Navigating climate-resilience: co-benefits and costs of a net zero development pathway in Ethiopia

Abstract

ABSTRACT This paper examines the co-benefits of a pathway to net zero emissions (NZE) in Ethiopia focusing on the economic, social and environmental impacts of climate change mitigation and adaption. Using a novel, participatory, systems dynamics modeling approach – the Ethiopia Green Economy Model (GEM) – the authors assess a NZE pathway against a business-as-usual (BAU) scenario to 2050. Assumptions, design of the model, and features of the pathways were gathered through a collaborative initiative, working with representatives of the government of Ethiopia and local experts. The assessment compares the costs of implementing BAU versus NZE development pathways to the co-benefits of climate action. A key policy question is: how will climate action impact growth and investment as well as poverty, income inequality, employment, and ecosystem services? This analysis shows that moving onto a NZE pathway could raise Ethiopia’s GDP growth to 8.1 percent compared to 6.7 percent per year under BAU from 2020 to 2050. Implementation of NZE is estimated to raise cumulative investment costs as well compared to BAU by 2050 but yields significantly more in co-benefits and avoided costs combined, with the latter mainly from energy savings. Economic performance under the NZE pathway will bring about economic structural change, with a decline in agricultural GDP offset by growth in industry and the service sector. Beyond economic growth, a NZE pathway is expected to create employment co-benefits, adding green jobs, while also bringing about faster reduction of extreme and moderate poverty and raising average disposable income. Overall, this broad economy-wide analysis shows a benefit to cost ratio (BCR) greater than 1 by 2030, with $1.04 of benefits generated for every dollar invested, rising to nearly triple this by 2050. Implementation challenges include the need for a dedicated financing strategy and complementary policies to ensure a just transition for unskilled workers; not examined in any detail here, these are topics ripe for future work.