How climate policy can fight extreme poverty

A woman working as a tomb crusher adjusts her dress at a site near the Cité internationale des affaires in N'Djamena, April 12, 2021.

A woman working as a tomb crusher adjusts her dress at a site near the Cité internationale des affaires in N’Djamena, April 12, 2021.
Photo: Marco longari (Getty Images)

Climate change and global inequalities are closely linked. The climate crisis disproportionately affects poor people who are more at risk to extreme events and risk losing everything in the event of a disaster.

A new study published Tuesday in Nature Communications shows why it is imperative to tackle these two problems together. Failure to do so could end up meaning that climate change policies place an undue burden on the poor and push people deeper into poverty.

Currently, 1.89 billion people live in extreme poverty, defined by the United Nations standard of living on less than $ 1.90 a day. To see what effect international climate action might have on global poverty, the authors modeled the economic impacts of certain policy approaches. They based their experiences on “shared socio-economic pathways” or SSP that climate modellers invented in the early 2010s, which illustrate how global society, demographics and the economy could change over the next century.

The authors first modeled the path global inequalities will take without any bold new climate change mitigation policies. The results show than under SSP2, which refers to a ‘halfway’ path where socio-economic trends continue, 350 million people will still live on less than $ 1.90 a day by 2030. This means the world will miss out on the un target eradicate extreme poverty by 2030. And that’s probably a conservative estimate because it does not take into account the exacerbating effects of climate change or covid-19, both of which have placed increased economic pressure on populations in difficulty.

The authors then examined how a strict carbon tax, which would meet the objective of the Paris Agreement of keeping global warming indoors 1.5 degrees Celsius (2.7 degrees Fahrenheit) of pre-industrial temperatures – would play into this scenario. They found that if everyone in the world were to pay the same price for shows, an additional 50 million people would be living in extreme poverty by the end of the decade, bringing the total to 400 million.

Next, the researchers looked at what would happen if all nations had access to the domestic revenues provided by the carbon price. They found that this could offset the “negative side effects of climate policy on poverty eradication” and even reduce the number of people living in extreme poverty by 6 million. But even this gradual redistribution would not be enough to offset the side effects of policies in most countries in the poorest regions of the world. In the countries of sub-Saharan Africa, which is the region where extreme poverty is already most prevalent, countries would still operate at a loss.

Fortunately, researchers have found that there is a way to mitigate this: share the burden of carbon pricing fairly rather than evenly.

“To fairly share the costs of mitigating climate change, industrialized countries should financially compensate developing countries,” said Nico Bauer, who works on climate models at the Potsdam Climate Impact Research Institute. and co-author of the study in a report.

The authors examined the effect of combining a carbon tax with an international climate finance mechanism, whereby revenues from carbon prices were collected globally and redistributed equitably. By transferring just 5% of the money that energy sectors in industrialized countries had to pay to pollute, the authors found an international body could raise some 100 billion dollars a year to distribute to poor countries in addition to their domestic income. This could lead to a net reduction in global poverty of around 45 million people by 2030.

“Poverty reduction must therefore be included in the design of climate policies,” Bjoern Soergel, a researcher at the Potsdam Institute for Climate Impact Research and lead author of the study, said in a statement.

It is not a particularly radical climate policy. As the authors note, this level of climate finance “reflects the commitment of industrialized countries” during the negotiations around the 2015 Paris Climate Agreement. In a just world, one would expect that industrialized countries contribute even more. A recent report, for example, suggested that the United States should contribute trillions in international climate finance because the largest historical carbon emitter. But the strategy modeled by the authors illustrates how climate justice depends on economic equity.

“Combining national redistribution of revenues from emissions pricing with international financial transfers could therefore provide an important entry point towards fair and equitable climate policy in developing countries,” said Elmar Kriegler, head of the “transformative pathways” research department at the Potsdam Institute for Climate Impact Research and co-author of the study. “And it does not end there: we must look beyond 2030 and continue to work towards the eradication of extreme poverty.”

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