Climate change mitigation policies and poverty in developing countries

Abstract

Mitigation of the potential impacts of climate change is one of the leading policy concerns of the 21st century. However, there continues to be heated debate about the nature, the content and, most importantly, the impact of the policy actions needed to limit greenhouse gas emissions. One contributing factor is the lack of systematic evidence on the impact of mitigation policy on the welfare of the poor in developing countries. In this letter we consider two alternative policy scenarios, one in which only the Annex I countries take action, and the second in which the first policy is accompanied by a forest carbon sequestration policy in the non-Annex regions. Using an economic climate policy analysis framework, we assess the poverty impacts of the above policy scenarios on seven socio-economic groups in 14 developing countries. We find that the Annex-I-only policy is poverty friendly, since it enhances the competitiveness of non-Annex countries-particularly in agricultural production. However, once forest carbon sequestration incentives in the non-Annex regions are added to the policy package, the overall effect is to raise poverty in the majority of our sample countries. The reason for this outcome is that the dominant impacts of this policy are to raise returns to land, reduce agricultural output and raise food prices. Since poor households rely primarily on their own labor for income, and generally own little land, and since they also spend a large share of their income on food, they are generally hurt on both the earning and the spending fronts. This result is troubling, since forest carbon sequestration-particularly through avoided deforestation-is a promising, low cost option for climate change mitigation.

Improving poverty and inequality modelling in climate research

“…Disaggregation of households into several groups or many representative households has been implemented for developed 33,42,59,60 and developing countries [61][62][63][64][65] With respect to climate change impacts, studies that quantify inequality or (multidimensional) poverty are rare (with the exception of a recent World Bank study 6,69 ). Many impacts and vulnerability studies rely on present-day income distributions and poverty levels to assess future vulnerability 70,71 .…”

The Standard GTAP Model, version 7

“…1-119. (Hussein et al, 2013) • 26 citations (Stone et al, 2010) • 8 citations Journal of Global Economic Analysis, Volume 2 (2017), No. 1, pp.…”

Economic Implications of EU Mitigation Policies: Domestic and International Effects

“…Eventually, the authors estimate that Annex I mitigation effort, without any corrective measure, might potentially increase malaria mortality in developing countries. Hussein et al (2013) analyze with a computable general equilibrium model the poverty impacts of climate change mitigation in Annex I regions, implemented with different combinations of fossil and non-fossil fuel GHG taxes coupled with a forest carbon sequestration subsidy to all regions, on seven socio-economic groups in fourteen developing countries. The general finding is that the policy increases poverty in eleven out of the fourteen countries.…”

“…On the contrary, the forest carbon sequestration subsidy in the developing countries leads to increased poverty and that happens to be the dominating subcomponent of the policy package. Hussein et al (2013) identify three forces at work. The direct effect of the subsidy is to reduce the land available to agriculture and thus to benefit landowner with higher prices of agricultural commodities.…”