Ethiopia

Ethiopia's Climate Resilient Green Economy (CRGE) Strategy approved in 2011 represents the overarching framework guiding the country's ambitious sustainable development strategy until 2030. The country is positioning itself a green economy exemplar for lower income countries that are seeking to combine rapid economic growth with ambitious emissions reduction targets. Currently undergoing a revision and updating process, the CRGE strategy follows a sectoral approach and is based on 4 main pillars: improving crop and livestock productivity to boost yields while also reducing GHG emissions; protecting and regenerating forests for their ecosystem and economic benefits, but also as carbon sinks; expanding renewable electricity generation; and mobilising energy efficiency technologies in the transport, industrial and building sectors. The Strategy is fully mainstreamed into the Countrys development plans and guides green initiatives. Particularly over the past three years, regulatory frameworks are being revised. In terms of setting a clear path for economic reform - Ethiopia has launched an economic reform agenda that aims to overcome challenges through comprehensive and well-synchronized set of measures. The CRGE Strategy includes 60 initiatives for each of the key sectors identified and call for an overall reduction of GHG emissions of slightly over 3% on 2030 compared to the 2010 baseline. However, the country is expected to experience robust economic and population growth over that period (over 10% expected GDP growth per year). Therefore, the CSGE strategy projects a 64% reduction on GHG emissions in 2030 against a business as usual growth trajectory. The CRGE strategy is aligned with the country recently updated Growth and Transformation Plan II for the period 2015-2020) and is complemented by a Climate Resilient Green Economy National Adaptation Plan approved in 2019. Ethiopia has recently (June 2020) unveiled its first-ever ten-year economic development plan, themed which will replace the expiring Growth and Transformation Plan II. In terms of diversifying its economy the country also launched a Home Grown Economy reform agenda which aims to ensure elimination of macroeconomic imbalances and sustainable and inclusive growth. That highly encourage the private sectors engagement by transitioning the economy from public-led to the private sector drives. The newly developed plans, policies or revised ones address the countrys three complementary objectives - ensuring a sustainable economic growth, zero net emission path, and building resilient society. Ethiopia' Nationally Determined Contribution (NDC) is under revision with clear actions, target dates and details, as well as measuring and reporting tools.

Ethiopia has in place a participation processes for public consultation for important policy documents, although in some cases these processes lack in comprehensiveness and intensity. In terms of engagement of civilian in the making or policy formulation or planning, the country used the "5 in 1" model that brings the five people in one group for discussion of challenges or opportunities as well as suggestions starting at the grassroots level (villages at subnational level) that will be aggregated to Woreda, Zonal, Regional, and National level using same method. This method has been used for decades in regards to engaging communities and public entities. Currently, the country has opened platforms to engage the wider public in policy reforms, using the national media presenting the next 10 years' consolidated national plan as well as sectoral plans with the purpose of not only raising awareness of the general public but also receiving suggestions of missing points and comments, with the goal of making all citizens participants in the process and give them a sense of ownership. There was a public consultation process for the drafting of the Climate-Resilient Green Economy strategy as well as the Growth and Transformation Plan, documents that represent the cornerstones of sustainable development planning in Ethiopia. Stakeholder engagement and consultation is in place and it is a known trend in Ethiopia at all steps of policy development - from drafting to finalizing. Yet, in the past year the gap was there in regards to incorporating suggestions into consideration. However, currently the government is working on addressing these gaps, including inclusive governance (gender, private sector, Civil society ...).

The UN SDG and the Africa Agenda 2063 is incorporated in Ethiopias development. In addition, Ethiopia has established a standing institutional structure to involve a vast array of stakeholders, including the private sector, in the implementation, coordination and monitoring of the SDGs. Known as the "Public Wing" the institutional framework allows for consultation and participation of stakeholders in the development of policies pertaining to the SDGs. Ethiopia`s most recent 10-year national development plan, launched in 2021, emphasises structural changes and revisions in terms of mobilizing local resources by engaging the private sector.

