Climate-friendly policies could plunge millions into poverty without redistribution

April 27, 2021

Climate change policies will help the planet but exacerbate poverty in many areas of the world, especially sub-Saharan Africa. (AP Photo/Jerome Delay)

Efforts to reduce climate change in line with Paris Agreement goals could push an additional 50 million people into extreme poverty by 2030 unless widespread economic redistribution efforts are implemented, according to new research.

Without redistribution efforts, a total of 400 million people, largely in sub-Saharan Africa, would be living in extreme poverty by 2030, according to the paper, published April 27 in Nature Communications. The authors of the paper, as well as organizations including the World Bank, define extreme poverty as an income below the international poverty line, currently set at $1.90 per day. 

"It's really important to have these climate policies, but you need to design them so that the policies do not become an additional burden for poor households," said lead author Bjoern Soergel, a climate researcher at the Potsdam Institute for Climate Impact Research in Germany. 

The eradication of poverty is explicitly mentioned in the 2015 Paris Agreement, Soergel and his colleagues wrote, but potential climate mitigation policies, such as a universal carbon price, stricter land-use policies and higher food prices, "could have negative side effects for the global poor."

In order to address climate change without hurting the poor, Soergel and his co-authors proposed a redistributive carbon-pricing program. Under the plan, countries would tax carbon emissions at a progressively higher rate in order to push the market toward the Paris Agreement goal of limiting the global average temperature increase to 1.5 degrees Celsius. 

If the revenue from these taxes were distributed through universal, equally sized payments to every resident of a given country, the number of people in poverty around the world would be reduced by about 6 million. However, if the revenue were distributed in line with current levels of inequality, an additional 50 million people would be forced into poverty. 

"We went for a relatively simple but elegant scheme," Soergel said of the universal payments idea. "You can create this win-win situation where you protect the climate and you reduce the prevalence of extreme poverty." 

Since wealthier people generally consume more carbon-intensive products, many households with more money would see emission prices outweigh the universal payment, Soergel said. But for poorer households, the value of the universal payment would mostly outweigh the emissions-related increase in consumer prices.

"For poor households, what that typically means is they get more back at the end than they paid in the first place in terms of emission prices," he said. 

Soergel wrote the paper alongside his Potsdam Institute for Climate Impact Research colleagues Elmar Kriegler, Benjamin Leon Bodirsky, Nico Bauer, Marian Leimbach and Alexander Popp. Kriegler is also associated with the University of Potsdam.

The researchers used a modeling framework called REMIND-MAgPIE, short for Regional Model of Investment and Development, Model of Agricultural Production and its Impacts on the Environment. The wordy program helps predict future economic performance while incorporating energy and climate concerns.

"It's an integrated model that covers the economy, the energy system, the land use system," Soergel said. 

Notably, the model does not incorporate the effects of climate change itself on global poverty, such as changing weather patterns that can decimate crops. Instead, it is designed to measure how efforts to address climate change will affect poverty. 

It also does not include data from the COVID-19 pandemic, which the World Bank estimates pushed roughly 119 million to 124 million more people into extreme poverty last year. 

Despite these limitations, Soergel believes the paper provides valuable insights that can shape longer-term climate policy. 

"Our study tries to look more at long-term development," he said. "The numbers we give in the paper are, in a way, a pre-COVID baseline." 

Soergel and his colleagues are not the only researchers to find that emissions-related pricing could devastate the world's poor if implemented improperly. In March, Swiss researchers found that adding the cost of carbon removal to food prices would disproportionately impact poor countries. 

If the costs of removing carbon were incorporated into beef prices, for example, Americans would pay 21% to 41% more per kilogram, compared to a 58% to 115% surge for global consumers, the Swiss Federal Institute of Technology researchers found in a PLOS ONE paper

Most research into climate change has found that it disproportionately hurts poor nations. To address this inequity on an international scale, Soergel's team proposed that, in addition to distributing carbon pricing revenues evenly within countries, wealthier nations should contribute a portion of their carbon pricing revenue to poorer countries, especially those in sub-Saharan Africa.  

"You need this combination of the national redistribution and the international climate finance to really get synergy," Soergel said. "There needs to be support, especially from industrialized countries." 

Soergel said studying climate and poverty issues on a global scale inherently "comes with a number of assumptions and simplifications." He said further research should focus on more country and regional-level modeling. 

"It would always be helpful to dig deeper on individual country levels," he said. 

The paper, "Combining ambitious climate policies with efforts to eradicate poverty," published April 27 in Nature Communications, was authored by Bjoern Soergel, Benjamin Leon Bodirsky, Nico Bauer, Marian Leimbach and Alexander Popp, Potsdam Institute for Climate Impact Research; and Elmar Kriegler, Potsdam Institute for Climate Impact Research and the University of Potsdam.

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