Friends of Fossil Fuel Subsidy Reform Ethiopia’s Initiative on S ubsidy R emoval Wondwossen Sintayehu 07 December 20

1. Friends of Fossil Fuel Subsidy Reform Ethiopia’s Initiative on Subsidy Removal WondwossenSintayehu 07 December 2011 Durban

2. 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

3. 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

4. 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

5. Strategic interventions CRGE Strategy – Transport/ Industry is just concluded

6. Transport – Estimation of current emission levels and projection of business-as-usual 2030 Main drivers and sources Output overview • 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 Emissions per year, Mt CO2e 42 Freight: International Freight: Liquid Cargo Freight: Construction & Mining Freight: Dry Cargo Passenger: International 5 Passenger: Inter-city Passenger: Intra-city Baseline 2010 Business-as-usual 2030

7. Transport – List of identified abatement levers Macro levers Lever Description • Passenger transport • Light Rail • Urban electric rail public transit • Bus Rapid Transit • Fast & efficient bus transit • Congestion-Intelligent Traffic System • Optimization using transit info and com. tech (ICT) • Inland Cargo • Expanded Electric Freight Rail Capacity • Zero emissions freight • Liquid petroleum pipeline • Higher efficiency transport of inland liquid cargo using a pipeline • General • B5 Diesel-Biodiesel Blend • Cleaner fuel mixture for passengers & cargo • Ethanol Fuel Blend (15-85%) • Cleaner fuel mixture for passengers & cargo • Fuel Efficiency Standards • Improved fuel efficiency for passenger and cargo transportation

8. Transport STC Quantification of CO2 Abatement Levers • Electric Rail 9.1 • BAU emissions: 42 Mt in 2030 • Light Rail Transit .1 • Bus Rapid Transit .04 • Hybrid Vehicles .03 • B5 .8 Abatement potential in 2030 for subset of analyzed levers is 13 Mt CO2e per year Business-as-usual Mt CO2e/ year Abatement measures 3.2 • Fuel Efficiency Standards 2010 2015 2020 2025 2030

9. 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

10. 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)

11. 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