Ethiopia's Climate Resilient Green Economy (CRGE) Strategy and its Green Economy Adaptation Plan make no mention of any type of wealth accounting mechanisms, neither in use or in development. While several of its peer countries in Africa, such as Botswana, Uganda, Rwanda and Zambia are core implementing partners of the Wealth Accounting and the Valuation of Ecosystems Services (WAVES) led by the World Bank, Ethiopia has not taken meaningful steps in this area. Ethiopia is not a signatory of the Gaborone Declaration for Sustainability in Africa which is leading the way in terms of incorporating ecosystem valuation and natural Capital Accounting in Africa. However, some advances suggest that Ethiopia is making some progress in this area. For instance, the 10-year Forest Sector roadmap that was launched in 2018 (10-year National Forest Sector Development Program (NFSDP) serves as the main guiding document for coordinating strategic policy interventions to increase the national forest coverage and its contribution to national green growth.

Ethiopia's Climate Resilient Green Economy Strategy lays the foundation for the development of a carbon neutral economy in the long-term and identifies at least 60 initiatives for climate adaptation and resilience. The Strategy, which estimates a need for funding of approximately 150 billion USD over a 20 year period, establishes a CRGE Facility to administer climate finance mobilized from bilateral and international climate finance institutions under the umbrella of the Ministry of Finance. As the focus is primarily on adaptation and emissions abatement projects, typically offering a low or negligible return on investments, mobilisation of private sector or commercial financing is not the primary focus. Despite these challenges, the government has mobilised over 200 million USD in the last ten years from public and multilateral sources to fund climate change mitigation and adaptation projects benefitting poor and vulnerable populations.

Although Ethiopia's Climate Resilient Green Economy Strategy (CRGE) touches upon potential financing mechanisms for the 60 climate mitigation and adaptation initiatives identified in the Plan, the government has taken very few strides in relation to environmental fiscal or monetary reforms. In terms of monetary policy, Ethiopia does not appear to be close to issuing green sovereign bonds, a step recent taken by Nigeria on the African continent. However, several projects located in Ethiopia are eligible for funding under a bond issuance by the African Development Bank. In terms of fiscal policy, the country has pressing matters that involve modernising the tax collection and payment system as the percentage of national revenues collected as taxes is quite low by international standards. Due to these as of yet solved structural problems, there has been limited movements in terms of green fiscal reforms in Ethiopia.

The Central Bank of Ethiopia conducts limited stress tests on financial institutions operating in the country. However, the tests cover only some market risks and do not include climate-related or social risks. No plan is in place for conducting an integrated assessment of the resilience of the county's financial system due to climate related or transition risks or shocks.

Ethiopia expresses in its Climate Resilient Green Economy Strategy its interest in the use and promotion different policy instruments, including pricing carbon in its efforts to transition to a sustainable growth path. As many of the initiatives highlighted in the plan offer important carbon abatement opportunities, the document mentions the potential use of carbon trading schemes to raise funds for the implementation of these projects. However, there is no evidence of implementation of any carbon pricing schemes or mechanisms in Ethiopia to raise funds for climate mitigation initiatives or act as a market mechanism to encourage low carbon alternatives. A recent World Bank study explores the potential in Ethiopia for pursuing a policy of carbon taxing, but no plans are currently established to move forward with similar policy initiatives.

Ethiopias climate change mitigation and adaptation efforts are summarized in its Climate Resilient Green Economy (CRGE) strategy, Similarly, the country drafted and approved in 2019 a National Adaptation Plan to guide efforts to avoid the worst effects of climate change as the country is vulnerable to several important climate-related risks. The country also has a Growth and Transformation Plan II (GTP II) for the period 2015-2020, its second such five-year plan intended to mark the nations course to achieve middle income status by 2025 whilst adopting a low carbon trajectory to growth. Ethiopia recently announced the adoption of a new 10-year economic growth plan, that has not yet been made available publically. All if these documents have adopted a sectoral based approach in terms of target setting as well as initiative development. Ethiopias CRGE strategy establishes emission reduction targets for the countrys main sectors, including agriculture (currently accounting for 50% of the countrys emissions), forestry (37% of emissions), electricity generation, transport, industry, and buildings (each generating about 3% of the countrys total emissions). In terms of the institutional setup for the green economy plan implementation, Ethiopia has established a permanent inter-governmental mechanism for capacity-building and identifying specific sectoral initiatives. The green economy is incorporated and mainstreamed in the national development plan. In the CRGE Strategy document and its Operational Plan the lead coordinating institutions were set to be Environment, Forest and Climate Change Commission (previously it was at a Minister level) and the Ministry of Finance. Currently, since 2018, the government revised the mandate of Planning and Development Commission (PDC) to assign the institution with authority of coordination and evaluation of sectoral plans and implementations. This mandate empowered the Commission to develop the green 10-year national development plan.

