Presentation from Workshop on Climate Change: Assumptions, Uncertainties and Surprises, 3-4 September 2020

1. Economics of disasters and
climate change
Stephane Hallegatte
Lead Economist
World Bank Group

2. Three criteria for climate change risk assessments

3. Go beyond physical impacts to consider socio-economic factors and resilience

4. Go beyond physical impacts to consider socio-economic factors and resilience

5. Material World by Peter Menzel.
Do not let aggregation hide the real impacts

6. Material World by Peter Menzel.
Climate and socioeconomic uncertainties at the core of the approach (not a
sensitivity analysis at the end…)

7. One example: microsimulations to assess distributional
impacts of climate change
Bramka Arga Jafino
Brian Walsh
Stephane Hallegatte
Julie Rozenberg
Policy Analysis Research Group, TU Delft
GFDRR Unit, World Bank
Climate Change Group, World Bank
Sustainable Development Group, World Bank

8. 8
Methodology overview
Household-level
impact assessment
Thousands of socioeconomic
change scenarios
Integrated assessment of
multiple climate impact channels

9. 9
Examples of representative households
Weight in 2018 Income in 2018
10,000
50,000
200,000
200
4,000
10
5
3
25
70

10. 10
We create 1000 baseline scenarios to account for development
Weight in 2018 Weight in 2030Income in 2018 Income in 2030
10,000
50,000
200,000
200
4,000
10
5
3
25
70
15,000
4,000
50,000
2,000
10,000
30
25
5
70
150

11. 11
And we add climate impacts through five different channels
• Increasing food prices
• Reducing available household income
• Decreasing productivity
• Decreasing food demand and thus farmers income
• Reduced labor productivity for outside workers
• Share of outside workers differs per sector
• Increasing severity and occurrence of floods,
drought, cyclone, and storm surges
• Increasing prevalence and severity of malaria,
diarrhea, and child stunting

12. 12
Propagating climate impacts to household income
Weight in 2018 Weight in 2030Income in 2018
10,000
50,000
200,000
200
4,000
10
5
3
25
70
15,000
4,000
50,000
2,000
10,000
Income in 2030
30
25
5
70
150
28
23
8
50
140

13. 13
Extreme poverty by 2030 in baseline scenarios (no climate change)
~600 million
~150 million

14. 14
Baseline scenarios affect climate change vulnerability
-48.5%

15. 15
Climate change likely to worsen
within-country inequality
• Markets are likely to magnify the
inequality impacts
• Land markets for instance
• Policies may well magnify inequality
impacts
• Shifting resources from social
assistance and poverty reduction to
adaptation (of richer population?)

16. 16
The “problems” are different across regions…
People pushed to poverty (million)
Differences in vulnerability are driven by differences in socioeconomic contexts

17. 17
Remember this is only for 2030… Challenging to go beyond (but working on it…)
Source: IPCC 2014
This is the range we are
looking at now
This is where we could be
at the end of the century

18. 18
Methodological implications
• First, climate change vulnerabilities are determined by the socioeconomic
context as much as by local changes in climate conditions
• Socioeconomic evolutions can drastically change these vulnerabilities and they are highly
uncertain. Many socioeconomic scenarios need to be systematically considered.
• Real-world constraints really matter for assessing vulnerabilities, so simple theoretical
economic models assuming away governance and institutional issues or imperfections in
markets cannot answer policy-relevant questions.
• Climate and socioeconomic uncertainty interacts (in complex manners) so they need to be
considered together
• Second, there is a very large heterogeneity in vulnerability and ability to cope and
adapt (aka resilience), so that aggregated results need to be considered with
caution…
• Finally, improvement in the socioeconomic situation can be as efficient as
targeted adaptation to reduce future impacts.