CLIMATE CHANGE AND

INEQUALITY

Dr. Iqra Mushtaq

DOES CLIMATE AFFECT GROWTH
AS WELL AS LEVELS OF OUTPUT?

• This is an open question. While level effects are

straightforward to rationalise (for example,
higher temperatures reduce agricultural output),
the underlying mechanisms behind growth
effects are less clear.
• In developed countries, growth effects seem less
likely because growth is shaped by new
innovations and technological progress. In
developing and emerging economies, growth
effects are more of a possibility because growth
is shaped to a greater extent by events and
institutional change.
• Higher temperatures may affect investments if
climate-induced scarcity reduces savings and
investments at low income levels, or if climate events
affect institutions through civil unrest and conflict.
• It is also possible that climate shocks such as natural
disasters, droughts and other extreme weather could
result in persistent level effects if they cause people
to become trapped in poverty (Balboni et al, 2021).
• Understanding the relevance of these
mechanisms almost certainly requires a more
micro-founded examination and understanding
of the relationship between climate change,
growth and development.
W H Y A R E PO O R ER C O U N T R IE S M O R E
A F F EC T ED B Y M A N - M A D E C L IM AT E
CHANGE?

• Climate change aggravates the effects of population growth, poverty,

and rapid urbanisation. The climate crisis is likely to push millions
further into poverty and limit the opportunities for sustainable
development.
• Impoverished families in developing countries are often the least to
blame for man-made climate change – yet they typically bear the
worst of the consequences.
• One example is island states in the Caribbean. In 2020 the region had
a record-breaking 30 tropical storms - including six major hurricanes.
• On islands such as Antigua and Barbuda, experts say that many
buildings have been unable to withstand the intense winds these
storms have brought.
 HOW RESPONSIBLE IS THE
DEVELOPING WORLD FOR THE
C L I M AT E C R I S I S ?

• Developing countries have historically contributed a very

small proportion of the damaging emissions driving
climate change - while currently the wealthiest 1% of
the global population account for more than double
the combined emissions of the poorest 50%.
• The G20 is responsible for around 80% of global
greenhouse gases and a similar proportion of carbon
dioxide, the gas produced by burning fossil fuels that is
the main cause of the rise in global temperatures which
are triggering an increasing intensity of heatwaves,
droughts, floods and storms.
WHAT ARE RICHER NATIONS
DOING TO HELP?

• The mounting economic cost of the climate crisis in the

developing world will far exceed financial assistance that has
been pledged by richer nations, a UN report recently warned.
• The cost of climate impacts in developing countries could be up
to $300bn per year by 2030 and $500bn per year by 2050, the
analysis found.
• This is between five and 10 times higher than the financial aid
richer countries have pledged to support countries dealing with
worsening effects of global heating.
• Securing finance to help poorer nations was a central aim of
policy makers.
 S H O U L D W E A LT H I E R
N AT I O N S PAY C L I M AT E
C H A N G E R E PA R AT I O N S ?

• Some argue that nations should pay

reparations to vulnerable countries for the
damage already caused by climate change.
• Wealthy nations have never acknowledged
legal liability for the impact of their
emissions, most likely because the bill
would be astronomical. Scotland is the only
country promising to donate to a
compensation fund for countries whose
economies have been damaged by climate
change with a £1m pledge.
 CLIMATE CHANGE
AND INEQUALITY

• In recent decades, global economic

growth has lifted millions out of extreme
poverty and reduced inequalities
between countries.
• But unmanaged climate change
threatens to set back that progress by
damaging poverty eradication efforts
worldwide, and disproportionately
affecting the poorest regions and people.
• The evidence is rising: a
World Bank report estimated that an
additional 68 to 135 million people could
be pushed into poverty by 2030 because
of climate change.
• The lowest income countries
produce one-tenth of emissions,
but are the most heavily impacted
by climate change.
• Vulnerable populations in these
countries suffer damaging
outcomes in terms of health, food
and water, education and more.
• Developing countries have a
window of opportunity to put
mitigating policies in place.
• The World Bank reports that only one-tenth of the
world's greenhouse gases are emitted by 74 lowest
income countries, but they will be most affected by the
effects of climate change.
• Compared to the 1980s, they have already experienced
approximately eight times as many natural disasters in
the past 10 years.
• By 2050, unchecked climate change might force more
than 200 million people to migrate within their own
countries, pushing up to 130 million people into poverty
and unravelling decades of hard-won development
achievements (WEF, 2023).
IMF shows that if the most dire projections of future
economic damages in the current scientific literature
hold true, climate change would reverse the gains of
the past few decades and cause inequality between
countries to rise again.