Although a new concept in Ethiopia, social entrepreneurship has recently begun to emerge and gain traction. For instance, in 2019, the Social Enterprise World Forum was held in Addis Ababa and several organisations that promote and support social (and environmental) enterprises have established themselves in the country, including Reach for Change Development Forum, East Africa Social Enterprise, and Ice Addis. In addition, an umbrella organisation, Social Enterprise Ethiopia, has recently been formed to promote efforts to support and scale-up social enterprises in the country. Despite these recent advances of social entrepreneurship in Ethiopia, governmental efforts in this area have been largely modest to date in terms of legislative and policy support as well as financing. Several government ministries supported the organisation of the Social Enterprise World Forum, but there remains no distinct legal form or registration process for social enterprises in Ethiopia nor do national policies explicitly mention social enterprises. Nonetheless the government of Ethiopia has promoted several policies in the past several years to assist small and micro enterprises in the country. For instance, the Micro and Small Enterprise Strategy and Policy recognizes the important role of small and micro enterprises in the countrys economic growth and development while the Growth and Transformation Plan (GTP II) includes capacity building aimed at these businesses.

Although Ethiopia`s Climate Resilient Green Economy Strategy offers an ambitious vision and Plan to reduce the countrys carbon emissions by 64% compared to a business as usual (BAU) scenario by 2030, there is currently no initiatives underway to use carbon budgeting as a policy tool to limited its carbon emissions trajectory by sectors. The CRGE and subsequent National Adaptation Plan is organized by sectors and includes targets and initiatives for each of the countrys most important sectors in terms of carbon emissions (agriculture, forestry, energy, industry, buildings and transport), no plans or initiatives are in place or under consideration to put strict limits on emissions on each sector in lines with the Paris Climate Agreements.

Emissions from the energy sector account for only about 3% of Ethiopias total. Ethiopia currently achieves the vast majority of its electricity from hydro power (90%) and is currently augmenting that capacity with several large-scale projects under development, most notably the Grand Ethiopian Renaissance dam. However, these plans have encountered some resistance internally and by neighbouring counties concerned about the projects impact on their water availability, Ethiopia also can exploit wind, solar, and geothermal sources to meet its growing energy needs, and in fact, plans to be a net exporter of electricity in the mid-term. Ethiopias Second Growth and Transformation Plan (GTP II) established twelve major targets for the energy sector for the period 2015 to 2020 that would increase capacity threefold to 17GW mainly through the use of renewable energy sources. A recently unveiled 10-year economic development plan calls for thee continued modernization of the countrys energy infrastructure through the expansion of renewable energy sources. However, over 90% of energy usage is based around fuelwood usage, representing the countrys second largest source of GHG emissions. The countrys Climate Resilient Green Economy (CRGE) Strategy includes an ambitious initiative to significantly increase the use of efficient stoves in rural areas. To scale up solar power, Ethiopia is part of the World Banks Scaling Solar program. As part of the program, the Ethiopian Ministry of Finance has launched several rounds of tenders for the development of large-scale solar photovoltaic energy projects. The countrys National Energy Policy revised in October 2018 highlighted weak energy governance and non-comprehensive legal framework as a gap that the policy aims to address and stated that the energy policy needed to be updated to comprehend new energy development related issues and directions which are not clearly stipulated in the policy and to give more emphasis to the development and utilization of all renewable and clean energy resources in a sustainable and environmental friendly manner through participation of both public and private sector. Specifically, adequate affordable and reliable supply to modern energy is vital for enabling structural transformation of Ethiopia's economy and society, including further poverty reduction rates and a shift towards higher productivity rates and industrialization. The Policy aims to meet the following objectives - improve the security and reliability of energy supply and be a regional export hub for renewable energy; increase access and connectivity to affordable modern energy; promote efficient, cleaner, and appropriate energy technologies and conservation measures; strengthen energy sector governance and build strong energy institution; ensure environmental and social safety and sustainability of energy supply and utilization; Strengthen Energy Sector Financing through the involvement of the private sector (National Energy Policy, 2018).

