July - Ethiopia: Funding ambitious green economy and climate targets

Ethiopia, July 2015 - Ethiopia has set out ambitious plans for channelling rapid economic growth towards greening the environment while achieving bold development targets.

Hosting the Third International Conference on Financing for Development, Ethiopia provides inspiration with its efforts for greener economic development. Leveraging both private and public international financing  through a conducive international policy framework will be essential for accomplishing these ambitious development targets.

Ethiopia is one of the fastest growing nations in the world, with a GDP growth rate that has averaged over 10.5% annually since 2004. In 2011, the Ethiopian Government launched the Climate Resilient Green Economy (CRGE) initiative, aiming to build a green economy and  reach middle income status by 2025 through 4 pillars of focus:

  1. Improving crop and livestock production practices to allow for better food security and higher farmer incomes while reducing greenhouse emissions;
  2. Protecting and re-establishing forests for their economic and ecosystem value, specifically including an increase in carbon stocks;
  3. Expanding electricity generation from renewable sources of energy for domestic and regional markets; and
  4. Leapfrogging to modern and energy-efficient technologies in the transport, industrial, and construction sectors.

"Tackling climate change is not a cost, but a fundamental part of maintaining strong social and economic performance. In the face of accelerated industrialization, building a green economy and implementing Ethiopia's existing environmental laws are critical for combating the impact of climate change. Thus, the Climate Resilient Green Economy is a core national strategy that is incorporated in all sectors of GTP I and II planning and implementation.”

H.E. Minister of Environment and Forestry, Belete Tafer, World Environment Day, 6 June 2015

The Government of Ethiopia  took another major step towards a green economy on the 10th of July 2015, by submitting  their Intended Nationally Determined Contribution (INDC) to the United Nations Framework Convention on Climate Change  global climate change agreement expected to be developed at the 21st Conference of Parties (COP21) in Paris this December. With this announcement, Ethiopia  became only the third African nation to submit their INDC, after Gabon and Morocco.

Ethiopia set forth the ambitious target of reducing greenhouse gas (GHG) emissions by 64% below the expected business-as-usual emission level by 2030. This target is notably contingent on the inclusion of appropriate funding and investment mechanisms in the agreement to be reached at COP21.

Leveraging financing is a crucial component for Ethiopia to attain its climate and development goals. The CRGE aims for annual spending of USD 7.5 billion to respond to climate change, and current resource mobilization is falling far short of this goal with approximately 440 million USD spent annually by the Government of Ethiopia.  This expenditure represents  14.5% of government spending, nearly half of what is spent on primary education. This signifies a massive opportunity cost for spending that could otherwise be invested in further human development such as health care or education.

During the 13th-16th  of July, 2015, Ethiopia will host the Third International Conference on Financing for Development (FfD) in Addis Ababa. The aim of the conference is to identify solutions, including through strengthening public finance and unlocking the transformative potential of people and the private sector, while ensuring that investment, and consumption and production patterns support sustainable development, strengthening national and international policy environments, closing technology gaps, and scaling up capacity building at all levels.

Going forward, leveraging both private and public international financing  through a conducive international policy framework will be important for Ethiopia in order to realize its ambitious goals for reducing GHG emissions while accelerating human development to achieve middle-income status by 2025.