Ethiopia's long-term low emissions and climate resilient development strategy (2020-2050)

1.1 Defining the long-term low emission Climate-Resilient Development Pathways development strategy��������������������������������������������12 4.1 National net-zero and climate-resilient

1.2 Purpose of the LT-LEDS for Ethiopia������������������13 development pathways ������������������������������������������28 > GDP outcomes of the different pathways for reaching NZE�������������������������������������������������������� 30 214 > Employment implications of the NZE pathways������������������������������������������31 Process and Methodology of Developing Ethiopia’s Long-Term Low Emission and 4.2 Energy transition towards net-zero and Climate Resilient Development Strategy climate-resilient pathway ��������������������������������������32

2.1 Process of developing the LT-LEDS > Sectoral background��������������������������������������������32 in Ethiopia�����������������������������������������������������������������14 > Business-as-usual scenario��������������������������������32

2.2 The approach and methodology of developing > Low-emission scenarios��������������������������������������34 Ethiopia’s LT-LEDS��������������������������������������������������16 > Strategic actions for the energy sector�����������35 > Climate resilience of the energy sector�����������38 318 4.3 Transport sector decarbonization pathways������41 National Context > Sectoral background��������������������������������������������41 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Business-as-usual scenario��������������������������������41

3.1 Ethiopia’s vision for a low-carbon > Low-emission scenario����������������������������������������42 and climate-resilient future�����������������������������������18 > Climate resilience of the transport sector������46

3.2 Ethiopia’s brief profile��������������������������������������������19 > Demography and economy�������������������������������19 4.4 Modernizing the agriculture sector through > Key challenges for development����������������������19 climate-resilient and low-carbon practices��������47 > Main climate impacts������������������������������������������ 19 > Sectoral background��������������������������������������������47

3.3 Ethiopia’s GHG inventory �������������������������������������20 > Business-as-usual scenario��������������������������������48

3.4 Description of relevant climate policy, legal and > Low-emission scenario����������������������������������������49 institutional frameworks ��������������������������������������21 > Climate resilience of the agriculture sector����51

3.5 Main development objectives������������������������������24

4.5 Climate actions in forestry and other land use for enhancing carbon sinks������������������������������������������56 > Sectoral background��������������������������������������������56 > Historical land use change���������������������������������57 > Business-as-usual results�����������������������������������57 > Low-emission scenarios��������������������������������������59 4 > Mitigation potential of the forestry sector���� 60 > Additional mitigation actions 788 for increased ambition��������������������������������������� 61 Ensuring Gender and Social Inclusion in the > Climate resilience of the forestry sector�������� 61 Net-Zero and Climate-Resilient Pathways

4.6 Improving waste management systems ������������ 64 > Sectoral background������������������������������������������� 64 8 92 > Business-as-usual scenario������������������������������� 65 Financing the Net-Zero and Climate- > Low-emission scenario��������������������������������������� 65 Resilient transition > Solid Waste disposal ������������������������������������������ 66

8.1 Investment needs for the > Wastewater treatment and discharge������������ 67 NDC‑aligned scenario�������������������������������������������� 93 > Climate resilience of the waste sector������������ 69 8.2 Investment requirements for mitigation interventions���������������������������������������� 94

4.7 Modernizing IPPU through decarbonization interventions ����������������������������������������������������������� 70 > Investment requirements for cross-cutting interventions�������������������������������������������������������� 94 > Sectoral background������������������������������������������� 70 > Business-as-usual scenario������������������������������� 71 8.3 Investment requirements of the maximum > Low-emission scenario��������������������������������������� 71 ambition and late action scenarios��������������������� 95 > Climate resilience of the IPPU sector������������� 73 8.4 Finance gap��������������������������������������������������������������� 96 574

8.5 Strategy to close the financing gap �������������������� 97 Macroeconomic and Cost and Benefit Implications of the Net-Zero and Climate‑Resilient Pathways 9 100 Ensuring Implementation of the LT-LEDS:

5.1 Implications for economic growth and Institutional Arrangements and Monitoring employment�������������������������������������������������������������� 74 and Evaluation System

5.2 Costs and benefits of the decarbonization of 9.1 Institutional setting for implementation of the Ethiopia’s economy������������������������������������������������� 77 LT-LEDS�������������������������������������������������������������������100

5.3 Impact on the balance of trade���������������������������� 80 9.2 Monitoring and evaluation system of the LT‑LEDS (including MRV) �����������������������������������102 682

9.3 Managing, monitoring, and evaluating inclusive outcomes ���������������������������������������������������������������103 Assessing SDG Co-Benefits of the Net- > Capacity building on MRV�������������������������������103 Zero Emission Pathways Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 6.1 Contribution of the LT-LEDS interventions toward SDG achievement ������������������������������������ 83

