Guest post: Climate change could reverse falling inequality between countries

§ Falling inequality

The world today is less unequal than it was in 1990. As shown in the chart below, economic growth in China (red), India (orange) and other Asian countries (yellow) explains the observed decline in inequality.

Socioeconomic and climate systems are intertwined. For example, the rising wealth of China since the turn of the century has been powered by a rapid expansion in coal-fired electricity generation.

We set out to explore how these interlinkages would continue to evolve over time, depending on the future pathway for climate change and socioeconomic development.

§ Futures intertwined

Socioeconomic development drives energy demand and land-use change, which both can generate greenhouse-gas emissions, depending on policy choices. These emissions warm up the atmosphere, leading to physical climate change impacts, changes in temperature, precipitation patterns and sea level rise, which affect socioeconomic systems in turn.

Uncertainties are associated with every step of this chain of causation and interaction, which is shown in schematic form in the figure below.

The evolution of socioeconomic factors, such as population, education, technology and the availability of fossil fuels, will play a key role in what the future will be. These factors will enable the economic development of future countries, driving their energy and land uses – and their resulting emissions.

§ Socioeconomic narratives

In 2017, researchers from different disciplines and different research institutions built narratives for future socioeconomic pathways, the Shared Socioeconomic Pathways (SSPs). These describe five alternative narratives in terms of broad societal trends.

For instance, SSP1 puts great emphasis on inclusive development, sustainability and well-being, leading to low resource and energy intensity, while SSP3 depicts resurgent nationalism and concerns about national priorities rather than inclusive development and environmental issues.

In each of these socioeconomic pathways, we consider different emissions pathways. Policies can be implemented to reduce greenhouse-gas emissions and reach stringent global climate targets.

These policies are costly, with their cost varying from one narrative to another. It is easier to reduce emissions in a world where energy demand is low, and where we assume fast technological progress. Integrated assessment models (IAMs) are used to quantify these mitigation costs and to assess how those differ according to assumptions of future socioeconomic pathways.

In the study, we consider five socioeconomic pathways (SSP) – and for each of these, between three and five emission pathways. First, a baseline in which there is no policy to reduce emissions. Second, a series of lower emissions scenarios matching the Representative Concentration Pathways (RCP), for which the mitigation costs are assessed by up to four different IAMs.

§ Economic impacts

Once we have our set of greenhouse-gas emission pathways and mitigation costs, we then move on to investigating the economic damages due to warming. (There is uncertainty in how much warming to expect from a given level of emissions, which we also explored in our study.)

The impacts of warming fall more heavily on the poorest countries, which are more exposed to water stress, extreme temperatures and other changes because of their locations. They also feel any impacts more keenly, due to the structures of their economies and lower quality infrastructure.

The economic impacts are also uncertain, with cost estimates varying greatly according to the methodology used. To assess the potential range of damages, we consider eight estimations of country-by-country impacts. In total, we build 3,408 scenarios that span uncertainties along the different dimensions.

We find that of all the uncertainties we considered, the socioeconomic and damage estimate dimensions are the primary drivers of future inequality between countries.

This is clear in the figure of our results, below, showing how inequality between countries (“Gini index”) changes in the future, depending on the different socioeconomic pathways (the numbered SSPs in each chart) and between the highest damage estimates (red) versus the lowest (blue).

If the economic damages from climate change are in line with the highest estimates, then we find that warming would reverse gains in declining inequality over the past few decades. Instead, there would be a rise in inequality between countries in the course of the 21st century.

In this case, the emission pathway plays a key role, as lower emission pathways show lower inequality levels and can delay the date when inequality starts rising again.

If the economic damages are lower, then cutting emissions still reduces inequality in some combinations of socioeconomic pathway, mitigation costs and their distribution.

This suggests that climate change mitigation is key to limiting future inequality, provided that mitigation costs do not fall too heavily on the poorest countries.

§ Limiting inequality

In our study, we focus on income inequality between countries, as measured via the Gini index. However, other forms of inequality are also important to consider in the analysis of different emission pathways.

In particular, inequality between individuals within countries have increased in the last decades and could be exacerbated by warming because lower-income households are more vulnerable to climate change impacts. Conversely, mitigation policies, if poorly designed, can disproportionately  hit the poorest households, thereby increasing inequalities.

Nevertheless, we show that climate change will be an important driver of future inequality. More research is needed to further understand how inequality at different levels may evolve under different mitigation pathways.