Projecting Poverty at the Household Scale to Assess the Impact of Climate Change on Poor People

Abstract:

This paper quantifies the potential impacts of climate change on poverty in 2030 and 2050, in 92 countries covering 90% of the developing world population. It accounts for the deep uncertainties that characterize future socio-economic evolutions and the lack of data regarding the condition and livelihood of poor people. It also considers many impacts of climate change, another source of uncertainty.

We use a micro-simulation model based on household surveys and explore a wide range of uncertainties on future structural change, productivity growth or demographic changes. This results, for each country, in the creation of several hundred scenarios for future income growth and income distribution. We then explore the resulting space of possible futures and use scenario discovery techniques to identify the main drivers of inequalities and poverty reduction.

We find that redistribution and structural change are powerful drivers of poverty and inequality reduction, except in low-income countries. In the poorest countries in Africa, reducing poverty cannot rely on redistribution but requires low population growth and productivity growth in agriculture. Once we have explored the space of possible outcomes for poverty and inequalities, we choose two representative scenarios of the best and worst cases and model the impacts of climate change in each of these two scenarios. Climate change impacts are modeled through 4 channels. First, climate change has an impact on labor productivity growth for people who work outside because of higher temperatures. Second, climate change has an impact on human capital because of more severe stunting in some places. Third, climate change has an impact on physical capital via more frequent natural disasters. Fourth, climate change has an impact on consumption because of changes in food prices.

Impacts are very heterogeneous across countries and are mostly concentrated in African and South-East Asian countries. For high radiative forcing (RCP8.5), the impact of climate change on poverty is 6 times larger in the pessimistic scenario than in the optimistic scenario, illustrating how development and poverty reduction are powerful adaptation tools. Our results stress the urgency of achieving poverty eradication by 2030 in order to limit the negative impacts of climate change on the poor.