One hundred billion dollars per year. This is the amount of funding that rich countries pledged in 2009 to help poorer nations adapt to climate

change, largely in recognition of the fact that poorer countries are at once more vulnerable while having contributed less to the problem. Some estimates suggest the adaptation needs of the developing world may be much higher. According to a 2022 United Nations report, estimated annual adaptation needs may rise to $160 billion to $340 billion by 2030 and $315 billion to $565 billion by 2050.

The question of whether these adaptation finance targets are adequate to the task is a complicated one. To start, it is difficult to clearly conceptualize how to measure climate adaptation costs because people have always adapted to climatic conditions, and depending on factors like income and technology, the optimal level of adaptation to even a stable climate is not precisely defined. In principle, adaptation to climate change should be measured from this baseline of current adaptation. But delineating where current adaptation ends and adaptation to human-made climate change begins is a difficult problem, to say the least. Moreover, this difficulty is often compounded by the fact that, in many developing countries, separating the needs associated with climate adaptation from the needs associated with poverty is easier said than done.

Whether the magnitude of aspired and delivered adaptation finance flowing from Global North to Global South is enough is often contested. Less contested is the moral imperative behind some form of North-South resource transfer. Both the inequality in historical emissions and the inequality in economic outcomes that climate change is poised to exacerbate make it difficult to disagree with the ethical persuasion of such arguments as that made by UN Secretary-General Guterres and others.

But how often do we stop to consider what such funds should be used for? Should the money be transferred to the bank accounts of the world’s poor? Setting aside the issue of whether those most in need have bank accounts to begin with, the magnitude of the adaptation challenges and the economic mobilization aimed at meeting them are likely such that questions about not only who is most vulnerable. But why and how to choose among various adaptation policy options may become ever more important in a warming world.

Answers to many such pivotal questions have so far remained cloaked in uncertainty.

Income Matters

Central to the issue of global climate justice is the greater vulnerability of people in poor countries. One important determinant is the fact that poor countries tend to be much more reliant on agriculture. For poor countries in the 10th percentile of the global income distribution, employment in agriculture accounts for 65 percent of the workforce. For countries in the 90th percentile, this figure is 3 percent.

Moreover, crop yields can be highly sensitive to climate, and increased heat and precipitation variability will have significant adverse impacts on agricultural production in many parts of the world. According to a recent meta-review, 2 degrees Celsius of warming (3.6 degrees Fahrenheit) is expected to reduce yields of major staple crops – namely, maize, rice, soy and wheat – by an average of 20 percent, with wheat and soy experiencing the most dramatic nonlinear effects. This is even though, on the margin, carbon fertilization from increased CO2 pushes yields up by around 11 percent for a doubling of CO2 concentrations.

Considering the likelihood that farmers in poor countries will typically have access to fewer adaptation options than has been observed in richer contexts, the effects of such yield reductions on livelihoods could be severe. This prompts an important question of what kinds of adaptation options are most cost-effective, and whether there are significant factors other than income that hinder their timely, widespread adoption. We will return to this question momentarily.

Another important piece of evidence indicating people in poor countries tend to be more vulnerable comes from studies of heat and human health. Returning to the study on heat and mortality by the nonprofit Climate Impact Lab discussed in previous chapters, we can make a few additional observations. By estimating not only the causal effect of heat on mortality in the tens of thousands of regions they have data for, but also estimating how this effect varies by average income and climate, the researchers are able to estimate the role of income in potentially blunting the effects of future climate change.

Their findings suggest that the relationship between hotter temperature and mortality depends heavily on income. Richer people tend to be substantially better insulated against the health risks associated with hotter temperatures, even when controlling for the average climate. In other words, a 90 degree Fahrenheit (32.2 degree Celsius) day causes far more death in Bangkok than it does in Singapore, due in part to the many adaptations that are afforded by higher incomes.