Within countries, the impacts of climate change also

risk worsening inequality.
• At the same time, actions taken to curb warming could have an unwelcome
effect on inequality, if climate policies prove too burdensome for poor
countries. Such actions need to be complemented by measures to offset
the costs on the poor and vulnerable across and within countries.
• We view mitigating climate change as a necessary condition for
sustainably improving living standards around the world. At the same time,
we maintain that distributive and procedural justice must be at the
forefront of every stage of environmental policymaking. In planning,
development, and implementation, the effort to reduce emissions must be
at the service of broader objectives of
• development, such as poverty and inequality reduction, the creation of
decent jobs, improvement of air quality, and improvement of public health.
•Low-income nations are more exposed to
environmental hazards and pollution and have a harder
time recovering from the impacts of climate change,
according to the Intergovernmental Panel on Climate
Change (IPCC) Fourth National Climate Assessment
Report.

•For example, it takes longer for low-income

communities to be rebuilt after natural disasters, and
many people in poorer nations don’t enjoy the same
social safety nets as those in wealthier nations if their
livelihood is crippled by a climate disaster.

•There are also geographical considerations. Many

developing nations are coastal, and therefore more
vulnerable to storms and floods.
•According to the United Nations Development
Programme, developing countries suffer 99% of the
casualties attributable to climate change.
 H O W D O E S C L I M AT E C H A N G E
S H A P E I N E Q UA L I T Y, P OV E RT Y
A N D E C O N O M I C O P P O RT U N I T Y ?

• Persistent climate change will have

dramatic effects on inequality, poverty
and economic opportunity. At the same
time, poverty and inequality contribute to
climate change.
• For example, social polarisation and
income inequality within countries directly
affect support for policy action.
• There is also huge inequality in the
historical contribution to climate change.
The UK and other advanced economies
are largely responsible for either
generating or consuming the vast
majority of emissions historically.
 Yet without action from developing
countries, which collectively account for
generating 60% of emissions today and
almost all emissions growth going
forward, global emissions reductions
will not be achieved (
Wolfram et al, 2012).

HOW TO ‘Degrowth’ is not a solution. We

need a bigger, cleaner and more
REDUCE inclusive global economy.
EMISSIONS?

But, developing economies, which are

rightly focused on growth and
development to reduce poverty and
increase relative living standards, will
increase emissions, unless they can be
decoupled from growth and
development.
Low-carbon growth opportunities do exist (
Acemoglu et al, 2012; Aghion et al, 2016,
Van Reenen, 2020; Stern and Valero, 2021).

In advanced economies, growth is constrained by new

innovations and technological progress.

Investments in new low-carbon solutions could fuel a

new industrial revolution. But this is not guaranteed.
• Differences in values and political constraints could limit
innovation and the structural transformation needed to mitigate
climate change (Besley and Persson, 2021).
• Further, even if a low-carbon industrial revolution in developed countries
unfolds, constraints on technology adoption and integration may
impede the decoupling of emissions in developing and emerging
economies.
• Understanding what these constraints are and how amenable they are to
policy intervention is critical if we are to reduce emissions and increase
global prosperity.
 • In June 2021, temperatures in the Pacific
Northwest hit a record high of 46.6°C during
a four-day heatwave, killing more than 200
people.
• Scientists from World Weather Attribution
analysed that this heatwave would have
been virtually impossible without climate
change.
• The heavy rainfall events that led to severe
W E AR E A LR E A DY B E I N G flooding in Western Europe at the same time
H AR M ED BY C LIM AT E were also found to be made more likely by
climate change.
C H AN G E .
• These events dominated headlines around
the world.
• Other events in 2021 – severe flooding in
Ghana, Niger, India, Afghanistan and South
Sudan, drought and heatwaves in Central
Asia, Tropical Cyclone Seroja, which hit
Indonesia in early April, and Hurricane Grace,
which hit Haiti two days after it experienced
a M7.2 earthquake – received less attention.
• Socially and economically disadvantaged groups
bear the brunt of climate change and other
environmental risks. Whether making comparisons
between or within countries, the poorest and most
vulnerable tend to be more exposed, lose a greater
share of their wealth when disaster strikes, and
have fewer resources to cope with the
consequences.
• But vulnerability is not simply a descriptive way to
delineate the consequences of environmental
disaster. Poverty, inequality and economic
opportunity are directly shaped by environmental
risk, which in turn affects vulnerability to future
environmental shocks.
 • To date, much of the emphasis has
been on inequality across countries.
Evidence suggests that total
damages from natural disasters and
higher temperatures are larger in
C L I M AT E C H A N G E A N D developing countries (Nath, 2021).
I N E Q UA L I T Y A C R O SS
COUNTRIES • Research shows that the relationship
between economic activity and
temperature is non-linear, with
productivity peaking at 13°C and
declining strongly at higher
temperatures (Burke et al, 2015).
• That rich and poor countries appear
to respond similarly when exposed to
the same temperatures raises
concerns about the degree to which
wealthier countries will be protected
from higher temperatures, as well as
the degree to which development will
weaken economic losses as poor
countries become wealthier.
• As poor countries tend to be exposed
to higher temperatures, they currently
suffer and will continue to suffer the
most from higher temperatures.
• Because of larger temperature-driven
reductions in GDP per capita in the
poorest countries, it is estimated that
the ratio between the top and bottom
income deciles is likely to be 25%
larger today than it would have been in
the absence of experienced global
warming (Diffenbaugh
and Burke, 2019).
 There is less evidence on how climate risk
affects inequality within countries.

