Climate change will dramatically worsen inequality
Money is the best defense against the physical and financial impacts of climate change; those with the least are far more exposed and will suffer greater harm
Climate change will negatively impact nearly everyone on earth. As Kelsey Piper at Vox wrote in 2019:
Most models warn that as a result of climate change, the incredibly rapid progress humanity has been making in life expectancies and in ending extreme poverty will stall; we could even lose decades of the progress we’ve made.
But within this overall decline are huge differences in exposure to the risks of climate change. In the most vulnerable places, people will die, homes will be destroyed, and millions will be forced to flee as conditions grow too hot, dry, or flood-prone.
Those from relatively climate durable places, on the other hand, will also experience harm, including things like more intense and damaging weather events, less reliable electricity, and rising food prices. But the first-order effects will be manageable and, for the most part, day-to-day life won’t look dramatically different.
Place will not be the only driver of unequal climate harms. The more time I spend reading and thinking about climate change the clearer it is that money, along with location, will be the critical dividing line. Most people and communities with enough money will be able to protect themselves from the worse climate impacts, while impoverished people and communities around the globe will be more exposed and have a more difficult time finding shelter from literal and figurative storms.
This is hardly an original insight, everyone from the UN to the Pope to the Trump Administration has noted that climate impacts will fall – and are already falling – disproportionately on the poor. But the insight is foundational and also has layers, so let’s dig into it and see what we find.
Here are several big ways in which having money makes climate adaptation easier.
Paying for infrastructure upgrades – As I wrote last week, well-off cities and counties have the financial wherewithal to pay for smaller infrastructure projects directly, and to borrow to finance larger ones. This includes the flexibility to raise local taxes, the strong credit rating to finance larger projects at low interest rates, and the political influence to capture a disproportionate share of federal and state funds. Infrastructure is the key to climate adaptation so these advantages are extremely consequential.
To-date, we’ve focused the collective adaptation capability of well-off communities, but well-off households also have enormous advantages in adapting to global warming.
Climate durable homes – Climate durable homes are not just better able to resist climate impacts, they are also the homes that will appreciate the most in the future. As the understanding of climate change sinks in for more and more people, the value of these homes will become more widely understood. Demand for climate durable homes and real estate will rise, driving up prices. (In parallel, demand for climate vulnerable homes and real estate will fall, driving prices down.)
Homeowners insurance – Perhaps the most important defense against the financial risks of climate change is home insurance. But not everyone can afford it. When climate disasters hit areas where fewer people have home insurance, the damage to communities can be devastating, and sometimes permanent. In addition, insurance policies vary in quality. The better policies cover more and cost more, putting them out of reach for lower-income homeowners, who are left with thinner coverage that leaves them exposed. As insurance costs rise to reflect growing risks from climate-intensified weather events, this “insurance inequality” will continue to grow.
Home ruggedization – Homes themselves, the physical structures, can be more climate durable or less. Homes can be made more durable, i.e. ruggedized, with a range of improvements like better drainage, tighter connection between frame and roof, double-paned windows, fire resistant exteriors, sump pumps, and much more. A climate ruggedized home provides not just physical safety, but financial security, as well. That’s because even if home insurance pays out when a climate disaster damages a home, the owner’s rates will rise as a result. The surest financial investment is having a structurally strong and climate resilient home in the first place, and that costs money.
More home ruggedization – Yet another place where having wealth creates a significant advantage is in hardening your home against electrical grid unreliability and rising energy costs. Putting in solar panels to generate free, renewable electricity and then electrifying a home – batteries for storage, heat pumps, induction stoves, electric dryers, and electric cars – frees a home from fossil fuels. No need for oil for heat, gas for cooking, and $5 per gallon gasoline, which means insulation against energy inflation. It also means the air conditioning stays on even in heatwave brownouts. But going solar and electrifying requires an up-front investment of mid-five figures, give or take. Financing and leasing options exist, as do tax credits in some states, but it’s more accessible and less daunting for those with the money to pay for it.
Evacuations – As life-threatening wildfires and hurricanes become a more frequent feature of life in vulnerable places, the annual cost of evacuations will increase. Evacuations cost money, for gas and especially lodging. For those with comfortable finances the expense is relatively minor, but for households with little savings it can bite. (This hints at another kind of climate infrastructure we need more of: temporary shelters for evacuees.)
Household agility – Agility is how quickly a household can act when speed is beneficial. Climate change will create a variety of situations where people who can react quickly will thrive, while those who can’t will suffer. We just discussed one example: evacuations. Another situation is the need to quickly sell a home in a climate vulnerable place when the market starts to turn down. Households with more money can worry less about getting the best possible price for their home, or whether they’ll be able to find a new place to live. But those whose wealth is mostly home equity may be hesitant to sell in general, and especially disinclined to sell quickly.1 But waiting will only hurt. When housing bubbles in vulnerable places start to deflate, minimizing financial harm will require selling quickly. (Another factor, distinct from wealth but often correlated with it, is people whose jobs can be done remotely have more flexibility to sell their homes and move on short notice without jeopardizing their jobs.)
It’s worth noting here that money isn’t the only important ingredient in climate adaptation. People also need to understand what climate change is and that it’s real, accurately perceive reality and its shifting risks, and be willing to invest not just in their homes but also their communities in the form of higher taxes. I wrote about this in detail in last week’s The five essential criteria for buying a climate-durable home.
The following are my main takeaways from this analysis.
Big picture
Climate change is going to worsen inequality. Both between rich and poor people within societies, and between rich, climate durable countries in North America and Europe and lower income, climate vulnerable countries in the Global South.
Climate change is not just a human catastrophe, it’s also a moral abomination.
Philanthropy and nonprofits
The philanthropic community needs to shift more focus and funding to addressing the impacts of global warming on low-income communities.
Climate adaptation philanthropy has to be much more than grants. We need innovative approaches to help low income households afford home insurance and ruggedize their homes, and to help less well-off communities access infrastructure financing at affordable rates.
Climate era personal finances
From the perspective of value and appreciation, a family or individual will be better off owning a modest home in a well-off area than a nicer home in a less well-off area. The former will be able to make the necessary infrastructure investments to ruggedize against climate change, while the latter may not.
Investments in ruggedizing your home have multiple benefits, which makes them a very sound investment. First, they make your home structurally stronger, more resilient, and better able to avoid and resist climate damage. Second, they will help hold down your home insurance premiums, which increase each time your home incurs damage requiring payouts. And third, ruggedization investments increase the resale value of your home.
Notes
https://www.vox.com/future-perfect/2019/6/13/18660548/climate-change-human-civilization-existential-risk
https://www.washingtonpost.com/energy-environment/2018/11/23/major-trump-administration-climate-report-says-damages-are-intensifying-across-country/
Note that this hesitance to make quick decisions about major financial assets is in most cases a sign of prudence and self-possession. Global warming shifts many things, including what qualities are strengths and weaknesses in different situations.