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2011-07-22 | News

Climate change to reduce average income of Ethiopia by about 30 percent within the next 50 years

Press release from Environmental Economics Policy Forum for Ethiopia, Addis Ababa, Ethiopia 2011-07-20

Agriculture, particularly rain-fed agriculture, is likely to be affected by climate change.
Developing countries, whose economy is largely dependent on agriculture, are expected to bear the adverse effects of climate change for they have low adaptive capacity. Climate change is capable of affecting other sectors of the economy besides the agriculture sector either directly or indirectly. But what does this mean to Ethiopia’s growing economy? A research carried out by economists Dr. Zenebe Gebreegziabher, Professor Jesper Stage, Dr. Alemu Mekonnen and Atlaw Alemu shows that over a fifty year period the projected reduction in agricultural productivity may lead to reductions in average income of some 30%, compared to the outcome that would have prevailed in the absence of climate change
.

Jesper stage

Ethiopia, as well as many other African countries, has a range of factors that may undermine communities’ ability to adapt to climate change. The country has a complex climate system and combined with socioeconomic challenges such as endemic poverty, limited access to capital and global markets, ecosystem degradation, complex disasters and conflicts.

Accordingly, the effect of climate change on the performance of Ethiopia’s economy is likely to be a function of both the structure of the macro-economy and sector-specific vulnerability. This means that government adaptation policies are likely to be important; however, such policies are likely to be costly, and without a realistic baseline scenario there is a risk that government programmes will be evaluated against an inappropriate no-cost, no-climate change status quo rather than against the outcomes that will prevail if no government  adaptation is carried out. It is, therefore, important to assess what impacts climate change is likely to have if private agents are left to adapt on their own, to use as a baseline against which to assess activist adaptation policies.

That is why the researchers used Computable General Equilibrium (CGE) model in order to grasp the economy-wide effect of climate change induced shocks in agriculture on Ethiopia’s economy. This is not the first study that tried to illustrate the impacts of climate change in Ethiopia. But unlike the other researches, this study tried to grasp the overall impact of climate change on the economic growth and poverty of the country as well as on different zones/areas while incorporating the inter-linkages of livestock farming with crop production. 

“In those parts of the moisture sufficient highlands where cereal production currently dominates,
the part of the country which currently accounts for the largest share of agricultural production,
overall productivity is projected to increase until approximately 2030 as a result of climate
change, but to decline sharply thereafter” say the researchers.

“In the drought prone highlands, the situation is somewhat different. Land productivity in crop
production is expected to decline as a result of climate change more or less continuously
throughout the period, but a large part of the decline is projected to take place relatively soon,
after which the decline slows down temporarily between 2030 and 2050.”

According to the researchers, productivity growth matters more than climate change for the overall outcome. It is possible that income levels rise over the coming fifty years despite climate change provided that current growth trends continue. If Ethiopia’s growth regresses back to the trends experienced in the pre-1992 period, income levels would remain extremely low even if there were no climate change to worry about. Regardless climate change will have a dramatic impact in Ethiopia even in high-growth scenarios since its economy is totally dependent on agriculture. And that is why income level is anticipated to be affected as compared to what would have prevailed without climate change.

The research received funding from Sida (the Swedish International Development Cooperation
Agency) and the International Institute for Environment and Development (IIED).

Time and place for public presentation:
09:00 am on Wednesday 20 July 2011 in Jupiter International Hotel, Cazanchis area, Addis
Ababa, Ethiopia.

Title of the research:
Climate change and the Ethiopian economy: A CGE analysis

More information:
Contact Jesper Stage, telephone +46 (0) 60 14 84 46, email jesper.stage@miun.se

Co-authors:
Alemu Mekonnen, telephone+251 (0) 11 553 86 32, email alemu_m2004@yahoo.com  
Zenebe GebreEgziabher, telephone +251 (0) 11 553 86 32, email zenebeg2002@yahoo.com 
Atlaw Alemu, atlawalemu@yahoo.com 

Press officer:
Tsehay A. Hailemichael, telephone +251 (0) 11 553 86 32, email tsehayata@gmail.com