Despite rapid economic growth in the past decade slowed down somewhat by the COVID-19 pandemic, Ethiopia remains a very poor, primarily agricultural and livestock based economy. Nearly a quarter of the citizens live below the official poverty line, while approximately 75% of the population achieves its subsistence from small hold farming and livestock activities. Therefore a great deal remains to be done to achieve the mid income status as set out in the country's Growth and Transformation Plan for the period 2015-2020 (GTP II). The GTP includes ambitious targets in terms of poverty reduction and employment creation in an inclusive manner, featuring a plan to promote the growth of the manufacturing and service sectors as transitions away from the agricultural sector. A newly established Job Creation Commission (established in 2018) has developed a Plan of Action for Job Creation, proposing holistic interventions to solve the employment and job creation challenges and provides a new vision of employment in Ethiopia. The plan aims to foster the business environment and conditions necessary to create 14 million green jobs by 2025, to absorb the currently unemployed, and to ensure that jobs are waiting for new entrants to the labour force. The plan has been developed through important and lengthy consultations with relevant stakeholders.

During Ethiopia's recent rapid and prolonged economic growth, social protection measures have taken a central role, as the country attempts to address serious issues of poverty, inequality and social exclusion. As such, social protection measures have been an important component of poverty-reduction efforts and development strategies in the country for over a decade. For instance, The National Social Protection Policy of 2014, together with the accompanying strategy document and action plan, outline a long-term roadmap for developing, scaling-up and strengthening Ethiopias social protection system as well as achieving its domestic financial sustainability. The Policy calls for transforming the focus of social protection away from humanitarian assistance (primarily financed by foreign countries) to a structured social safety net with defined assistance measures and services. These social policy frameworks are based on five focus areas for social protection (Safety Net Programme): productive safety nets; employment opportunities; social insurance; and access to health (Community-Based Health Insurance), education and other social services. Despite these multiple efforts which have borne spectacular fruits in terms of overall poverty reduction, there has not been meaningful linkages of these pro-poor policies with the country's ambitious green economy initiatives. This not to imply that there are no connections, however. For instance, the Urban Productive Safety Net Programme includes some conditional assiance tied to performing jobs that benefit the nation's natural conservation efforts. Despite some linkages, the poor-poor policies and the efforts the promote a long-term carbon neutral economy remain largely separate.

Recent political and ethnic violence has highlighted Ethiopias difficult road to stable and participatory democratic institutions. Newly elected Prime Minister Abiy Ahmed has initiated steps to revise and modernise longstanding legislation that has limited civil society organisations involvement in policy making. Ethiopia has in place a participation processes for public consultation for important policy documents, although in some cases these processes lack in comprehensiveness and intensity. In terms of engagement of civilian in the making or policy formulation or planning, the country used the "5 in 1" model that brings the five people in one group for discussion of challenges or opportunities as well as suggestions starting at the grassroots level (villages at subnational level) that will be aggregated to Woreda, Zonal, Regional, and National level using same method. the country has opened platforms to engage the wider public in policy reforms, using the national media presenting the next 10 years' consolidated national plan as well as sectoral plans with the purpose of not only raising awareness of the general public but also receiving suggestions of missing points and comments, with the goal of making all citizens participants in the process and give them a sense of ownership. There was a public consultation process for the drafting of the Climate-Resilient Green Economy strategy as well as the Growth and Transformation Plan, documents that represent the cornerstones of sustainable development planning in Ethiopia. Stakeholder engagement and consultation is in place and it is a known trend in Ethiopia at all steps of policy development - from drafting to finalizing. Yet, in the past year the gap was there in regards to incorporating suggestions into consideration. However, currently the government is working on addressing these gaps, including inclusive governance (gender, private sector, Civil society ...). However, no evidence could be found of a robust process in place for impact assessments of key legislative initiatives.