The Climate Impact Lab researchers estimate that without any adaptation (so, simply extrapolating current “dose-response” relationships into a warmer future), climate change is likely to increase mortality rates by 221 per 100,000 people annually. This is a massive increase that is over 15 times the current U.S. automobile fatality rate, and more than the reported U.S. Covid-19 fatality rate at the height of the pandemic. But adaptation is projected to reduce this figure by almost two-thirds: from 221 per 100,000 to 73 per 100,000. The bulk of this comes from higher incomes.

The second notable observation is that people in relatively hotter climates tend to be better adapted to heat, even after controlling for income. While income growth accounts for over 78 percent of the adaptations, the rest comes from better adaptations for a given level of personal income. This suggests that two persons living in equally affluent societies that have different long-run average climates (for instance, persons living in colder Poland relative to warmer Greece) have different sensitivities to heat-related health risks for reasons that are as yet unclear. In fact, even within the United States, the heat-mortality dose-response curve can vary enormously across cities like Seattle, Chicago or Houston, which have different historical experiences with hotter temperatures despite roughly similar average income levels.

A recent study by economist Ishan Nath suggests a similar pattern. He finds potential for highly effective adaptation in the context of manufacturing productivity as well. Using nationally representative firm-level data from 17 countries including India, Brazil, the United Kingdom and the United States, Nath finds that the effect of heat on worker productivity varies significantly with income. For the least adapted firms in poor countries with moderate climates, a day with a maximum temperature of 40 degrees Celsius (104 degrees Fahrenheit) reduces annual output by 0.4 percent, which comes out to roughly the equivalent of erasing a full working day. In middle-income countries, the impacts of a similarly hot day were roughly half as large, and in rich countries the effect was negligible on average, save for the least adapted firms in select areas.

These and similar findings suggest that income is a key determinant of vulnerability to climate change, or at least a highly informative proxy for it. They also suggest that a wide range of adaptations can be highly effective at blunting the adverse impacts of climate change, at least for weather events within the domain of observed experience. This is good news. The fact that adaptation can be so effective means that we have the opportunity to make whatever climate change we have locked ourselves into more manageable.

However, the findings also raise important questions. For example, why are poorer people more vulnerable? That the marginal effects of climate shocks are attenuated for higher-income groups does not tell us which of the many possible factors associated with being richer makes the biggest difference. In addition, we may ask why some adaptations occur with more experience living in a hotter climate, even without the benefit of higher incomes.

As mentioned at the outset, these questions are significant because as governments around the world become more serious about financing and implementing climate adaptation measures, it will make a big difference whether or not they can target such efforts toward the most effective solutions in an evidence-based manner. And, as we’ll discuss in the final chapters, having a clear way of differentiating among adaptations that would be expected to arise naturally as the world warms (and as incomes rise, assuming future economic growth) versus those that require some form of government intervention may be increasingly important.

The Hidden Determinants of Climate Vulnerability

We know that to a first approximation, climate change is going to hit hardest for subsistence farmers in the developing world. They are likely to be among the most exposed to various climate hazards, as well as the most vulnerable.

But a closer look at the specific constraints that lower-income farmers face in adapting to climate change reveals how easy it may be to overlook some of the most important points of potential leverage – the hidden institutional and economic fixes that may have an outsized impact on climate vulnerabilities for the world’s poor.

A growing literature finds that constraints to adaptation in agricultural settings are not only about crops’ inherent sensitivity to temperature and precipitation but also about social and economic institutions that govern how farmers respond to climatic changes of various kinds. For instance, a recent paper by economists Robin Burgess, Olivier Deschenes, Dave Donaldson and Michael Greenstone suggests that access to banking may be an important fulcrum of adaptation and resilience in developing countries.

Rural households in the developing world often lack access to even the most basic means of smoothing consumption over time. Without access to loans or other financial products, for instance, a few bad harvests may spell disaster. With access, households may have a much better chance of bouncing back and may be forced to make harsher trade-offs less often. An improved financial environment, such as one with better access to banking services, should in principle mitigate the impact of weather on well-being, including on health, to the extent that households are better able to sustain essential services and strain less during leaner times induced by poorer harvests.

