Discussion Paper

Climate Change and the Ethiopian Economy: A Computable General Equilibrium Analysis

Oct 14, 2011 | Zenebe Gebreegziabher, Jesper Stage, Alemu Mekonnen, Atlaw Alemu

This was created in partnership with Environment for Development .

Abstract

This paper analyses the economic impacts of climate change on Ethiopia’s agriculture using a countrywide computable general equilibrium model. The impacts on agriculture are based on results from a Ricardian model where current (and future) agricultural production is analyzed as a function of temperature and precipitation. We project that the effect of overall climate change will be relatively benign until approximately 2030 and then worsen considerably. Our simulation results indicate that, over a 50-year period, the projected reduction in agricultural productivity may lead to 30 percent less average income, compared with the possible outcome in the absence of climate change. Autonomous adaptations that the farmers make and government policies in response will be crucial for Ethiopia’s future development.