Biofuels, Economic Growth, and the External Sector in Ethiopia: A Computable General Equilibrium Analysis
In this study, we assess the economy-wide effects of biofuel investment in Ethiopia, with a focus on the external sector. The Government of Ethiopia has been revising its energy policy to switch from imported fossil oil to domestically produced biofuels, partly in response to climate change and partly in response to rising world oil prices, which leave oil-importing countries such as Ethiopia vulnerable to external oil price shocks. In Ethiopia, the value of oil imports relative to export earnings has increased over time, which has negatively impacted its balance of payments. Specifically, this paper assesses the implications of biofuels investment for growth and the external sector in Ethiopia using a dynamic recursive computable general equilibrium (CGE) model. The study is based on primary data collected from biofuel firms in Ethiopia and assumes that the amount of land is fixed in a given period. The results indicate that the macroeconomic and sectoral effects of biofuel investment in the context of Ethiopia are mixed. Biofuel expansion can help to improve economic growth if such expansion generates spillover effects, with jatropha and castor bean found to have the strongest positive impact on the economy. Without spillovers, the effect of biofuel investment on economic growth is negligible, indicating the importance of technology transfers. The impact on the external sector, especially on exports and imports, is negative, as biofuels expansion affects both the real exchange rate and production of export commodities. This negative effect might be mitigated by policies encouraging biofuels investment to move in a direction that does not compete with the use of land for traditional export crops.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bouët, Antoine & Dimaranan, Betina V. & Valin, Hugo, 2010. "Modeling the global trade and environmental impacts of biofuel policies," IFPRI discussion papers 1018, International Food Policy Research Institute (IFPRI).
- Sourie, Jean-Claude & Treguer, David & Rozakis, Stelios, 2006. "Economic impact of biofuel chains in France," 2006 Annual meeting, July 23-26, Long Beach, CA 21184, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Yao, Shujie & Liu, Aying, 2000. "Policy Analysis in a General Equilibrium Framework," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 589-610, September.
- Huang, Jikun & Yang, Jun & Msangi, Siwa & Rozelle, Scott & Weersink, Alfons, 2012. "Biofuels and the poor: Global impact pathways of biofuels on agricultural markets," Food Policy, Elsevier, vol. 37(4), pages 439-451.
- Negash, Martha & Swinnen, Johan F.M., 2013.
"Biofuels and food security: Micro-evidence from Ethiopia,"
Elsevier, vol. 61(C), pages 963-976.
- Martha Negash & Jo Swinnen, 2012. "Biofuels and Food Security: Micro-evidence from Ethiopia," LICOS Discussion Papers 31912, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Negash, Martha, 2012. "Biofuels and Food Security: Micro-evidence from Ethiopia," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126793, International Association of Agricultural Economists.
- Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
- Nin Pratt, Alejandro & Yu, Bingxin, 2008.
"An updated look at the recovery of agricultural productivity in Sub-Saharan Africa:,"
IFPRI discussion papers
787, International Food Policy Research Institute (IFPRI).
- Nin Pratt, Alejandro & Yu, Bingxin, 2009. "An Updated Look at the Recovery of Agricultural Productivity in Sub-Saharan Africa," 2009 Conference, August 16-22, 2009, Beijing, China 51731, International Association of Agricultural Economists.
- Arndt, Channing & Msangi, Siwa & Thurlow, James, 2010. "Are Biofuels Good for African Development? An Analytical Framework with Evidence from Mozambique and Tanzania," Working Paper Series wp2010-110, World Institute for Development Economic Research (UNU-WIDER).
- Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
- Birur, Dileep & Hertel, Thomas & Tyner, Wally, 2008. "Impact of Biofuel Production on World Agricultural Markets: A Computable General Equilibrium Analysis," GTAP Working Papers 2413, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Arndt, Channing & Pauw, Karl & Thurlow, James, 2010. "Biofuels and economic development in Tanzania," IFPRI discussion papers 966, International Food Policy Research Institute (IFPRI).
- Arndt, Channing & Pauw, Karl & Thurlow, James, 2012. "Biofuels and economic development: A computable general equilibrium analysis for Tanzania," Energy Economics, Elsevier, vol. 34(6), pages 1922-1930.
When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-13-08-efd. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)
If references are entirely missing, you can add them using this form.