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The Distributive Effect and Food Security Implications of Biofuels Investment in Ethiopia: A CGE Analysis


  • Gebreegziabher, Zenebe
  • Mekonnen, Alemu
  • Ferede, Tadele
  • Guta, Fantu
  • Levin, Jörgen
  • Köhlin, Gunnar
  • Alemu, Tekie
  • Bohlin, Lars


In 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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  • Gebreegziabher, Zenebe & Mekonnen, Alemu & Ferede, Tadele & Guta, Fantu & Levin, Jörgen & Köhlin, Gunnar & Alemu, Tekie & Bohlin, Lars, 2013. "The Distributive Effect and Food Security Implications of Biofuels Investment in Ethiopia: A CGE Analysis," Discussion Papers dp-13-02-efd, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-13-02-efd

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    References listed on IDEAS

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    Cited by:

    1. Djanibekov, Utkur & Gaur, Varun, 2016. "Assessing nexus effects of energy use in rural areas: the case of an inter- and intra-household model for Uttar Pradesh, India," Discussion Papers 244754, University of Bonn, Center for Development Research (ZEF).
    2. repec:eee:rensus:v:75:y:2017:i:c:p:1035-1045 is not listed on IDEAS
    3. repec:eee:enepol:v:113:y:2018:i:c:p:439-453 is not listed on IDEAS
    4. Negash, Martha & Riera, Olivia, 2014. "Biodiesel value chain and access to energy in Ethiopia: Policies and business prospects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 975-985.

    More about this item


    biofuels investment; CGE model; food security; household welfare; equivalent variation; Ethiopia;

    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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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