6.2 Achieving SDG targets through LT-LEDS interventions ����������������������������������������������������������� 86 Infographic of Ethiopia’s low emission and climate resilient development strategy�������������������������������������������������������������� 104 5 List of Tables Table 3.1 Total and sectoral annual emissions in Mt Table 4.12. Mitigation and adaptation actions of the CO2e, 2000–2020�������������������������������������� 21 forestry sector according to the updated NDC���������������������������������������������� 62 Table 3.2. Ambitions and policy actions in the updated NDC 2021����������������������������������� 23 Table 4.13. Adaptation co-benefits and trade-offs of mitigation actions in the forestry sector��� 62 Table 3.3. Ethiopia’s main development objectives��� 24 Table 4.14. Mitigation co-benefits and trade-offs of Table 4.1. Average real GDP growth rate for adaptation actions in the forestry sector�� 63 selected periods������������������������������������������ 31 Table 4.15. Ambition levels for the low-emission Table 4.2. List of mitigation measures for Ethiopia interventions in the waste sector LT-LEDS in the energy sector������������������� 35 (for all scenarios)������������������������������������������ 65 Table 4.3. Adaptation interventions and their Table 4.16. Adaptation co-benefits and trade-offs of respective targets in the energy sector mitigation actions in the waste sector���� 69 that are modeled in GEM�������������������������� 39 Table 4.17. Ambition levels for the low-emission Table 4.4. Adaptation co-benefits and trade-offs of interventions in the IPPU sector mitigation actions in the energy sector����40 (for all scenarios)������������������������������������������ 71 Table 4.5. Transport policy interventions Table 4.18. Adaptation co-benefits and trade-offs of and targets���������������������������������������������������� 43 mitigation actions in the IPPU sector����� 73 Table 4.6. Adaptation co-benefits and trade-offs Table 5.1. Share of green jobs in total of mitigation actions in the employment������������������������������������������������� 75 transport sector������������������������������������������� 46 Table 5.2. Total number of green jobs and green jobs Table 4.7. High-level mitigation measures for by category������������������������������������������������������6 low-emission pathways for Ethiopia’s Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) agriculture sector���������������������������������������� 49 Table 5.3. Discounted costs and benefits per scenario relative to the BAU scenario���� 78 Table 4.8. Adaptation interventions and their respective targets in the agriculture sector Table 6.1. Description of SDG indicators assessed ���������83 that are modeled in GEM�������������������������� 52 Table 6.2. Performance in achieving SDG targets in Table 4.9. Adaptation co-benefits and trade-offs the BAU and low-emission scenarios����� 87 of mitigation actions in the agriculture sector���������������������������������������� 55 Table 8.1. Capital investments per sector and per technology (net present value) ���������������� 93 Table 4.10. National average emissions for 2020–2050 Table 8.2. Investment estimates per LT-LEDS (tCO2e/ha & tCO2e/yr)������������������������������ 58 scenario (net present value)���������������������� 95 Table 4.11. Quantitative targets of Ethiopia’s forestry Table 8.3. Conditional and unconditional sector decarbonization and adaptation investments (net present value)��������������� 95 interventions������������������������������������������������ 59 Table 8.4. Suggested potential utilization of public vs. private funds (net present value)������� 96 6 List of Figures Figure 2.1. Process of developing the LT-LEDS for Ethiopia��������������������������������������������������������� 15 Figure 2.2. Methodological approach of the development and analytical assessment of the scenarios������������������������������������������������ 16 Figure 3.1. Total and sectoral annual emissions in Mt CO2e, 2000–2020�������������������������������������� 20 Figure 4.1. Total annual CO2e emissions�������������������� 30 Figure 4.2. Total real GDP in bn USD (left) and real GDP growth rate (right)����������������������������� 30 Figure 4.3. Total employment and unemployment rate������������������������������������ 31 Figure 4.4. BAU projections of total energy demand by sector (upper), and total power generation capacity (lower)����������������������� 33 Figure 4.5. Total CO2e emissions under BAU scenario from the energy sector������������������������������ 34 Figure 4.6. Total energy demand in LT-LEDS scenario���������������������������������������� 36 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Figure 4.7. Carbon intensity of energy production in tCO2/TJ (left) and in tCO2e/USD million (right)������������� 37 Figure 4.8. Total power generation capacity under LT‑LEDS scenario ��������������������������������������� 37 Figure 4.9. Total CO2e emissions under the BAU and the low-emission development scenarios in the energy and transport sector���������� 38 Figure 4.10. Load factor of hydropower plants in scenarios with and without climate impacts���������������������������������������������������������� 38 Figure 4.11. Share of non-hydro renewables in electricity generation with and without adaptation interventions��������������������������� 40 © Atypeek Dgn, Pexels 7 Figure 4.12. Total transport sector emissions (left) and Figure 4.24. GHG emissions from waste sector (left) energy consumption (right)����������������������� 42 and maximum ambition emissions from waste sector (right) ������������������������������������ 68 Figure 4.13. Low-carbon emission pathways (left) and energy consumption pathways (right) in Figure 4.25. GHG emission projections from the IPPU the transport sector������������������������������������ 42 sector (Mt CO2e)����������������������������������������� 71 Figure 4.14. Low-emission scenarios for transport Figure 4.26. BAU and NZE scenarios for energy demand (left) and transport GHG emissions from the IPPU emissions (right)������������������������������������������� 45 sector (mt CO2e)������������������������������������������ 73 Figure 4.15. Estimated annual GHG emissions for the Figure 5.1. Total green jobs and additional agriculture sector, without considering green jobs����������������������������������������������������� 75 perennial crops.������������������������������������������� 48 Figure 5.2. Average annual savings in imports of Figure 4.16. Estimated annual GHG emissions for the petroleum and inorganic fertilizer, in agriculture sector, considering perennial million USD�������������������������������������������������� 80 crops (BAU scenario)���������������������������������� 49 Figure 5.3. Average annual savings in imports of Figure 4.17. Projected GHG emissions from Ethiopia’s fossil fuels and inorganic fertilizer, agriculture sector combined in % of total imports���������������� 81 (under low-emission pathways).��������������� 51 Figure 6.1. Relevant SDG indicators for a Figure 4.18. Impact of water scarcity on the yield of transition to green growth cereals and pulses in region 1 (top) and in the energy sector������������������������������������ 84 region 7 (bottom)���������������������������������������� 52 Figure 6.2. Relevant SDG indicators for a transition to Figure 4.19. Reduction in crop production in the NZE green growth in the water sector������������ 84 scenarios with and without climate impacts ������������������������������������������� 54 Figure 6.3. Relevant SDG indicators for a green growth transition in the Figure 4.20. Forest and other wooded land (left) and agriculture sector���������������������������������������� 85 natural and planted forest (right) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) (Source: FAO, 2020)����������������������������������� 57 Figure 6.4. Relevant SDG indicators for a transition to green growth in the forest secto������������� 86 Figure 4.21. National BAU GHG emissions for the forestry sector, Figure 9.1. Ethiopia’s integrated CRGE Governance 2020–2050 (cumulative)��������������������������� 58 structure������������������������������������������������������101 Figure 4.22. Emissions pathways for Figure 9.2. Ethiopia LT- LEDS MRV and M&E decarbonization forestry intervention framework��������������������������������������������������102 actions, 2020–2050����������������������������������� 60 Figure 4.23. Emission pathways and mitigation potential for BAU and decarbonization intervention actions������������������������������������ 61 8 Abbreviations AD Anaerobic digestion M&E Monitoring and evaluation AFD French Development Agency MEFCC Ministry of Environment, Forest and Climate Change BAU Business as usual MoPD Ministry of Planning and Development BRT Carbon capture and storage MoWE Ministry of Water and Energy CCS Bus rapid transit MRV Measurement, reporting, CRGE Climate Resilience Green Economy and verification EE Executing entity MSW Municipal solid waste EFCCC Environment, Forestry and Climate NAP-ETH National Adaptation Plan Change Commission NFSDP National Forest Sector FIE Federal implementing entity Development Program FOLU Forestry and other land use NMT Nonmotorized transport GEM Green Economy Model NZE Net-zero emissions GoE Government of Ethiopia NDC Nationally Determined Contribution GGSim Green Growth Simulation Tool ODF Open-defecation free IE Implementing entity O&M Operation and maintenance IEA International Energy Agency RDF Refuse-derived fuel IPPC Intergovernmental Panel on RIE Regional implementing entity Climate Change SCC Social cost of carbon IPPU Industrial processes and product use Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) SDG Sustainable Development Goal LDC Least Developed Country 10YDP 10-Year Development Plan LFG Landfill gas WWTP Wastewater treatment plant LRT Light rail transit W2E Waste to energy LT-LEDS Long-term low emissions strategy 9 Executive Summary Background BAU and national pathways for Ethiopia’s net-zero and climate-resilient transition As part of the Paris Agreement, countries are encouraged to produce a long-term low emissions development The development of Ethiopia’s net-zero and climate- strategy (LT-LEDS) to provide a roadmap for long- resilient pathways is based on a series of consultations term decarbonization and climate resilience, which is with the sectoral working groups and MoPD and particularly useful in the context of Nationally Determined engagement with relevant stakeholders during the Contributions (NDCs), since these trajectories can then second national stakeholders’ consultation and be used as a benchmark for revised and updated NDCs. validation workshop. A business-as-usual (BAU) scenario Underpinning the interim and long-run targets of the LT- and three net-zero emissions (NZE) scenarios were LEDS with scientifically sound modeling demonstrates developed. The BAU scenario constitutes the baseline the feasibility of the targets and, in turn, enhances the against which the performance of the NZE scenarios credibility of the whole LT-LEDS. Using recognized, sector- is compared and costs (and benefits) are assessed. The specific, and open-access models help to build national economic growth forecast is aligned with the 10-year capacity and expertise needed for updating the LT- economic transformation plan and the longer-term LEDS in a transparent and participatory way. Against this growth strategy. The three decarbonization scenarios background, the current summary note aims to present show a range of possible trajectories for choosing a the main outcomes of the development of the LT-LEDS pathway for Ethiopia. for Ethiopia. In the NDC-aligned scenario, ambition is phased in to achieve the NDC emissions target in 2030, after which ambition is increased by 2035 to achieve NZE by 2050. Ethiopia LT-LEDS process and main activities The maximum ambition scenario envisages the maximum ambition early on, leading to NZE reached around 2032 The LT-LEDS development process was led by the and remaining below zero after that. In the late action Ministry of Planning and Development (MoPD), with scenario, ambitions are reduced, compared to the other Global Green Growth Institute (GGGI) providing scenarios, and most ambition is implemented in 2040– technical assistance and the AFD providing financial 2050; the NDC 2030 emissions target is missed, but if support. The MoPD established an LT-LEDS Steering high ambition is implemented during the last years, the Committee to provide overall guidance and endorse the scenario can reach NZE by 2050. process and development of the LT-LEDS. In addition, to ensure that the LT-LEDS enhances ownership, promotes knowledge sharing, and ensures data flow from key stakeholders, seven technical sectoral working groups Cost-benefit analysis of the NZE pathways Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) were established. The working groups consisted of government experts from different line ministries and The implementation of LT-LEDS gives way to many costs the Climate Resilience Green Economy (CRGE) Facility, and benefits that should be considered in exploring the as well as GGGI technical experts, and covered the appropriate pathways towards decarbonizing and climate following sectoral and cross-sectoral thematic areas: proofing Ethiopia’s economy. Benefits significantly exceed energy and transport, forestry, agriculture, waste, the costs in all scenarios, whereas an overall judgment sees industry, macroeconomy, and adaptation. advantages in favor of the NDC-aligned scenario. Avoided costs and added benefits are the main drivers of the net A series of workshops were also organized as key benefits derived from the implementation of low-emission milestones of the project to engage with stakeholders development. In terms of avoided costs, the energy bill is on the LT-LEDS development process and to solicit the main contributor. The main added benefits derived feedback to incorporate into the LT-LEDS. Furthermore, from the decarbonization of Ethiopia’s economy are total the MoPD with the support of GGGI, ensured a real GDP and additional discretionary spending in the wider stakeholder engagement through six national economy generated through job creation. Comparing the stakeholder consultation and validation workshops and cost-benefit analysis of the three scenarios as compared five training and capacity building events. to the BAU scenario, the differences are larger or smaller 10 depending on the metric considered. The maximum ambition scenario yields the highest benefits but also the highest investment and costs. This can be explained by the expectation that technologies mature over time such that decarbonization actions become cheaper over time, thus making early action more expensive. In line with this, the late action scenario is the least cost scenario but also leads to fewer benefits. Ensuring gender and social inclusion outcomes in LT‑LEDS implementation The LT-LEDS recognizes the role that women, youth, and vulnerable communities play in climate action, and in alignment with national sustainable development policies, LT-LEDS implementation will maximize opportunities for gender and social inclusion outcomes. The LT-LEDS proposes an economic transformation that leads to the creation of economic opportunities and green jobs though paid employment and entrepreneurship. The LT-LEDS acknowledges the principles of just transition to a decarbonized, resilient economy and proposes measures to ensure a more inclusive labor market through establishing a Women and Youth in Green Jobs Program that addresses barriers to accessing economic opportunities. The program will also address the challenges workers face in vulnerable employment and enterprises in informal sectors. Financing the net-zero and climate-resilient transition The LT-LEDS presents estimates of investments needed to achieve NZE by mid-century under the three selected Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) scenarios. It estimates the gap between the needed and available investments to meet the net-zero targets and provides recommendations to close the financial gap by describing the financing options associated with costs estimates derived from the Cost Benefit Analysis. © David Mark, Pixabay 11 1 1. Introduction

