The Distributive Effect and Food Security Implications of Biofuels Investment in Ethiopia: A CGE Analysis
AbstractIn response to global opportunities and domestic challenges, Ethiopia is revising its energy policy to switch from high-cost imported fossil fuel to domestically produced biofuels. Currently, there are biofuel investment activities in different parts of the country to produce ethanol and biodiesel. However, there is no rigorous empirical study to assess impacts of such investments. This paper assesses the distributive effect and food security implications of biofuels investment in Ethiopia, using data from 15 biofuels firms and 2 NGOs in a CGE (computable general equilibrium) analysis. Findings suggest that biofuels investments in the context of Ethiopia might have a ‘win-win’ outcome that can improve smallholder productivity (food security) and increase household welfare. In particular, the spillover effects of certain biofuels can increase the production of food cereals (with the effect being variable across regions) without increasing cereal prices. When spillover effects are considered, biofuel investment tends to improve the welfare of most rural poor households. Urban households benefit from returns to labor under some scenarios. These findings assume that continued government investment in roads allows biofuels production to expand on land that is currently unutilized, so that smallholders do not lose land. Investment in infrastructure such as roads can thus maximize the benefits of biofuels investment.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-13-02-efd.
Date of creation: 18 Jan 2013
Date of revision:
biofuels investment; CGE model; food security; household welfare; equivalent variation; Ethiopia;
Find related papers by JEL classification:
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- O44 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
- O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-05-11 (Agricultural Economics)
- NEP-ALL-2013-05-11 (All new papers)
- NEP-CMP-2013-05-11 (Computational Economics)
- NEP-ENE-2013-05-11 (Energy Economics)
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