Climate variability has tremendous impacts on rural and urban livelihoods in developing countries, and it tends to be the dominant source of risks to income and consumption. Fluctuations in climate can affect people's access to food, water and transport, their health and property, and the price they pay for goods. In addition, the lack of access to credit markets coupled with climate uncertainty contributes to the existence of poverty traps, and prevents certain segments of the population from participating in financial markets.
Climate shocks like droughts and floods often lead to the destruction of productive assets such as plough animals, which can push people into persistent poverty. But even in relatively "good" years, the threat of climate variability makes people and institutions risk-averse. For example, farmers won't chance spending more on fertilizers or improved seeds in the face of climate uncertainty, and thus miss out on the increased yields that could have resulted.
The IRI has a number of ongoing projects to help societies deal with changing climatic conditions. For example, advances in seasonal climate prediction allow us to forecast probability shifts in rainfall conditions and crop yields well in advance of the start of the growing season. Reliable forecasts have the potential to reduce not only the impacts of climate shocks but also the perceived risk of variability so that people can take advantage of favorable conditions.