Feedback Loops in Climate Change and Inequality

The world is non-linear, and so are the problems 🔄 The butterfly effect is real which means one can accentuate the other, starting a downward spiral. For instance, climate change leads to environmental degradation ↓ Rising temperatures and shifting weather patterns result in the loss of arable land and reduced agricultural yields. ↓ This directly impacts food security, causing job losses in farming communities and increasing poverty levels. ↓ As poverty rises, access to healthcare, education, and other essential services diminishes, leading to higher rates of disease and lower overall quality of life. ↓ Poverty then fuels crime, as individuals and families struggle to survive and meet their basic needs. Increased crime rates further destabilise communities, making them less attractive for investment and economic development. ↓ This widens the gap of income inequality, as those with resources move to safer areas, while those without remain trapped in a cycle of poverty and violence. ↓ Wars and conflicts often emerge from these stress points. Competition for scarce resources, political instability, and social unrest can lead to violence and large-scale displacement of populations. ↓ These conflicts further degrade the environment and disrupt economic activities, creating a vicious cycle that seems impossible to solve. 📌 There are some real anecdotes for us to look at: 1️⃣ Syria: Prolonged drought from 2006 to 2011 devastated agriculture, leading to mass migration from rural to urban areas. This strain on cities contributed to economic hardship and social unrest, which played a role in the outbreak of the Syrian Civil War. The war caused immense human suffering, displacement, and further environmental degradation. 2️⃣ The Rust Belt, USA: The decline of manufacturing industries led to job losses and economic decline in many cities. As unemployment rose, so did crime rates. The lack of economic opportunities perpetuated cycles of poverty and inequality, contributing to social and political tensions. 3️⃣ Greece: The financial crisis in Greece led to severe austerity measures, resulting in widespread job losses and economic hardship. The resulting poverty increased crime rates and social unrest. The austerity measures also reduced public spending on healthcare and education, worsening health outcomes and limiting opportunities for economic mobility, thus deepening income inequality. Therefore if we imagine climate change and environmental problems only to be limited to the environment and our surroundings, we can't be further away from the truth. Picture - Christian Sarkar / Philip Kotler

The spatial correlation of climate risks breaks standard insurance models. New research synthesizes how this and other market failures should guide adaptation policy. A new working paper identifies key market failures preventing efficient adaptation: insurance markets cannot fully cover spatially correlated climate risks (e.g. hurricanes in Florida making state-wide infrastructure damages), credit constraints block adaptation investments for low-income households, and positive and negative externalities distort private adaptation decisions. Their analysis formalizes adaptation through two economic channels. Ex-post responses to weather shocks and ex-ante investments based on climate expectations. This framework shows how incomplete insurance markets and credit constraints create adaptation gaps. For instance, smallholder farmers often cannot access credit to invest in irrigation systems, while disaster insurance remains prohibitively expensive due to correlated risks. The chapter points toward distributional concerns in adaptation markets. Low-income households invest less in adaptation despite higher marginal benefits, creating a feedback loop where climate vulnerability concentrates among the poor. These distributional effects justify public intervention even when markets function well - particularly as historical emissions from wealthy regions drive adaptation needs in poorer areas. Great work from top scientists: Tamma Carleton, Esther Duflo, Jack Kelsey, and Guglielmo Zappalà, published by the National Bureau of Economic Research. (https://lnkd.in/e3gcrvn8)