Exploiting data from the rollout of India’s rural bank branch expansion program, which ran from 1977 to 1990, the researchers found that access to local banking services substantially mitigated the impact of hot weather on mortality. The average district saw the impact of hot days on mortality fall by roughly 75 percent due to expanded bank penetration, from a 1.2 percent increase in mortality per day above 90 degrees Fahrenheit (32.2 degrees Celsius) to a 0.3 percent increase. In addition, the authors found that hot weather sharply depressed agricultural yields and the wages of agricultural laborers in rural areas, suggesting that an important mechanism through which heat affects health in poorer rural areas may be its indirect effect on livelihoods in addition to its direct effect on human physiology.

Access to insurance appears to play a similarly important role in reducing vulnerability. One study by economists Dean Karlan, Robert Osei, Isaac Osei-Akoto and Christopher Udry found that Ghanaian farmers who were given access to weather insurance were able to not only reduce the downside risk associated with unpredictable and highly weather-dependent harvests but to “crowd in” other investments – in other words, initial investment begetting more investment – that boosted their productivity. Another recent study found that guaranteeing access to credit in the event of a flood not only led farmers to be more likely to overcome negative shocks when they happened but also led them to make riskier but more profitable investments in their farms. This is despite the fact that the loan product is financially viable for the lender as well.

A third related factor is access to markets, domestic or global. Many in the developed world take integration with national and international markets for granted. It is difficult to overstate the hypermarket connectivity enjoyed by most rich world consumers in a globalized, e-commerce age, where one can have myriad items delivered to one’s door with a keystroke. For many poor people, especially in rural areas in developing countries, such market access is by no means a given. Whether due to lack of good roads, lack of trade or lack of internet connection, many in the developing world face additional challenges in coping with climate shocks.

Whether we are aware of it or not, being plugged in to trade networks offers a form of implicit insurance against adverse food price shocks because bad weather and reduced agricultural yields in one part of the world can be partially made up by production in other places. This is not always the case for farmers in the developing world. A combination of high inland transport costs, high administrative fees and long customs delays make trade additionally costly particularly for many landlocked African countries, even without accounting for tariff barriers.

Such challenges can be compounded by what economists refer to as “the food problem,” whereby farmers in poorer countries with harsher climates (and thus less productive agriculture) who might otherwise benefit from specializing less in domestic agriculture, end up perversely specializing more as the world warms, in part because food is a necessity. According to work by Ishan Nath, this perverse overspecialization in low-productivity agriculture among the poorest, least-trade-liberalized countries may lead to climate damages that are significantly larger than would be the case with greater openness and less reliance on domestic food production, particularly for poorer countries.

Even when countries are well integrated into international markets, many poorer economies may be additionally vulnerable due to differences in “terms of trade” – the ratio between the prices of a country’s exports and the prices of its imports. According to research by economist Frances Moore and her colleagues, whether one is a net food importer or exporter matters. Because demand for food tends to be relatively inelastic, when global agricultural yields decline, food prices rise. For countries like the United States and Canada, which tend to be net food exporters, this price effect may partially offset the decline in yields, leading to less economic damage. For countries like Nigeria or Egypt, which are net food importers, the price effect exacerbates the damage, making policies and systems that can serve as shock absorbers for residents of such countries all the more valuable.

A failing well in Kenya miles from the nearest settlement.

Shock Absorbers, Shock Amplifiers

In many agrarian societies, more rain during the growing season is a gift, as it can boost agricultural productivity. But whether this gift ultimately is of benefit may depend on surprising factors like one’s age and gender, and how the social and economic structures of the society one lives in adjust.

In a fascinating paper, economists Manisha Shah and Bryce Steinberg found that in rural India positive rainfall shocks led to lower human capital investments for most school-aged children, while they boosted later educational achievement of toddlers and infants – namely those age 2 and below and those in gestation at the time of the windfall of rainfall.

How do we make sense of these seemingly conflicting findings? A few important contextual features stand out. As late as the 2010s, most rural Indians engaged in agriculture as their principal economic activity. This often includes children who may, depending on the economic environment, drop out of school to help on the farm. Moreover, due to limited access to international food markets, local agricultural productivity can be an important determinant of diet and nutrition in such settings. When times are good, more bellies are full. When times are bad, more mouths go hungry.

