of people, who may reduce investments and asset accumulation because of the possibility of losses and select lower-risk but lower-return activities—a rational strategy to avoid catastrophic outcomes, but one that can keep them in poverty.

The key finding of the report was that climate change represents a significant obstacle to the sustained eradication of poverty, but future impacts on poverty are determined by policy choices: rapid, inclusive, and climate informed development can prevent most short-term impacts whereas immediate pro-poor, emissions-reduction policies can drastically limit long-term ones.