Poverty alleviation and local environmental degradation: An empirical analysis in Colombia

Poverty eradication and global warming are the two biggest challenges of our time. Yet they are also inter-linked. While it has been widely demonstrated that climate change hinders poverty eradication efforts, there is no consensus on the reverse causality, mainly due to methodological limitations of existing research. This study addresses this gap in our understanding of the causal relationship between poverty reduction and climate change mitigation through the analysis of a cash transfer program aimed at poverty reduction. By linking micro and macro data, the study explores the causal link between poverty reduction at the household level and environmental impact at the aggregate local level. The context of the empirical research is the Familias en Acción program in Colombia, a conditional cash transfer program launched by the Colombian government in 2000. Multiple data sets are used for the analysis. The findings show that the receipt of cash transfers at the household level is associated with increases in the purchase of land- and energy-intensive goods. But this, in turn, does not have a negative effect on local environmental conditions in treated municipalities. Deforestation rates are, in fact, lower compared to similar municipalities. This counter intuitive finding is partly explained by the mediating effect of market proximity. The research thus contributes to the literature by providing new and novel evidence on the relationship between poverty reduction and the local environment and by proposing empirical solutions to address existing methodological challenges for research in this area. From a policy perspective, the study demonstrates the significance of local context, advocates for the use of global carbon footprints, and confirms that the environmental footprint of poverty reduction is small.