1.1 DEFINING THE LONG-TERM LOW EMISSION DEVELOPMENT STRATEGY Parties to the Paris Agreement have agreed to “strive to formulate and communicate long-term low greenhouse gas emission development strategies,” including the long-term goal of limiting global temperature rise to well below 2°C and pursuing efforts to limit warming climate resilience issues throughout the process and strategy development. Underpinning the interim and long-run targets of the LT‑LEDS with scientifically sound modeling demonstrates Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) to 1.5°C. the feasibility of the targets and, in turn, enhances the credibility of the whole LT-LEDS. Using recognized, The 2050 Pathways Platform defines a long-term sector‑specific, and open-access models helps to build low emissions development strategy (LT-LEDS) as a the national capacity and expertise needed for updating pathway “that will help to envision the transition to the LT-LEDS or for developing long-term strategies for low carbon economic development integrating the other purposes. At the same time, involving external needed institutional, economic, technological and experts and research institutes to use their know-how social changes, and the phases to achieve them.” As and expertise ensures the use of scientifically sound, part of the Paris Agreement, countries are encouraged state-of-the‑art‑methods. Modeling the impact of the to produce an LT-LEDS to provide a roadmap for long- targets in the LT-LEDS on other policy dimensions— term decarbonization, which is particularly useful in including employment, competitiveness, distributional the context of Nationally Determined Contributions consequences, and air pollution—helps to demonstrate (NDCs), since these trajectories can be used as a synergies between climate mitigation and adaptation benchmark for revised and new NDCs. In addition, in and other policy priorities. the context of Ethiopia, a highly vulnerable country to climate change and climate variability and impacts, The LT-LEDS are based on a contrast between the issue of climate resilience should be part of the business‑as-usual (BAU) and climate action scenarios long term strategy and planning of the country. with different levels of ambition to indicate which goals Therefore, the LT-LEDS of Ethiopia incorporates Ethiopia can reach by 2050. 12