We need more systematic evidence on how

climate risk and exposure, the consequences
CL IMATE CH ANGE of climate events, the costs of climate
AN D IN EQUAL ITY adaption and mitigation policies and the
benefits from opportunities arising from
W ITHIN transitions to a low-carbon economy affect
COU N TRIES different groups within society.

Understanding these effects is critical if we

are to increase resilience and ensure a fair
and just transition.
 CLIMATE CHANGE AND
PRODUCTIVITY

• To do so, better awareness of how existing disparities interact with climate

risks and policy responses is needed.
• The most vulnerable groups in society have neither the means to protect
themselves against climate events nor to recover from them when they
strike.
• This is likely to exacerbate existing inequalities: when higher
temperatures reduce productivity, earnings and health, and
hurricanes destroy homes and employment opportunities, the
economic situation of those most in need is made more risky still,
and further worsens their economic standing.
• For example, the economic effects of higher temperatures are not restricted to
agriculture.
• Higher temperatures have been shown to affect productivity and injuries in non-
agricultural settings in both developed and developing countries (
Graff Zivin and Neidell, 2014; Colmer, 2021; Somanathan, 2021).
• Even educational attainment has been shown to be affected by higher
temperatures, reducing test scores and learning (Park, 2020; Goodman et al, 2020).
• When schools have air conditioning these effects do not exist and so they affect
children in poorer school districts the most, exacerbating existing disparities in
educational achievement.
 • While progress has been made to
understand inequality in exposure to
environmental risks such as air pollution (
Currie et al, 2021), the distributional
effects of climate change, natural
disasters and climate policy are still little
RESPONSE-WHAT understood.
IS HAPPENING • Rather than focusing solely on climate-
specific policies, it is also important to ask
how broader efforts to improve
economic opportunity and reduce
poverty and inequality can increase
resilience and reduce vulnerability.
 • It will be costly to mitigate the effects of
climate change and to adapt to the climate
change that we are already experiencing. If
policies are to be politically acceptable,
serious consideration must be given to who
is paying.
RESPONSE-
WHAT SHOULD • In the United States, the Green New
Deal and other efforts to link climate
BE DONE change action with economic justice
have been popular. But by placing less
emphasis on market-based
mechanisms, such as carbon taxes,
these policies are likely to be far more
costly.
• Carbon taxes can be linked to economic
justice goals as well (Fried et al, 2020).
• The money raised by carbon taxes should be
redistributed as a lump-sum transfers to
lower-income groups.
• Not only would low-income individuals be
compensated for increases in energy prices,
but they would also come out ahead.
• This would preserve incentives to reduce
emissions, while making it very clear that
the less wealthy would not be paying for it.
• If inequality and climate change are not
addressed together, it is unclear
whether either can be addressed at all.
 REFERENCES

• https://www.economicsobservatory.com/how-does-climate-change-shape
-inequality-poverty-and-economic-opportunity
• https://www.independent.co.uk/climate-change/infact/developing-
countries-climate-crisis-b1958491.html
• https://www.imf.org/en/Publications/fandd/issues/2021/09/climate-chang
e-and-inequality-guivarch-mejean-taconet
• https://www.weforum.org/agenda/2023/01/climate-crisis-poor-da
vos2023/
• https://www.weforum.org/agenda/2023/01/climate-crisis-poor-
davos2023/