🌍 What if the very systems driving our progress are also accelerating our greatest challenges? I recently read an article titled “The System Dynamics Approach for a Global Evolutionary Analysis of Sustainable Development” by Feder, Callegari, and Collste, which uses the Earth4All model to explore this question. The study offers a sobering but vital perspective on how environmental, social, and economic systems are deeply interconnected—and how this interplay shapes our future. Here are the main findings: 📉 Unsustainable Development Erodes Resilience The study shows that our current development trajectory creates “macro-selection pressures” that harm global resilience. Environmental challenges like climate change and resource depletion degrade economies, while social issues like inequality and declining well-being weaken societies’ ability to adapt and innovate. 🌍 Interconnected Forces Amplify Risks These challenges are not isolated—they interact in feedback loops that compound their effects. For instance, environmental degradation increases inequality by raising the cost of resources, while inequality slows the social reforms needed to combat climate change. Together, they create cycles that destabilize long-term systems. 🔄 Delaying Action Increases the Costs The Earth4All model vividly illustrates how delays in tackling these issues lead to cascading crises. By the time the full effects are visible, reversing the damage becomes far more difficult and expensive. Here are some of my own reflections on this study: 💡 Systemic Interplay This research reinforces something I’ve long believed: we can’t address environmental, social, or economic challenges in isolation. They are interconnected. For example, policies focused solely on short-term economic gains often overlook their environmental costs, which eventually undermine the economy itself. Solutions must integrate these systems to work sustainably. 📊 The Role of Models Like Earth4All I’m a strong advocate for the Earth4All model because it provides a clear and integrated view of these complexities. It connects natural, social, and economic systems into one framework, helping us see the long-term impact of today’s decisions. For policymakers and leaders, it’s an invaluable tool to guide strategy. 🎓 Learning and Awareness Finally, this study reminded me of the importance of understanding complexity. Tools like Earth4All empower us to move beyond short-term fixes and focus on systemic solutions. Awareness is the first step toward meaningful action. To learn more about this model, I would highly recommend visiting their website: (https://earth4all.life/) If you’re interested, you can read the full article here: https://lnkd.in/e5tRft63 🌐 How do you see the interplay of these systems shaping the challenges in your field? #Sustainability #SystemsThinking #ClimateAction #SocialEquity #FutureOfEconomics 🌟

Repeated weather shocks worsen poverty and income inequality in rural Ecuador.   In a new paper, we combine representative household panel data from rural Ecuador with long-term rainfall data to show that weather shocks – such as droughts or excessive rainfall events – significantly reduce income and increase poverty. The effects get much worse when such shocks happen repeatedly, as is more and more the case with climate change. Agriculture-dependent households are suffering the most, calling for more effective climate adaptation measures and social safety nets. Our findings also have implications for other parts of the Global South.   Link to open access paper: https://lnkd.in/e7bkbhUz   Excellent work by Maria Cristhina Llerena Pinto in cooperation with Alisher Mirzabaev   Zentrum für Entwicklungsforschung / Center for Development Research (ZEF), International Rice Research Institute

🗳️⚽️Given the political football of #Climate v #Inequality that kicks around on election days, some deep research insights may be useful. As it turns out, just like in real politics and football, there’s some shady insider gambling at play. Whilst there’s a growing class of politicians espousing climate action hurting the less wealthy, research evidence shows the opposite, and that it’s climate impacts that hurts the less wealthy far more…coincidentally protecting the politicians in multi-million pound Georgian townhouses. 😮 In the UK, the costs of NOT zero have risen to £775 per household (total of £22bn: via Simon Evans https://lnkd.in/e5w7QYjf ) The costs of NON resilience are even higher. Take this prizewinning paper prepared for the European Central Bank h/t Irene Heemskerk https://lnkd.in/eyAnsiYA It shows that wealthy politicians selling an anti-climate message potentially benefit at the expense of those they sell down the river. Key highlights from research findings: 📉Low-income workers experience a relatively larger decline in income as climate-related damages reduce their productivity disproportionately. 🤑At the same time, the rate at which households with positive savings accumulate wealth rises. Importantly, 🌀low-income households who are financially constrained have weaker incen- tives to adapt to climate change and their failure to reduce vulnerability to climatic impacts exacerbates wealth inequality. ↕️While houses exposed to climate risk face a price discount … materialization of climate change risk in- creases house prices as habitat becomes reduced. 🏠low-income households allocate a larger fraction of their budget to housing as climatic impacts intensify, translating into a widening of the adaptation gap over time #justtransition ?