Purpose – Climate change has become one of the most important development challenges worldwide. It affects various sectors, with agriculture the most vulnerable. In Ethiopia, climate change impacts are exacerbated due to the economy’s heavy dependence on agriculture. The Ethiopian Government has started to implement its climate-resilient green economy (CRGE) strategy and reduce CO2 emissions. Therefore, the purpose of this study is to examine the impact of CO2 emission on agricultural productivity and household welfare.
Design/methodology/approach – This study aims to fill these significant research and knowledge gaps using a recursive dynamic computable general equilibrium model to investigate CO2 emissions’ impact on agricultural performance and household welfare.
Findings – The results indicate that CO2 emissions negatively affect agricultural productivity and household welfare. Compared to the baseline, real agricultural gross domestic product is projected to be 4.5% lower in the 2020s under a no-CRGE scenario. Specifically, CO2 emissions lead to a decrease in the production of traded and non-traded crops, but not livestock. Emissions also worsen the welfare of all segments of households, where the most vulnerable groups are the rural-poor households.
Originality/value – The debate in the area is not derived from a rigorous analysis and holistic economy-wide approach. Therefore, the paper fills this gap and is original by value and examines these issues methodically.
Keywords – Welfare, Climate-resilient green economy (CRGE), Computable general equilibrium (CGE), CO2 emissions.
Paper type – Research paper.