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Climate change will disproportionately impact the world’s poor: economic harm from rising temperatures will be worst in the Global South, and climate disruptions will disproportionately affect poorer citizens within any given nation. Climate action, on the other hand, has the ability to exacerbate poverty by raising prices for basic needs like food and electricity.

According to a new report, there is a way out of this predicament. In comparison to the current trend, carefully planned climate policies could also reduce the number of people living in extreme poverty around the world.
Researchers from Germany’s Potsdam Institute for Climate Impact Research used two well-known computer models to simulate global energy consumption, economies, climate, and land use through 2050. In various climate policy scenarios, they estimated GDP loss, rises in energy and food prices, and redistribution of carbon tax revenue, as well as the impact of all of these on poverty rates.

Researchers Carbon Taxes
Image Source: Anthropocene Magazine

By 2030, 350 million people would still be living in severe poverty (an income of less than US$1.90 a day) if current socioeconomic growth trends continue. And, according to the researchers, putting a price on carbon emissions in line with the Paris Agreement’s goal of reducing global warming to 1.5 degrees Celsius would increase global poverty by 50 million people.
But if countries distribute carbon tax revenues on an equal basis, the number of those living in extreme poverty worldwide will decrease by six million compared with the status quo, calculated by researchers.

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“Climate policies have to be designed such that they do not result in an extra burden on low-income households, especially so in the Global South,” says study team member Bjoern Soergel. “Our study shows that climate policies and poverty eradication can work hand in hand if a pricing of greenhouse gas emissions is combined with a redistribution of the revenues in the form of a ‘climate dividend’.”

Researchers Carbon Taxes
Image Source: OECD Development Matters

However, these global statistics conceal more complex regional trends. Sub-Saharan Africa, for example, has the highest rates of extreme poverty today. They will see significant rises in food and energy prices as a result of carbon taxes, but total revenue from a carbon tax will be poor in these countries. Even though equal-per-capita redistribution of carbon tax revenues would minimize extreme poverty globally, the researchers estimated that it would raise extreme poverty by 10 million people in Sub-Saharan Africa.
What is the solution? An international climate finance program that would redistribute approximately 5% of carbon tax revenues from developed countries to developing countries. Compared to current trends, this will result in 30 million fewer people in severe poverty in Sub-Saharan Africa and 45 million fewer worldwide in 2030.

In this scenario, the contribution needed by high-income countries is about $100 billion per year, similar to what they have committed to in the Paris Convention. “High-income leaders should realize that domestic reductions in emissions and global climate finance are two sides of the same coin, only by combining these two countries will emerging economies and developing countries also take part in this,” said Soergel.

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Source: Anthropocene Magazine

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