Worldwide, close to 1 billion people live in poverty on less than $1.25 per day and more than 800 million are undernourished. Many of them are on the front lines of climate change. Extreme weather and droughts can put their food and water supplies at risk, raise prices, and destroy homes and businesses that are often built at the edges of livable land. They have little resilience to the volatility or economic havoc climate change can bring.
More shocks can also pull those just above the poverty line under, threatening to reverse decades of progress toward eradicating extreme poverty. At the World Bank Group, we are working on ways to address both climate change and poverty at the same time.
As climate negotiators gather in Lima for the latest round of UN climate talks, the impact on poverty should run throughout the discussions of risks and solutions.
“We’re only beginning to see the clear impacts of climate change. As these impacts deepen, the poor will have less means to cope. Climate change will put at risk the international community’s goal of ending poverty,” said World Bank Group Vice President and Special Envoy for Climate Change Rachel Kyte.
“To protect the poor, we must invest in resilience, including social protection measures, access to insurance, natural resources restoration – everything that will help them bounce back better when shocks come,” Kyte said.
That combination of climate action and social protection is important and urgent. The recent Turn Down the Heat report warns that the world will see the effects of temperatures about 1.5°C above pre-industrial times even with concerted action to lower emissions, and much worse if emissions continue unabated, making poverty even harder to escape. Even 1.5°C of warming will bring more severe droughts and sea level rise that can flood low-lying areas and contaminate coastal cropland.
Protecting the Poor and the Planet
Policies for mitigating and adapting to climate change must be designed to protect the poor. That is why the World Bank works with client countries to analyze the impacts of climate change risks and responses on poverty.
Research underway this year and next is finding that climate-related policies paired with social policies can both reduce poverty and modernize economies that were once carbon-intensive.
British Columbia, for example, has shown how revenue from a carbon tax can provide targeted support for the poor while also reducing business and income taxes. The Canadian province created a low-income climate action tax credit that provides quarterly payments to the poor to offset higher prices. Today, British Columbia has one of the lowest income taxes in the country, a thriving economy fueled in part by green growth, and its emissions have fallen.
Similarly, governments can reduce harmful fossil fuel subsidies and use the savings to create targeted support for the poor who most need assistance when fuel prices rise. Studies have found that fossil fuel subsidies tend to be inefficient and regressive: The wealthiest 20 percent of households in low- and middle-income countries receive about six times more of the benefit than the poorest 20 percent. Building in new sources of support for the poor – such as energy credits, reduced public transit fares, or cash transfers – while phasing out harmful subsidies can provide the intended support more efficiently.
Building resilience also helps poor communities deal with the effects of climate change. Better land-use planning and improved infrastructure, for example, can reduce vulnerability to future climate change impacts. When Hurricane Tomas hit St. Lucia in 2010, the damage cost the island nation 43 percent of GDP. The World Bank has helped St. Lucia improve data sharing to build back better, reduce future losses, and improve its disaster preparedness and capacity to respond.
Eliminating poverty and keeping it at bay as we deal with climate change requires wider use of what we already know works: well-funded social protection programs that can easily be scaled up in the event of a disaster; the data and capacity to identify the transient poor and provide them with support; and financial inclusion that allows the poor to save and borrow so they can bounce back more quickly from shocks. Access to health care and education are also important for recovering from shocks and getting out of poverty.