1.2 PURPOSE OF THE LT-LEDS FOR ETHIOPIA The LT-LEDS communicated under the Paris Agreement adaptation objectives, and national development priorities should aim to provide both a vision and a pathway to to ensure that any transformational changes scheduled for guide countries’ transitions to a decarbonized, 1.5°C implementation will promote sustainable development. compatible economy, consistent with the achievement of net-zero emissions (NZE) by mid-century and considering The LT-LEDS outlines the priorities for attracting national circumstances (2050 Pathways Platform). international and private-sector financing for green, low- This vision and pathway can help formulate Ethiopia’s carbon, and climate-resilient projects over the near and aspirations by identifying critical issues, challenges, and long term. Further, the LT-LEDS could provide country opportunities at the intersection of climate action and program guidelines for pipeline development priorities socioeconomic development objectives. and for the utilization of innovative financial mechanisms for transformational investment identification. The The LT-LEDS for Ethiopia will serve a critical role in completion of the Ethiopia LT-LEDS could help identify implementing the common objectives under the United funding sources and innovative financing mechanisms Nations Framework Convention on Climate Change and accelerate the process toward tapping international (UNFCCC) guidelines and the Paris Agreement. Given climate and private finance for the implementation of Ethiopia’s position as a “green champion” and a “green prioritized climate actions that generate significant model” country in Africa, building on the pioneering development benefits. Climate Resilience Green Economy (CRGE) strategy developed in 2011 and the recent launch of the Green The LT-LEDS is an inclusive process that requires Legacy Initiative, an impactful and transformational coordination among ministries, agencies, and LT-LEDS will further demonstrate Ethiopia’s global departments to ensure policy harmonization and leadership in climate action. alignment while considering interactions, synergies, and trade-offs. A fully participatory, cross-sectoral process The Ethiopia LT-LEDS will play an important role in that engages a broad range of stakeholders at different driving the alignment of Ethiopia’s NDC and near- levels provides the basis and inputs for exploring and term actions with longer-term Paris Agreement goals. developing the most appropriate pathways for each sector The LT-LEDS also provides a structure for establishing and the economy as a whole, boosting understanding milestones in Ethiopia’s NDC. Developing and updating between the Government of Ethiopia (GoE) and other the NDC with an aim to meet the LT-LEDS targets will stakeholders while enhancing the political and social help distinguish the short-term and long-term measures buy-in needed for implementation and a shared vision. that Ethiopia can use to achieve its climate ambition and In addition, the LT-LEDS process—through its various to help direct successive NDCs in being more ambitious. stages, including the modeling of different pathways and analysis of relevant sectors—is the right vehicle The LT-LEDS could be a key tool in bridging Ethiopia’s for enhancing the capacity of government staff and Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) sustainable development and climate mitigation and relevant stakeholders and for ensuring wider acceptance adaptation objectives, following a wholistic long-term and continuity. planning approach. Furthermore, given that Ethiopia is highly vulnerable to climate change impacts the Ethiopia Importantly, the longer-term perspective of the LT-LEDS LT-LEDS can raise the climate adaptation policy agenda allows for discussions beyond incremental technological and strengthen climate resilience and low emission substitutions and innovations and considers larger-scale growth by assessing cost-effective climate mitigation transformational changes. The LT-LEDS could provide and adaptation measures in an integrated manner. The evidence-based, long-term planning for decarbonizing, long-term planning horizon of the LT-LEDS provides climate proofing, and modernizing key Ethiopian an opportunity to consider interactions, synergies, and economic sectors while ensuring a just transition and trade‑offs between different sectoral goals, mitigation and the creation of economic and decent job opportunities. 13 2 2. Process and Methodology of Developing Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy

