Economic risks for the wealthy due to climate change is growing at the fastest rates because of impacts to global supply chains and goods and services, even as the highest risks remain with the poorest around the world, according to a new study.
A study by the Potsdam Institute for Climate Impact Research reveals that while the poorest people still face the highest economic risks from climate change, the wealthy are experiencing the fastest-growing risks due to global supply chain disruptions. The study also highlights how erratic weather increases economic challenges globally, affecting both low- and high-income groups, with wealthier consumers facing rising risks in the next 20 years
Economic risks for the wealthy due to climate change is growing at the fastest rates because of impacts to global supply chains and goods and services, even as the highest risks remain with the poorest around the world, according to a new study.
Across countries, lower-income consumers are known to face higher economic risks in a changing climate because of a low capacity to adapt.
However, researchers explained that inequality in consumption between varied income groups within a country is grounded in how easily one is able to substitute goods to adapt to the effects of climate change, including shocks to supply chains.
The team from the Potsdam Institute for Climate Impact Research (PIK), Germany found that low-income consumers are more vulnerable to supply shocks as they spend a greater share of their budget on hard-to-substitute necessary goods.
On the other hand, high-income consumers spent larger shares of their budget on easier-to-substitute goods so that they suffer smaller reductions of consumption, the researchers said.
"While current risk levels are lowest for high-income consumers, climate-driven risk increases may be largest. This may reduce adaptation advantages of higher-income consumers and thus result in substantial macroeconomic risks," the authors wrote in the study published in the journal Nature Sustainability.
The researchers added that inequality in consumption across income groups could trigger market processes, whereby higher-income consumers can afford higher prices for necessities, thereby inflating prices and pressuring lower-income groups.
For the study, the team looked at how erratic weather events, increasingly made more intense by climate change, affected global production and consumption across different income groups in 264 regions. In countries like the US and China, the researchers analysed province- or state-level data.
The results confirmed those from previous studies that the poorest people around the world bear the greatest economic risks from climate change, they said.
However, the risk for the wealthy is growing the fastest, they added.
"In the next 20 years, climate change will increase economic risks from erratic weather. The highest risks remain with the poorest around the world. But the increase of economic risk is strongest for the wealthy, in countries like the US and the European Union," corresponding author and PIK scientist, Anders Levermann, said.
The team also found that economies transitioning towards net-zero carbon emissions such as Brazil or China are also highly vulnerable and face the highest risks due to severe impacts of volatile weather and adverse trade effects.
"Consumers all around the world, regardless of their income, will thus face increasing challenges due to global warming -- without a transition towards carbon neutrality we will eventually not be able to meet these challenges," Levermann said.