Friends of Fossil Fuel Subsidy ReformEthiopia’s Initiative on Subsidy Removal

Wondwossen Sintayehu07 December 2011

Durban

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Fossil Fuel Consumption – quick facts

• Ethiopia imports petroleum and products – more than 50% of foreign currency earnings

• Diesel takes the larger share- transport system and industries

• Gasoline- for private smaller vehicles and automobiles

• Kerosene – for household purposes

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Fossil Fuel Subsidy Reform – quick facts

• A subsidy reform was initiated in 2008.• Council of Ministers endorsed a decision in

October 2008.• By this decision the Ministry of Trade was

mandated to follow up the international market and adjust the price accordingly

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Purpose

• focus on more priority development activities and needs (food , health and infrastructure)

• to encourage the transport/ industry systems adjust:

• to pave the way for alternative transport system,• to develop effective transport policies,• to make fuel switch in industries etc.

• greener path and mitigation of GHGs

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Strategic interventions

CRGE Strategy – Transport/ Industry is just concluded

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Transport – Estimation of current emission levels and projection of business-as-usual 2030

▪ Road Transport Authority, Petroleum Enterprise

▪ Forecast according to GDP/capita (GTP and CSA) and according to GTP plans (public transport, freight)

▪ African Association of Public Transport data

▪ IPCC data on combustion emis-sions by fuel type

Main drivers and sources Output overview

Emissions per year, Mt CO2e

Passenger: Intra-city

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Baseline2010

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Business- as-usual

2030

Freight: InternationalFreight: Liquid CargoFreight: Construction & Mining

Freight: Dry Cargo

Passenger: International

Passenger: Inter-city

Transport – List of identified abatement leversMacro levers

Passenger transport Urban electric rail public transitLight Rail

Cleaner fuel mixture for passengers & cargoEthanol Fuel Blend (15-85%)

Inland Cargo Zero emissions freightExpanded Electric Freight Rail Capacity

Cleaner fuel mixture for passengers & cargoGeneral B5 Diesel-Biodiesel Blend

Higher efficiency transport of inland liquid cargo using a pipeline

Liquid petroleum pipeline

Fast & efficient bus transitBus Rapid Transit

Optimization using transit info and com. tech (ICT)Congestion-Intelligent Traffic System

Improved fuel efficiency for passenger and cargo transportation

Fuel Efficiency Standards

Lever Description

Transport STC Quantification of CO2 Abatement Levers

Abatement measuresBusiness-as-usualMt CO2e/ year

BAU emissions: 42 Mt in 2030

0

10

20

30

40

50

2015 2020 2025 20302010

9.1 Electric Rail

.1 Light Rail Transit

.04 Bus Rapid Transit

.03 Hybrid Vehicles

Fuel Efficiency Standards

Abatement potential in 2030 for subset of analyzed levers is 13 Mt CO2e per year

.8 B5

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Price reduction efforts • After the subsidy removal the government of

Ethiopia introduced Ethanol Blending– October 2008 E5: 5% ethanol and 95 % gasoline – March 2011 E10: 10 % ethanol and 95 % gasoline

Purpose• Stabilize prices a little bit• Enhance environmental integrity

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Price reduction efforts

• Households still use kerosene as a source of fuel – but NO SUBSIDY.

• to control the price and provide alternative sources - the government of Ethiopia also introduced Ethanol cooking stoves (through the MoWE)

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Future plan 1. Enhanced fuel blending

– Ethanol blending with gasoline will reach 25% ( ethanol production to 181.6 million liters/ year by 2015).

– Bio-diesel production will begin by 2012 (Jatropha) – Blending will be 20% bio-diesel and 80% diesel – The combined abatement potential of increasing the use of

ethanol and biodiesel in the fuel mix is 1 Mt CO2e. – opportunity for more than 2 million farmers.

2. Policy adjustments– fuel efficiency standards for all vehicles, carbon finance

regulation (to encourage investment ), CSER… – Estimated reduction of GHG emissions will be 3 Mt CO2e

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