2.1 PROCESS OF DEVELOPING THE LT-LEDS IN ETHIOPIA The GoE, through the former Environment, Forestry and Climate Change Commission (EFCCC) and the Ministry of The Ethiopia LT-LEDS work plan developed five Planning and Development (MoPD), engaged with GGGI major activities to guide the development process: and the French Development Agency (AFD) in early 2020 to request support for the development of the LT‑LEDS > Activity 1: Organize the LEDS Process: for Ethiopia. The GoE and GGGI jointly developed a Institutional Arrangements, Coordination, Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) timeline and a detailed work plan for the development and Multi-Stakeholder Engagement Process and completion of the LT-LEDS by COP27 in Sharm (conducted during the entire LT-LEDS El Sheikh, Egypt. The LT-LEDS work plan also included development process) a comprehensive process for engaging with a range of key stakeholders through regular national workshops and > Activity 2: Assess the Current Situation: consultations, preparing the economy‑wide low‑emission Strategies, Policies, Practices, and Capacities scenarios, and identifying priority mitigation and (conducted June to December 2021 adaptation actions and potential financing mechanisms. > Activity 3: Analyze Scenarios – Identify The entire LT-LEDS development process was led by the and Analyze BAU and Low Emission MoPD, with GGGI providing technical assistance and the Development Scenarios (conducted AFD providing financial support. The MoPD established September 2021 to July 2022) an LT-LEDS Steering Committee to provide overall guidance and endorse the process and development > Activity 4: Prioritize Actions: Identify of the LT‑LEDS. In addition, to ensure that the LT-LEDS Financing and Other Implementation enhances ownership, promotes knowledge sharing, and Options and Priorities (conducted May ensures data flow from key stakeholders, eight technical to July 2022) sectoral working groups were established. The working groups consisted of government experts from different line > Activity 5: Prepare the Ethiopia ministries and the CRGE Facility—related to the LT-LEDS LT‑LEDS Document (conducted June sectors and thematic areas—and GGGI technical experts. to October 2022) 14 FIGURE 2.1 Process of developing the LT-LEDS for Ethiopia Coordination of LT-LEDS development process Ministry of Planning and Development Steering Committe (coordination and guidance) (oversight and political endorsement) Inclusive stakeholders’ consultation process and capacity building Sectoral analysis and modelling Cross-sectoral analysis Macroeconomy Macroeconomic 5 Technical SDG analysis LT-LEDS sectors working group analysis and CBA working groups analysis and (Technical inputs modelling and validation) Adaptation Adaptation Finance and working group analysis implementation Wider group of stakeholders academics, think tanks, private sector representatives Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) The LT-LEDS Steering Committee was established in conducted the analysis and modeling of the national March 2021 and comprises actors from the former pathways and the climate adaptation analysis, modeling, EFCCC, the AFD, GGGI, high-level officials from the and integration across the LT-LEDS sectors. CRGE implementing line ministries, the MoPD, academia, and other relevant institutions. Chaired by the MoPD, the A series of workshops were also organized as key committee serves as a high-level advisory group with the milestones of the project to engage with stakeholders objective of guiding the LT-LEDS process and development. on the development process and to solicit feedback to incorporate into the LT-LEDS. Furthermore, with the During the kick-off meeting of the Ethiopia LT-LEDS, the support of GGGI, the MoPD ensured a wider stakeholder MoPD established five sectoral and two cross-sectoral engagement—including regional bureaus, academia, technical working groups to conduct the modeling and women, youth, and civil society organizations—through analysis of the national and sectoral socioeconomic six national stakeholder consultation and validation and emissions pathways while also providing inputs on workshops and five training and capacity-building the level of ambition of the sectoral interventions and events. Lastly a wider sectoral stakeholders’ “circle” was technical validation. A total of 32 technical government established, including academia, think tanks, and other experts were nominated to work closely with GGGI relevant government agencies, where regular meetings experts in the seven established working groups that and calls provided additional feedback and guidance cover the sectors of energy, waste, forestry, agriculture, on the development of the sectoral and economy-wide and industrial processes and product use (IPPU) as well emission pathways while enhancing awareness of the as the cross-sectoral themes of macroeconomy and LT-LEDS process. Figure 2.1 illustrates diagrammatically climate adaptation. The cross-sectoral working groups the process for developing the Ethiopia LEDS. 15

2.2 THE APPROACH AND METHODOLOGY OF DEVELOPING ETHIOPIA’S LT-LEDS FIGURE 2.2 Integrated methodology of long term pathway analysis 1 2 4 6 Sectoral analysis and Cross-sectoral BAU low-emission Economic and modelling of mitigation macroeconomic pathway co-benefit assessment actions analysis GEM model 5 Extended CBA Energy AFOLU LEAP model EX-ACT model Alternative Society low-emission and SDG co-benefits Economy Waste IPPU climate resilient IPCC model Excel model Finance and investment Environment pathways 3 Climate adaptation modelling Climate impacts Climate adaptation actions Climate projections The first step in the analytical approach involves a mitigation and adaptation interventions and their long- sectoral analysis facilitated by a set of bottom-up models term ambition levels, which were then considered in the that consider primary sources and carbon sinks. These sectoral models to determine the sectoral low-carbon and models are selected by the working groups based on the climate-resilient development pathway to 2050. understanding of the priority sectors and compatibility with the models already used by the government. The To analyze the achievement of NZE in 2050 and conduct the corresponding environmental, climatic, social, and Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) exact bottom-up models used for each sector were the Stockholm Environment Institute’s LEAP model and the macroeconomic assessment, GEM was applied. GEM Green Economy Model (GEM) for the energy sector; the for Ethiopia was originally developed to support the Ex-ACT and NEXT models, both developed by the Food EFCCC and the Planning and Development Commission and Agriculture Organization, for the AFOLU sectors; the for the NDC revision process and the development of IPCC Waste Model for the waste sector; and an in-house the 10YDP. As the core model for the assessment of MS Excel tool for the IPPU sector. Ethiopia’s LT-LEDS, GEM is an integrated assessment model that goes beyond a linear representation of These models are used to derive sectoral BAU trajectories emission changes and incorporates socioeconomic and that consider only the current policies, programs, and environmental trends based on system dynamics models plans of the government, its partners, civil society, and to enable simulation of the whole Ethiopian economy the private sector as well as the most likely trends for and its interactions in terms of emissions. Due to the technologies and energy consumption if no external modular nature of GEM, it can be adjusted to changes mitigation programs or measures are adopted and applied in policy and to external shocks, such as the Covid-19 to reduce GHG emissions. In applying these models, it is crisis, which strongly influence sectoral growth rates in ensured that sectoral scenarios are consistent with national Ethiopia. the results of the individual sectoral models are development objectives and fully aligned with other input in GEM, in which the sectoral BAU trajectories are processes, such as the NDC and the 10-Year Development replicated and calibrated. In this way, a holistic cross- Plan (10YDP). Once the sectoral BAU pathways were sectoral macroeconomic assessment can be carried out established, the sectoral working groups identified for the BAU scenario established in the sectoral models. 16 In a further step, climate data is then introduced into GEM. Using historical data, such as spatially disaggregated precipitation and temperature data, past impacts of climate change on sectoral outcomes are identified and serve as the basis for estimating future impacts in the model. Future climate projections as per the RCP 4.5 and RCP 8.2 scenarios1 are then incorporated into the model. In the scenarios, climate change impacts are modeled only for the energy and agriculture sectors. The exact approach to modeling climate change impacts in these sectors is explained in more detail in sections 4.2 (energy) and 4.4 (agriculture), whereas all technical specifications of the models used are included in the technical annex. Once GEM has been calibrated with the sectoral BAU projections, the selected mitigation and adaptation measures are modeled, along with their targets, to derive the low-emission and climate-resilient scenario. For all scenarios, further assessments in terms of an extended cost-benefit analysis and co-benefits of achieving the UN’s Sustainable Development Goals (SDGs) are conducted. In addition, thorough finance and investment plans are also derived for all scenarios, emphasizing the conditionality and differentiation of public and private funding. The approach shown in Figure 2.2 makes Ethiopia’s LT‑LEDS among the first to fully integrate impacts of climate change in its long-term scenarios. This is an important milestone as climate change adaptation is a critical component of national priority in Ethiopia. The GoE also intends to combine the long-term mitigation and adaptation strategies to better understand the strong synergies and take advantage of them in national planning processes. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Identifying adaptation co-benefits of climate mitigation actions and incorporating this information in the prioritization process is highly valuable, as actions that may have small abatement potential but generate high adaptation benefits can be mainstreamed, which would not have been prioritized otherwise. Furthermore, by identifying adaptation co-benefits of mitigation actions, the chances of maximizing and mobilizing multiple funding opportunities for implementation of these actions are enhanced. In this LT-LEDS, both synergies and trade-offs of mitigation and adaptation actions are identified and validated by each sectoral working group. 1 The applied future climate projects are statistically downscaled from the second-generation Canadian Earth System Model (CanESM2), which was used in CMIP5. Source: https://doi.org/10.1038/ © GGGI in Ethiopia s41597-019-0038-1 17 3 3. National Context