Given that much agriculture in India is rain-fed, more rain during the growing season can be a driver of both local wages and nutrition. This means that when positive rainfall shocks lead to bumper harvests, labor demand is high due to a greater need for hands to pick the crop. One consequence appears to be that many youths, particularly those old enough to provide meaningful labor, drop out of school during such periods. Because education features many path dependencies, such decisions can have persistent consequences, as evidenced by lower test scores and attendance rates in the immediate aftermath of a positive rain shock and increased likelihood of dropping out of school or falling behind years later. Shah and Stein` berg find that, for 5-to 16-year-olds, a positive rainfall shock decreases math test scores by 2 to 7 percent of a standard deviation and increases the chances of a child dropping out of school by 4 percent. The effects are particularly detrimental for 11-to 13-year-olds because they are most likely to be transitioning from primary to secondary school.

By contrast, toddlers, infants and fetuses in gestation appear to benefit from the windfall, perhaps due to better nutrition and health – either for the children directly, or indirectly through improved maternal diet. For these groups, the researchers documented more educational investment later in life, as measured by higher test scores and higher chances of school enrollment many years later.

Findings like these underscore the importance of the economic and institutional environment in determining how climatic shocks affect well-being. Such factors can either serve as shock absorbers, reducing the realized harm, or they can act as shock amplifiers, exacerbating the long-term consequences of a given climatic event, and do so differentially across social groups. One can imagine very different dynamics playing out in a setting where children face less economic pressure to work, or one in which compulsory schooling and child labor laws are enforced more vigorously, as has increasingly been the case in India. It is worth bearing in mind the breadth of empirical evidence suggesting that early-childhood investments in education and health often pay large dividends over the course of a lifetime, even when the immediate opportunity costs of such investments (e.g., foregone household income) are high, as is often the case in poor, developing countries.

These findings are also consistent with the idea that a complex array of factors may connect climate change to human capital and educational outcomes more broadly, which ultimately may prove pivotal in determining whether the effects of climate change on economic development take the form of more damaging long-term growth effects. Consider the impacts of heat on learning. Work by Teevrat Garg, Maulik Jagnani and Vis Taraz found that hotter temperatures affect school performance in India through their indirect effects on nutrition and health, most likely operating through reduced agricultural yields. Although in the long run, investments in human capital will be a critical factor in whether developing countries are able to catch up economically, we still know uncomfortably little about the specific climate vulnerabilities faced by children in the developing world.

Another important set of institutional determinants of climate vulnerability may be found in the world of work. As we have seen, climate change is likely to expose workers to more potential workplace hazards. This suggests that the way labor markets are organized and regulated will matter a great deal. Here, too, evidence is slim, but available indicators offer important clues.

According to the International Labour Organization, 60 percent of the global work-force is in the informal sector, contributing roughly 35 percent of global GDP. Sometimes referred to as invisible workers, these workers often don’t have legal jobs or official contracts but contribute heavily to economic activity. Often (though not always) garment makers, agricultural workers and construction workers in developing countries fall into this camp.

Informal workers are less likely to have access to basic protections offered by social safety net programs including unemployment insurance and health insurance. They may be more likely to experience income volatility arising from climate shocks – agricultural workers without work during bad harvests, construction laborers working fewer hours due to increased heat, and so on. In many countries, informal workers are also less likely to have access to insurance against workplace accidents, and more likely to be affected by workplace harassment, both of which have been shown to increase during hotter weather. The role of work informality extends to our understanding of how climate change affects gender inequality as well. Women are estimated to perform six times the amount of unpaid labor as men, and in many countries, they receive significantly lower wages within the same occupation and industry.

