(Bloomberg) -- Erratic weather events linked to global warming are set to raise economic risks for high-income consumers the most in the coming years, according to the Potsdam Institute for Climate Impact Research.
While it’s well-established that the world’s poorest bear the brunt of the impact from climate change — a prospect which researchers at the German institute confirmed — they also found that threats to consumption by the wealthy will amplify the most over the next two decades in places like the US or European Union.
“The risk increases the strongest for the rich. That is also because it was lower in the beginning — but we know that changes are the thing that the people feel,” said Anders Levermann, one of the authors of the report. This could lead to substantial macroeconomic losses due to generally stronger consumption levels among higher-income groups.
Levermann explained that as global warming impacts production, goods become more expensive, which affects poor consumers strongly as they tend to purchase necessary items that they cannot avoid or substitute. The rich, meanwhile, are impacted because everything gets more expensive, and they are bigger consumers that are more integrated in global trade networks.
The report also said that economies in transition, like Brazil and China, are highly vulnerable to severe impacts from volatile weather and possible trade disruptions. It added that countries with diverse trading partners might be better hedged against the risks, especially when imports come from regions less affected by weather extremes.
While the report stresses that impacts to higher-income consumers have potential to hurt the wider world economy, easing the burdens of climate change on poorer groups should still be a focus for policymakers.
Poverty alleviation to reduce vulnerability of lower-income groups “should remain a priority since risk levels remain by far the highest,” the report said.
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