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

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 2

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 3

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 4

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

6. Transport – Estimation of current emission levels and projection of business-as-usual 2030 ▪ 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 Main drivers and sourcesOutput overview Emissions per year, Mt CO 2 e Passenger: Intra-city 5 Baseline 2010 42 Business- as-usual 2030 Freight: International Freight: Liquid Cargo Freight: Construction & Mining Freight: Dry Cargo Passenger: International Passenger: Inter-city

7. Transport – List of identified abatement levers Macro levers Passenger transportUrban electric rail public transitLight Rail Cleaner fuel mixture for passengers & cargoEthanol Fuel Blend (15-85%) Inland CargoZero emissions freightExpanded Electric Freight Rail Capacity Cleaner fuel mixture for passengers & cargoGeneralB5 Diesel-Biodiesel Blend Higher efficiency transport of inland liquid cargo using a pipeline Liquid petroleum pipeline Fast & efficient bus transitBus Rapid Transit Optimization using transit info and com. tech (ICT)Congestion-Intelligent Traffic System Improved fuel efficiency for passenger and cargo transportation Fuel Efficiency Standards LeverDescription

8. Transport STC Quantification of CO 2 Abatement Levers Abatement measures Business-as-usual Mt CO 2 e/ year BAU emissions: 42 Mt in 2030 20152020202520302010 9.1 Electric Rail.1 Light Rail Transit.04 Bus Rapid Transit.03 Hybrid Vehicles Fuel Efficiency Standards Abatement potential in 2030 for subset of analyzed levers is 13 Mt CO 2 e per year.8 B5 3.2

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 9

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) 10

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 11