In countries like the United Arab Emirates, where temperatures routinely climb above 40 degrees Celsius (104 degrees Fahrenheit), many of the most exposed jobs are staffed by migrants, including in construction. Research by economist Suresh Naidu, Yaw Nyarko and Shing-Yi Wang found that due to restrictions on such workers’ ability to find alternative employment outside of the firms who sponsor their visas, migrant workers are less able to bargain for higher wages. It stands to reason that such institutional factors may affect workers’ exposure to climate hazards on the job as well.

Will countries adopt changes in the labor market institutions and norms that govern the baseline protections workers are provided? These and other institutional factors may play outsized roles in determining how damaging climate change ends up being for individual economic mobility and national economic development alike, in the decades to come.

Innovating For The Bottom Billion

When I was in graduate school, I was asked to take part in a briefing for Bill Gates. It was part of a meeting held in Seattle aimed at bringing Gates up to speed on the latest climate change research. Much to my surprise, I, along with a few other academics, would spend an entire afternoon with Gates himself. No fancy entourage. No cameras. Just Gates and a handful of us talking data.

Our session was framed in terms of how the emerging evidence influenced the Bill and Melinda Gates Foundation’s understanding of the need for swift climate mitigation. But in retrospect, I wish I had focused more on the role that philanthropists like Gates needed to play in facilitating climate adaptation.

The reason isn’t simply because climate change looks to be a force that could reverse a significant fraction of the gains in livelihoods made among the world’s bottom billion. It is because, in studying the issue of adaptation since then, it has become increasingly evident that there are gaps in the adaptation marketplace that only coordinated global efforts can fill. This is perhaps especially true in the case of incentivizing innovation for adaptation technologies and practices that might help the world’s poorest individuals.

Technological change is not a magical process that happens spontaneously. It is a long and expensive process of tinkering and investment, influenced profoundly by the economic incentives surrounding would-be inventors. In the energy sector, we have already achieved remarkable redirection of technical change toward cleaner technologies like renewables through subsidies, societal norms around environmental sustainability, social pressure by activists and changes in norms around the process of technological change. The same coordinated effort may be needed for pro-poor adaptation technologies, especially those that could benefit the world’s bottom billion.

Global philanthropy may have a critical role to play in catalyzing the development and distribution of breakthrough adaptation technology. An analogy to the malaria vaccine might be apt. Because so many of the people who would benefit most from such a breakthrough have limited financial and political voice, and because they are diffuse across many different jurisdictions, each with limited incentive or wherewithal to make the necessary R&D push, the private market was long unable to provide an effective vaccine. Perhaps that is why the Bill and Melinda Gates Foundation donated over $250 million in 2005 toward malaria vaccine research.

Similarly, there may be a gap to be filled by private philanthropy in developing next-generation low-cost, low-emissions adaptation technologies.

The 300 homeowners on Guana Yala Comarca, Panama, are abandoning the island to rising seas.

What might this technology look like? As an economist and not an engineer, I can only speculate. It could be a solar-powered heat pump for rural homes (for air conditioning), or a battery-powered wearable cooling garment for outdoor workers, or something totally unexpected. Evaporative cooling or cool roofs for less humid areas might also be an option. It might even be that, to a first approximation, the technological solution to facilitating adaptation in the world’s poorest places has little to do with physical tech and more to do with financial innovations that help the poor gain better access to markets and capital.

The point is that philanthropists like Gates may have a significant role to play in facilitating climate adaptation, including in incentivizing innovation for adaptation technologies and practices that can help the world’s poorest individuals. The private market may be recruited as partners in such endeavors through public-private partnerships, but it is unlikely to fill this gap on its own.

This is particularly evident considering recent experience that shows innovation in climate adaptation to be relatively limited. One analysis using global patent data found that the share of inventions pertaining to climate adaptation in the year 2015 was roughly the same as those in the year 1995. The lack of progress in research and development for adaptation is in stark contrast to the growth of climate change mitigation technologies, which saw their portion of overall innovation more than double over the same period.

Climate Vulnerability and Climate Justice

If we cannot stop the seas from rising ... if you allow for a two degree rise in temperature, you are actually agreeing to kill us.

