# **1 Introduction**<sup>**1**</sup>

This paper addresses the interaction between climate and weather variability and shocks, exposure and vulnerability, poverty and environmental reliance. We seek to answer two broad questions. First, are the poor more exposed to climate extremes, weather anomalies and other shocks? Second, what is the role of environmental income in coping with shocks, and how does the role vary across poverty groups? Answers to these questions will help policy makers better understand how climate change might affect the poorest, and whether and how their access to natural resources – and sustaining the resource base – might help them cope with climate shocks.

We address these questions by using a global sample of nearly 8,000 rural households in 59 sites in 24 developing countries from the Poverty Environment Network (PEN) project.<sup>2</sup> We define environmental income as cash and subsistence incomes from products extracted from noncultivated (wild) areas. Environmental income accounts for 27% of total household income, suggesting that it plays an important role in income portfolios of rural households in developing countries, and needs to be factored into discussions on climate change and vulnerability. We argue that environmental income has characteristics, in terms of being more climate-resilient and relatively more accessible to the poor, which can increase the adaptive and coping capacity of poor households. At the same time, this key source of rural livelihoods is under threat by the degradation of natural resources in many parts of the developing world.

Climate change has both direct and indirect impacts on the livelihoods of the rural population in developing countries (Porter et al. 2014). Climate change is likely to have a negative impact on long term crop yields, affecting agricultural income directly. The impact will vary, however, depending on the nature of climate change (e.g. some areas may experience more and others less rainfall) as well as the differences in initial conditions (e.g. wet vs. dry areas). Climate change is also likely to impact the provision of environmental resources, such as the availability of and access to forest products. Changes in crop prices, wages, seasonal wage employment opportunities in agriculture, and alternative livelihood opportunities are potential indirect impacts of climate change. The large uncertainties of the magnitude and impacts of climate change underscore the importance of strengthening the adaptive and coping capacities of the poor.

While our data do not allow us to look at exposure and vulnerability to future climate changes _per se_ , studying current impacts of climate variability, weather anomalies and the selfreported shocks can shed light on possible climate impacts in the future. Moreover, _current_ climaterelated shocks already pose a challenge for poor people, thus also current exposure and vulnerability deserve the attention of policy makers.

A major contribution of the paper is to distinguish clearly between categories of poor. We differentiate between stochastic (temporary or transient) and structural (permanent, persistent or chronic) poverty. While the observed income in the survey year is of interest, it does not necessarily capture the likely income next year, nor the chances that a household will fall into (deeper) poverty in the event of a shock (vulnerability). We use the method outlined in Dokken and Angelsen (2015), and argue that _predicted_ income, based on a range of assets and other household and context

> 1 An accompanying paper by Noack et al. (2015) describes households’ environmental use in the PEN data set, and provides an econometric analysis of how climate shocks – through loss of crop income – might impact extraction of environmental resources. The two papers are complementary, and we refer at times to the Noack et al. paper for further elaborations.

> 2 See Angelsen et al. (2014) for details on the PEN project.

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