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Bio-Based Energy, Rural Livelihoods and Energy Security in Ethiopia

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Dawit Guta

This study explores issues of biomass energy use in relation to household welfare and it assesses Ethiopia’s future energy security with a focus on long-term model of the energy sector, and institutional arrangements required for decentralized energy initiatives. Data from Ethiopian rural households reveal negative welfare effects associated with traditional biomass energy utilization, while increases in the opportunity cost of fuelwood collection is associated negatively with allocation of labour to agriculture and fuelwood use. It appears that investment on integrated energy source diversification improves sustainability and resilience, but increases production cost. Innovations that improve alternative sources reduce production cost, improve energy security, and thus serve as an engine of economic growth.
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Abstract / Zusammenfassung

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Abstract

Energy consumption in Ethiopia is based mainly (90 %) on the traditional use of biomass for domestic needs, typically using rudimentary cooking stoves. Against this background this study examined the importance of biomass energy use among rural households and evaluated long-term energy security at the national level. To this end, a farm household model was developed to investigate the association between biomass energy use and food security. The study explored the effects of fuelwood scarcity on rural livelihoods through an examination of household decisions regarding the allocation of family labour and expenditures on food and energy. For this purpose the study relied on a panel dataset derived from Ethiopian households. Due to the endogeneity of shadow wages and prices, and to selectivity biases, a Fixed Effect Two-Stage Least Squares model was used with inverse Mills ratios to determine wages and food and energy expenditures. In addition, Seemingly Unrelated Regression and Almost Ideal Demand System analyses were used to estimate the allocation of labour to agriculture, fuelwood collection, and off-farm activities jointly. Discrete household energy decisions were estimated using a multinomial logit model with predicted wages and other determinants. Shadow prices of fuelwood and agricultural fuels were estimated based on their respective shadow wages and per unit labour hours expended in order to procure the respective energy sources. Ordinary Least Squares and Tobit models were used to estimate household demand for fuelwood, and for charcoal and agricultural fuels, respectively. A dynamic long-term model of the energy sector in...

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