3.1 ETHIOPIA’S VISION FOR A LOW-CARBON AND CLIMATE-RESILIENT FUTURE Ethiopia’s commitment to advancing its climate mitigation and adaptation actions has made the country a recognized leader in the low-carbon and climate-resilient development landscape. The GoE has developed the CRGE strategy, which is the backbone using a participatory approach. The LT-LEDS will enhance the Ethiopian government’s ability to plan for the decarbonization of its economy by providing a framework and pathway for a progressive revision and enhancement of targets under its NDC to reduce CO2 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) of the country’s climate policy efforts. The CRGE is emissions and enhance climate resilience. The LT-LEDS an ambitious national blueprint that intends to reduce outlines ambitious scenarios to decarbonize seven priority Ethiopia’s GHG emissions by 64%, compared to the sectors of Ethiopia’s economy by 2050. The scenarios BAU scenario, by 2030. The country has also signed will contribute to making the country’s economy more the Paris Agreement and is among the first Least innovative, sustainable, and resilient by leveraging various Developed Countries (LDCs) to submit an ambitious sustainable development and adaptation co-benefits of NDC to the UNFCCC. mitigation actions. The LT-LEDS is constructed as a living document that evolves with national circumstances, as Following the call from the Paris Agreement for parties new or improved data become available, and as improved to submit their LT-LEDS, Ethiopia has developed its decarbonization and climate-resilient options emerge. long‑term net-zero and climate-resilient 2050 strategy 18

3.2 ETHIOPIA’S BRIEF PROFILE Demography and economy and infrastructure. Additionally, Ethiopia’s Human Development Index is at a low 0.38, indicating that special Ethiopia is the second most populous country in attention and investments are needed to boost education Africa, with a current population of approximately and health services to an adequate level and tap the full 104.1 million, in 2022, which is expected to surpass potential of the Ethiopian people. Further, the country’s 200 million by 2050. Ethiopia has a population growth young and growing workforce (at around 2 million per year) of about 2.4% annually and is expected to continue presents an opportunity but also strains the absorption growing in the coming decades without reaching a peak. capacity of the labor market, necessitating the creation of Ethiopia is the fastest-growing economy in the region, sufficient new and decent jobs to capitalize on its potential. with 6.3% growth in 2020. However, it is also one of the Lastly, frequent extreme weather events, alongside long- poorest, with a per capita gross national income of USD term impacts of climate change, undermine agriculture and 1218, in 2022. Ethiopia aims to reach lower-middle- pastoral livelihoods and food security. The 2022 drought income status by 2025. was the worst in 40 years, severely affecting 7 million Over the past 15 years, Ethiopia’s economy has been people in southern and eastern parts of the country— among the fastest growing worldwide, at an average disproportionally impacting women, who are mainly of 9.5% per year. Among other factors, growth was responsible for food production and domestic care roles. led by capital accumulation, particularly through public infrastructure investments. Ethiopia’s real GDP Main climate impacts growth decreased in 2020 and further in 2021 due to COVID-19, particularly in industries and services Ethiopia is one of the most vulnerable countries that were mainly affected by the pandemic. However, to climate variability and climate change due to its agriculture, where over 70% of the population is high dependence on rainfed agriculture and natural employed, was not significantly affected by the pandemic, resources and its relatively low adaptive capacity to deal and its contribution to growth slightly improved in 2021 with these expected changes. Challenges include the compared to the previous year. The government has underdevelopment of water resources, low health service recently launched a new 10-Year Development Plan coverage, a high population growth rate, low economic (10YDP) that aims to sustain the remarkable economic development, inadequate road infrastructure in drought- growth of the previous decade while facilitating the shift prone areas, weak institutional structures, and a lack of toward a more private-sector-driven, competitive, and awareness. Ethiopia has frequently experienced extreme resource-efficient economy. events, like droughts and floods, in addition to rainfall variability and increasing temperatures, which contribute to adverse impacts on livelihoods. Primary environmental Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Key challenges for development problems are soil erosion, deforestation, recurrent Ethiopia faces several key challenges that hinder its droughts, desertification, land degradation, and loss of economic development. The incidence of conflict has biodiversity and wildlife. Given the nation’s vulnerability increased, particularly in the north since November to climate change impacts, there is a pressing need for 2020, leading to substantial impacts on lives, livelihoods, climate change adaptation across all sectors. 19