Constructing a broad-based social safety net has been a central component of the myriad poverty-reduction efforts and development strategies in Ethiopia in recent years. Central to this effort is the National Social Protection Policy of 2014, which together with the accompanying strategy document and action plan, outlines a long-term roadmap for developing, scaling-up and strengthening Ethiopias social protection system to combat the endemic poverty, inequality and deep seated social vulnerabilities that have plagued the country for decades. Central to the strategy and policy is shifting the focus of social protection structures and measures away from humanitarian assistance funded by foreign direct assistance and charities to a comprehensive social safety net with defined assistance measures and services. While these comprehensive efforts have accomplished an enormous amount in terms of overall poverty reduction and more meaningful social inclusion, there remains few clear linkages between these social protection and anti-poverty measures and the country's ambitious green economy and sustainability initiatives. Some pilot projects linking both spheres exist, however. For instance, the Urban Productive Safety Net Programme includes some conditional assistance tied to performing jobs that benefit the nation's natural conservation efforts.

As a landlocked country, special consideration must be taken in assessing Ethiopia's efforts to achieve SDG 14. Nonetheless, Ethiopia's efforts to achieve SDG 14 are outlined in its most recent Voluntary National Review Report to the High Level Political Forum on Sustainable Development, especially in regards to its efforts to promote sustainable watershed management. In addition, Ethiopias Sustainable Land Management Programme funded by the World Bank was a key effort in regards to the countrys effort to achieve SDG 15 and encompassed two phases that seeks to reduce land degradation and improve land productivity in selected watersheds in targeted regions in Ethiopia. The Programme featured several components, including integrated watershed and landscape management to support scaling up and adoption of appropriate sustainable land and water management technologies and practices by smallholder farmers and communities, as well as rural land administration to encourage smallholder farmers to adopt sustainable land and water management practices on communal and individual land.

Ethiopia's Climate Resilient Green Economy (CRGE) Strategy, the main strategic document guiding the countrys sustainable development in the near and midterm does not explicitly mention the development or implementation of natural accounting on a national basis. The document refers to tapping into international carbon trading schemes as a means to finance its carbon mitigation and adaptation efforts, but fails to articulate a strategy or initiatives that seek to integrate methodologies for measuring and monetizing natural capital and ecosystem services as a complement to traditional national accounting systems. In this sense, Ethiopia is a laggard compared to some of its continental neighbours, such as Botswana, Uganda, Rwanda and Zambia, which are core implementing partners of the Wealth Accounting and the Valuation of Ecosystems Services (WAVES) led by the World Bank. Similarly, Ethiopia is not a signatory of the Gaborone Declaration for Sustainability in Africa which is leading the way in terms of incorporating ecosystem valuation and natural Capital Accounting in Africa. Ethiopia has, however, participated in some African forums for promoting the use of natural capital accounting among African countries.

Ethiopia has been a laggard among African countries in terms of the development and adoption of methodologies to incorporate natural capital and ecosystem services valuations into its national accounting system. Significantly, Ethiopia is not a signatory of the Gaborone Declaration for Sustainability in Africa which is a leading initiative working towards incorporating ecosystem valuation and natural Capital Accounting in Africa. In addition, it has not participated in a significant way with the Wealth Accounting and the Valuation of Ecosystems Services (WAVES) initiative led by the World Bank and representing one of the most arenas in the development of methods, methodologies and tools for natural accounting. Similarly, an independent body has not been established in Ethiopia to move forward in this area.

Despite recent reform efforts, Ethiopias fiscal and taxation system remains very inefficient. The percentage of national revenues collected as taxes is quite low in Ethiopia by international standards as the countrys main economic sector remains agriculture, predominantly smallholder farms. Given this level of development, environmental taxation is not high among the national priorities. However, this does not mean that the country does not contemplate interesting funding schemes to implement the 60 climate mitigation and adaptation initiatives identified Climate Resilient Green Economy (CRGE) Strategy. In this sense, the CRGE Strategy, which estimates a need for funding of approximately 150 billion USD over a 20 year period, establishes a specific Facility to administer climate finance mobilized from bilateral and international climate finance institutions under the umbrella of the Ministry of Finance. As the focus remains largely on climate adaptation and emissions abatement measures, the Strategy and accompanying plans calls for tapping into international carbon trading and offset schemes for a large part of its green economy funding.