— Mohamed Nasheed

Nasheed, the former president of the Maldives, a small island nation in the Indian Ocean, once held a cabinet meeting underwater to demonstrate the potentially catastrophic future consequences of climate change for low- lying island nations like his own. He and the leaders of other small island nations have made repeated pleas to the international community to limit warming to the (now) ambitious target of 1.5 degrees Celsius. The crux of their argument is that the eventual sea level rise associated with such warming would likely wipe many of these countries out of existence, and that most of the emissions contributing to such sea level rise have come from richer, developed countries. Their demands are part of a broader narrative that emphasizes the culpability of the Global North and the aggrievement of the Global South.

The international community, in addition to making 1.5 degrees Celsius an aspirational target and pledging to provide significant adaptation finance as mentioned earlier, has recently also agreed to entertain the concept of “loss and damage,” which could add to North-South financial flows under the aegis of climate justice in a significant way.

Small island nations provide a particularly poignant case of how multiple layers of inequality and injustice could overlap when it comes to climate change. Many readers might agree that elements of the situation seem deeply unfair.

I have suggested that whether one is inclined to be devoted to the mission of climate justice, an important starting point may be a dispassionate and fact-based understanding of who is likely to be hurt most by a changing climate, and why. While it may be true that climate change brings many historical injustices into harsh relief, particularly between the Global North and the Global South, an overemphasis on moral indignation at past wrongdoing risks obscuring the very action-relevant gaps in our collective understanding of the problem at hand – particularly with respect to reducing vulnerabilities.

As I have tried to highlight here, there are at least two dimensions of climate justice that risk being obscured amid the familiar narrative. The first is the highly local way in which climate damage may vary, and how this informs our understanding of the optimal targeting of support. It is true that to a first-order approximation, the biggest winners and losers from climate change will likely be defined in terms of whether one resides in a rich or poor country. But increasingly, the data suggests that, at least over the medium term, climate change may cause significant hardship for all poorer people, even in relatively affluent countries like the United States, South Korea, France and Germany, and perhaps most importantly in middle-income countries like China, India and Brazil. Conversely, richer individuals outside of the developed world – whether they be the urban elites of Shanghai or New Delhi or Accra – are likely to be shielded reasonably well from many of climate change’s initial blows.

The second is that we still know uncomfortably little about why some groups are hurt more than others, and how the adverse impacts of climate change on one group of people ripples out across the global economy through its many complex linkages. This is important in part because such information may be critical in helping citizens, governments and philanthropists decide what kinds of adaptation interventions might be most effective at reducing harm. Of course, as ammunition for climate rallies, the “whether” of unequal impact may be sufficient information. But once we take seriously the challenge of evidence-based climate adaptation policy, we can begin to appreciate how many gaps in our collective knowledge base there are.

Climate retribution may be an important component of what it means for us to live with dignity in a just world. But the familiar trope of righteous indignation risks missing important dimensions of the problem.

There is much we do not yet understand about how climate change affects the poor. In general, having higher incomes helps protect against climate change. But why exactly that is the case remains something of a mystery. An improved understanding of which adaptation solutions should be prioritized and to whom may be just as important as the amount of financial resources available to poorer countries. In some cases, simply boosting incomes by way of cash transfers may do the trick. In others, more systematic overhauls to the social and economic infrastructure of community may be first order. These may include improving the availability of local credit and banking services or other less obviously climate-related interventions like reforming educational institutions or labor market policies.

As developing countries receive international climate financing for adaptation and begin to expand their efforts at facilitating adaptation and resilience, understanding how these can be best allocated to high-impact regions and policies becomes an increasingly urgent priority. Of course, important caveats to this technocratic perspective deserve mention. History, including very recent history, cautions against the hubris of interventionist agendas, particularly by a Western, technocratic elite.

As the specter of colonialism still looms large in many developing and formerly developing countries, it would be wise to approach the communities that we seek to help with genuine humility and a sensitivity to the procedural dimensions of justice as well. Still, the evidence I’ve presented suggests that the more we can learn about what works and what doesn’t when it comes to climate adaptation, the better chance we might have in helping to protect the world’s most vulnerable from the warming we have in store.