MANILA, PHILIPPINES – The destruction brought by climate change is skewed toward the poor, exacerbating rising inequality in Asia and the Pacific. Narrowing Asia’s widening inequality should therefore lead the region’s development effort, and building resilience to climate change should anchor this effort, says Independent Evaluation at the Asian Development Bank (ADB).
A new issue of Independent Evaluation’s Learning Lessons stresses that improving access to economic opportunities, assets and financial services, and institutional capacity will help the poor cope with the impacts of climate change.
“There’s great urgency to tackle economic inequality given widening wealth gaps in many Asian countries. Climate change hurts the poor disproportionally. Environmental shocks push the poor into direr straits. Hence, responding to climate change helps to reduce inequality,” says Independent Evaluation Director General Vinod Thomas.
Rising economic inequality and climate risks threaten to roll back years of hard-won development progress, particularly in poverty reduction. A just-released evaluation of ADB’s country partnership strategy with Indonesia shows how rising inequality, aggravated by climate change, considerably slowed poverty reduction in recent years. Had inequality remained stable, and holding everything else constant, the country’s poverty headcount ratio in 2014 would have been 3.6%, rather than 11.3%. Deteriorating urban conditions have forced increasing numbers of Indonesia’s poor to settle in areas prone to floods, exposing them to a particularly dangerous aspect of extreme weather.
Likewise, Typhoon Haiyan, one of the world’s most powerful storms which struck the Philippines in November 2013, showed how climate-related disasters can dramatically increase poverty. The lingering effects of the disaster pushed 1.5 million more Filipinos into extreme hardship, living on less than $1.25 a day. And nearly 6 million people lost their jobs and livelihoods in the aftermath.
Evaluation findings of development programs and projects in several Asian countries point to interventions for reducing economic inequality and enhancing the poor’s adaptability to climate change. Social safety nets, particularly conditional cash transfer programs, can improve the poor’s capacity to respond to shocks such as natural disasters or spikes in food and fuel prices. But for these interventions to be effective, they must be designed and targeted to address pre-existing inequalities that worsen during disasters.
Indonesia illustrates the point well. Its recent removal of fuel subsidies likely helped ease inequality. A 30% increase in gasoline prices reduced the Gini index—a well-known measure of inequality—by 0.15% as richer households disproportionately benefited from these subsidies, the study shows. The elimination of the fuel subsidies narrowed the absolute income difference between poor and non-poor households, with richer households bearing the larger loss of welfare.
The Philippines’ Pantawid Pamilya Pilipino conditional cash transfer program is expected to enhance the employment prospects of the poor, improving their capacity to cope with environmental shocks. The program’s targeting system, however, needs to be improved, an evaluation of ADB’s inclusive growth interventions reveals.1 A properly targeted safety nets scheme is also needed in Viet Nam, where poverty is concentrated among ethnic minorities living in remote, mountainous areas, the inclusive growth study notes. Disasters threaten to further reduce the already limited access of Viet Nam’s ethnic minorities to basic services.
Evaluation findings also stress the need to improve the resilience of infrastructure to withstand climate-related disasters to keep communities, especially their poorest members, connected to health facilities and markets. For example, transport and water infrastructure need to be designed to withstand extreme flooding or water shortages; and drainage systems to account for extreme rainfall.
The Indonesia study draws attention to the severe strains that the breakneck pace of urbanization is putting on infrastructure and basic services. The worry is that in this and similar settings across Asia, overcrowding and the depredation of resources will severely hamper the poor’s ability to prepare for climate change in all its manifestations.
Climate-resilient infrastructure is also crucial in disaster-prone countries such as Tajikistan and Papua New Guinea. However, climate change is not viewed as an urgent development agenda at the local level in these two countries. Awareness of climate risks is still low and institutional commitment to confront climate change is weak among local governments in Tajikistan and Papua New Guinea, the Learning Lessons reveal.
“The twin challenges of rising inequality and climate change hinder Asia’s development outlook. To avoid setbacks in the region’s fight against poverty, a well-defined course of action for promoting sustainable and equitable growth is imperative,” says ADB Evaluation Specialist Hyun Son.
1 A 2013 study by the Philippine Institute for Development Studies refers to the available estimate using 2009 data of a leakage rate of nearly 30%.
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To download the Learning Lessons, visit: http://www.adb.org/documents/foster-inclusive-growth-tackle-inequality-and-climate-change and click on the PDF.
About Independent Evaluation at ADB. ADB's Independent Evaluation, reporting to the Board of Directors through the Development Effectiveness Committee, contributes to development effectiveness by providing feedback on ADB's policies, strategies, operations, and special concerns in Asia and the Pacific.