3.3 ETHIOPIA’S GHG INVENTORY FIGURE 3.1 Total and sectoral annual emissions in Mt CO2e, 2000–2020 300 250 200 Mt CO2e 150 100 50 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Energy Transport Land Agriculture Industry Waste Total Ethiopia has had two decades of strong growth in emissions beyond agriculture. Although emission growth carbon emissions. As Figure 3.1 and Table 3.1 show, from lands has slowed significantly since about 2007, since the beginning of the century, emissions have there is a constant annual loss of carbon stock in the Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) nearly doubled from 160 Mt CO2e to 300 Mt CO2e in form of biomass, hence the continued deforestation and 2020. If unabated, the steep rise is expected to continue land degradation. as the GoE seeks to maintain the country’s impressive economic growth performance while the population The remaining sectors—energy, transport (being a is expected to increase to about 200 million people in subsector of energy), IPPU, and waste—together only 2050, according to the UN (CITE). contribute about 8% of total emissions. This can be partly explained by the fact that emissions from burning The agriculture sector, including emissions from livestock biomass, as a category of energy consumption, are and managed soils, has the highest emissions (Figure 3.1), attributed to emissions from land. Moreover, with the contributing about half of all emissions in 2020. Ethiopia’s transformation of Ethiopia’s economy envisaged by the strong reliance on agriculture features a steady increase 10YDP, until 2030 and also beyond, emissions in the of livestock in line with population growth, notably since IPPU sector are expected to substantially increase as a significant share of the population lives in pastoralist economic activity shifts from agriculture and land-based communities. Land use, particularly deforestation and activities to manufacturing. land degradation, is responsible for almost all remaining 20 TABLE 3.1 Total and sectoral annual emissions in Mt CO2e, 2000–2020 2000 2005 2010 2015 2020 Total 159 100% 201 100% 244 100% 264 100% 299 100% Energy 4 3% 4 2% 5 2% 8 3% 11 4% Transport 2 1% 2 1% 3 1% 4 2% 5 2% Energy w/o transport 2 1% 2 1% 2 1% 4 2% 6 2% Land 75 47% 103 51% 116 48% 112 42% 122 41% Agriculture 76 48% 89 44% 116 48% 134 51% 152 51% Industry 0 0% 1 0% 1 0% 3 1% 4 1% Waste 4 3% 5 2% 5 2% 7 3% 9 3%

3.4 DESCRIPTION OF RELEVANT CLIMATE POLICY, LEGAL AND INSTITUTIONAL FRAMEWORKS Ethiopia’s economic and climate policies are based on > Ensuring a competent, independent, and several strategy documents and institutional frameworks quality civil service system by building the at the national level as well as, in more detail, in each sector. capacity of the government and establishing good governance. The Ten-Year Development Plan: A Pathway to Prosperity 2021–2030 (10YDP) sets a long-term vision of making > Building strong and inclusive institutions to Ethiopia an “African Beacon of Prosperity,” which will be ensure a peaceful society and access to justice brought about through the following objectives: and to uphold the rule of law and human rights. > Building a prosperous country by creating a The 10YDP inevitably concerns all sectors where the pragmatic market-based economic system and LT-LEDS sets emission reduction targets. For instance, enhancing the role and participation of the Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) the plan focuses on the fight against land degradation, private sectors. pollution reduction, forest protection, and green urban > Maintaining macroeconomic stability, ensuring development. Likewise, by increasing the economy’s rapid and sustainable economic growth, and productivity, it aims at increasing the policy space to creating decent jobs. make GHG emission reductions affordable. However, the plan’s targets have significant implications for > Ensuring structural economic transformation climate change, such as the intended increase in fertilizer by promoting overall productivity and application in agriculture. competitiveness. The Climate Resilient Green Economy (CRGE) strategy > Creating an enabling environment where every was launched in 2011 to foster a climate‐resilient and citizen will become an owner and beneficiary middle-income green economy by 2025. It demonstrates of the development endeavor by ensuring the Ethiopia’s commitment to bypassing a conventional quality and accessibility of basic social services economic development approach by creating a green and the provision of infrastructure. economy where economic development goals are met 21 in a sustainable way (SDG Knowledge Platform, 2011). The strategy identifies four pillars of development in the green economic action plan: > Improve crop and livestock production practices for higher food security and farmer income while reducing emissions. > Protect and reestablish forests for their economic and ecosystem services, including as carbon stocks. > Expand electricity generation from renewable energy sources for domestic and regional markets. > Leapfrog to modern and energy‐efficient technologies in transport, industrial sectors, and buildings. In 2017, the launch of Ethiopia’s National Adaptation Plan (NAP-ETH) provided an overarching framework to minimize the vulnerability of key economic sectors— agriculture, forestry, health, transport, energy (power), industry, water, and urban—to the impacts of climate change by developing adaptive capacity and resilience. Furthermore, the NAP Implementation Roadmap of 2019 expanded the options outlined in NAP-ETH with actions, which were categorized into short-term priorities (e.g., capacity building, strengthening the enabling environment, and promoting research) for 2020–2022, and long-term priorities (with sector-specific activities) for 2025–2030. For effective implementation of NAP-ETH, the government developed further strategies, including gender analyses for NAP-ETH, the NAP-ETH Resource Mobilization Strategy, and the M&E technical working paper for NAP. A full list Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) of climate- and environment-related strategies, policies, and programs, including the national communications, are provided in the technical annex. In 2015, as a signatory to the Paris Agreement, Ethiopia formulated an NDC, which was updated in 2021 through improved modeling and new data. Ethiopia pledged to limit its annual net emissions to 126 Mt CO2e or lower by 2030, which would constitute a 278 Mt CO2e (or 69%) reduction from the BAU scenario of 403 Mt CO2e. The country has committed to achieving 20% of this scenario out of its own financial resources (unconditional scenario), whereas it requests international financial support to achieve the other 80% (conditional scenario). Table 3.2 gives an overview of the emission reduction ambitions and the policy actions in each sector. © Atypeek Dgn, Pexels 22 TABLE 3.2 Ambitions and policy actions in the updated NDC 2021 Sector Unconditional Conditional Actions > Sustainable agricultural land management practices > Reduction in preharvest losses > Carbon sequestration in grasslands -48.4 Mt -240.1 Mt CO2e CO2e LUCF > Lowlands Livelihood Resilience Project (-35%) (-171%) > Fuel switch and biomass efficiency (improved cookstoves) > Reforestation > Landscape restoration > Enhancement of livestock productivity -14.8 Mt > Agricultural mechanization -1.9 Mt CO2e CO2e Livestock > Increase in the share of poultry (-1%) (-8%) > Oilseed feeding to reduce emissions from enteric fermentation > Energy efficiency -10.5 Mt -5.1 Mt CO2e > Transport electrification CO2e Energy (-26%) > Public transport expansion (-53%) > Industry fuel switch -0.4 Mt > Use of organic fertilizer and crop residues -0.1 Mt CO2e Managed CO2e soils (-1%) (-4%) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) -3.5 Mt > Clinker substitution in cement

1.2 Mt CO2e CO2e Industry (+5%) (-13%) > Reduction of waste per capita -8.6 Mt -2 Mt CO2e CO2e Waste > Waste separation and composting (-17%) (-75%) > Wastewater management -56.2 Mt -277.7 Mt CO2e CO2e Total (-14%) (-69%) Source: FDRE (2021), Updated NDC 23 While the first NDC incorporated only a few climate actions from the NAP Implementation Roadmap, which adaptation interventions under three pillars (i.e., drought, were prioritized by cross-referencing the 10YDP, the flood, and cross-cutting interventions), the updated NAP-ETH, and other relevant sectoral climate resilience NDC included a selection of over 50 climate adaptation or adaptation strategies.

