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

Zenebe Gebreegziabher, Alemu Mekonnen, Tadele Ferede, Fantu Guta, Levin, Jörgen, Köhlin, Gunnar, Tekie Alemu and Lars Bohlin
Authors registered in the RePEc Author Service: Tadele Ferede Agaje and Gunnar Köhlin

RFF Working Paper Series from Resources for the Future

Abstract: 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.

Keywords: biofuels investment; CGE model; food security; household welfare; equivalent variation; Ethiopia (search for similar items in EconPapers)
JEL-codes: O44 O5 Q42 Q56 (search for similar items in EconPapers)
Date: 2013-01-18
New Economics Papers: this item is included in nep-afr, nep-agr, nep-cmp and nep-ene
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Citations: View citations in EconPapers (5)

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