Climate change and poverty
Climate change and poverty are inextricably linked. While global warming has both a direct and indirect effect on all Australians, those from lower income households are likely to be hit hardest. Indeed, it is the United Nation’s (UN) view that “social justice cannot be fully realised without aggressively rectifying environmental injustices at the same time”. Left unchecked, the World Bank estimates that climate impacts could force 132 million people into poverty over the next 10 years (World Bank, 2020). Confronting the issue of climate change is therefore not only important in protecting our environment and economy, but it is also a vital step in improving social inequality both in Australia and globally.
Relationship between climate change and poverty (World Bank, 2020)
Global warming has led to an increase in the frequency of severe floods, storms, heatwaves, and drought, which have had a direct—sometimes catastrophic—impact on the natural environment. While natural disasters currently cost the Australian economy an average of $38 billion each year, economists predict that under a low emissions scenario, this cost is expected to increase to $73 billion by 2060 (Deloitte, 2021). Empirical research suggests that those living at or below the poverty line are most vulnerable to the cost of these natural disasters (Hallegatte et al., 2015) via several key channels:
Lower quality assets: The poor typically possess lower-quality assets, including houses and dwellings, which are more likely to be destroyed or loss during natural disasters.
Loss of income: Lower-socio economic households are more likely to depend on livelihoods derived from agriculture and ecosystems that are vulnerable to extreme weather events.
Health impacts: Those in poverty are typically more vulnerable to contracting climate-related diseases such as diarrhoea and malaria given their inferior access to electricity, clean water, and sanitation. This is associated with increased fixed treatments costs as well as a rise in the number of working days lost (Hallegatte & Rozenberg, 2017).
Reduced energy affordability: The rising energy demands associated with an increase in extreme weather conditions has led to higher energy bills. These costs are a greater burden on lower-income households given that they constitute a greater share of these households’ total wealth. Moreover, these households are less likely to have access to investment opportunities in more efficient home appliances and alternate energy sources such as solar.
Underinsured: Poorer citizens are more likely to be uninsured against extreme weather events given the high cost of premiums or the refusal of insurance companies to cover such damage.
Depressed labour productivity: Recent economic modelling suggests that 1°C in global warming may decrease labour productivity by 1-3% for those working outside or without air conditioning (Hallegatte & Rozenberg, 2017).
Reduced food security: Lower income households spend a larger portion of their total consumption on food, leaving them more susceptible to food price shocks. Using household level data across 86 countries—representing 64% of the total poor population—Jafino et al. (2020) show that the rising cost of food associated with climate change is one of the most influential channels for extreme poverty.
There are many channels through which climate change disproportionately affects lower income members of society. With the rate of global poverty reduction slowing in recent years (World Bank, 2020) and further hindered by the recent COVID-19 pandemic, the need to address climate change is now more important than ever. Indeed, by working as a nation to meet our 2050 Net Zero target, we are not only protecting the environment and global economies, but we are also taking meaningful steps to support disadvantaged sectors of our communities.
Climate policy is vital in protecting the poor (World Bank, 2020)
References
Deloitte Access Economics. (2021). Special report: Update to the economic costs of natural disasters in Australia. Retrieved from Sydney, NSW: https://www.iag.com.au/sites/default/files/Newsroom%20PDFs/Special%20report%20_Update%20to%20the%20economic%20costs%20of%20natural%20disasters%20in%20Australia.pdf
Hallegatte, S., Bangalore, M., Bonzanigo, L., Fay, M., Kane, T., Narloch, U., . . . Vogt-Schilb, A. (2015). Shock Waves. THE WORLD BANK. https://doi.org/10.1596/978-1-4648-0673-5
Hallegatte, S., & Rozenberg, J. (2017). Climate change through a poverty lens. Nature Climate Change, 7(4), 250-256. https://doi.org/10.1038/nclimate3253
Jafino, B. A., Walsh, B., Rozenberg, J., & Hallegatte, S. (2020). Revised estimates of the impact of climate change on extreme poverty by 2030.
United Nations. (2020). Social and Environmental Justice For All. Retrieved July 30 from https://www.un.org/development/desa/dspd/2020/09/international-day-for-the-eradication-of-poverty-17-october-2020/
World Bank. 2020. Poverty and Shared Prosperity 2020: Reversals of Fortune. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1602-4.