3.5 MAIN DEVELOPMENT OBJECTIVES The following table gives an overview of Ethiopia’s main economic development objective as well as strategic objectives relevant for LT-LEDS. TABLE 3.3 Ethiopia’s main development objectives Area Target Source Economy Economic growth Total GDP Agriculture Industry Manufacturing Services 10YDP until 2030 Annual 10% 6.2% 13% 20.6% 10.6% growth Targeted 22% 35.9% 17.2% 42.1% share in GDP Per capita income USD 2,220 (+8.5% annually) 10YDP by 2030 Forestry Prevention of USD 2,220 (+8.5% annually) Use of efficient cooking technologies (total abatement CRGE forest degradation potential 50 Mt CO2e) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Carbon Afforestation and management of 7 million ha (total abatement potential 42 Mt CO2e) CRGE sequestration by 2030 Forest cover by From 15.5% to 30% of country area 10YDP 2030 Wildlife habitats From 8.6% to 14% of country area 10YDP Timber production Private and community plantations on 15 million ha of degraded land to reduce REDD+ pressure on nature forest Strategy 24 TABLE 3.3 Ethiopia’s main development objectives (cont.) Area Target Source Agriculture Output targets by > Crop production: 92.5 million tons/year (+70%) 10YDP 2030 > Milk production: 11.8 billion liters/year (+170%) > Chicken meat production: 0.1 million tons/year (+121%) > Egg production: 5.5 billion tons/year (+96%) > Pesticide use: 5.5 million liters/year (+12%) > Fertilizer use: 3.3 million tons/year (+106%) Output targets by > Expand irrigation-based agriculture 10YDP 2030 and MoA > Promote nutrition-sensitive agriculture > Foster adoption of integrated soil fertility management practices > Enhance the productivity of livestock > Widely promote perennial crops, such as fruits and coffee > Promote research-based food security systems > Enhance agricultural production to boost agricultural export revenues and substitute imports > Improve private sector participation > Promote restoration of degraded agricultural land > Improve the supply of agricultural inputs and finance Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Expand agricultural mechanization 25 TABLE 3.3 Ethiopia’s main development objectives (cont.) Area Target Source Energy Electricity shares > 55% hydropower NEP by 2040 > 45% solar PV, geothermal, and others Citizens’ electricity > 2025: 65% on-grid and 35% off-grid NEP access > 2030: 96% on-grid and 4% off-grid Electricity targets > Electricity generation capacity: 19,900 MW (+344%) 10YDP by 2030 > Electricity transmission lines: 29,900 km (+62%) > Energy exports: 7,184 GWh (+156%) > Electricity customers: 24.3 million (+319%) > Grid-connected customers: 96% (+191%) > Off-grid customers: 4% (-64%) > Energy loss: 12.5% (-36%) Transport Railway network by +3,297 km (+366%) 10YDP 2030 Transport service > Increase rural transport service coverage from 67% to 100% 10YDP coverage by 2030 > Increase urban mass transport services from 34% to 70% Bus transport by Expand bus routes and increase the number of buses by 89,680 NTP 2035 Electrification of Increase electric vehicle infrastructure by 10% Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) vehicle fleet by 2030 Vehicle efficiency Ban on import of used vehicles by 2030 26 TABLE 3.3 Ethiopia’s main development objectives (cont.) Area Target Source IPPU Manufacturing > Increase the average manufacturing industry capacity utilization from 50% to 85% 10YDP industry targets by 2030 > Raise the domestic market share of locally manufactured industrial products from 30% to 60% > Raise the competitiveness of the manufacturing industry > Raise the number of small- and medium-scale manufacturing enterprises from 2,000 to 11,000 > Create 5 million new jobs in the manufacturing industry Waste Waste > Raise the coverage of liquid waste removal from 1% to 50% 10YDP management in urban areas by > Raise dry waste removal from 30% to 80% 2030 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 27 4 4. Ethiopia’s Long-Term Net-Zero Emission and Climate-Resilient Development Pathways

4.1 NATIONAL NET-ZERO AND CLIMATE-RESILIENT DEVELOPMENT PATHWAYS The development of Ethiopia’s net-zero and climate- resilient pathways is based on a series of consultations with the sectoral working groups and MoPD and engagement with wider stakeholders during the second national stakeholders’ consultation and validation In the NDC-aligned scenario, ambition is phased in to achieve the NDC emissions target in 2030, after which ambition is increased by 2035 to achieve NZE by 2050. Strengthening the NDC-aligned scenario seems to be the most plausible future in which Ethiopia realizes its Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) workshop. The BAU scenario and three NZE scenarios NDC pledges and works toward achieving NZE by 2050. were selected. The benefit-to-cost ratio projected for this scenario is the highest among the three scenarios assessed, In the LT-LEDS model, the total population is calibrated indicating the best proportion of costs to avoided costs according to the UN population forecast for Ethiopia. and added benefits. The economic growth forecast is aligned with the 10YDP and the longer-term growth targets. All technical The maximum ambition scenario envisages the specifications of the GEM model are presented in the maximum ambition early on, leading to NZE around technical annex. 2035 and remaining below zero after that. The maximum ambition scenario should be regarded as the maximum Using scenario analysis, the BAU scenario constitutes hypothetical potential for emission reductions if strong the baseline against which the performance of the ambitions are implemented early on. However, the decarbonization scenarios is compared and costs (and Cost Benefit Analysis (CBA) presented shows that the benefits) are assessed. In addition to the BAU scenario, implementation of the ambitions envisaged requires three decarbonization scenarios are simulated: the much financing for which funding is not secured. maximum ambition scenario, the NDC-aligned scenario, and the late action scenario. The three net-zero In the late action scenario, ambitions are reduced, scenarios presented in this chapter provide a variety of compared to the other scenarios, and most ambition is decarbonization pathways (early action, medium term, implemented during 2040–2050. In this scenario, the and late action) for the Ethiopian economy. NDC 2030 emissions target is missed, but high ambition 28 implemented during the final years allows the scenario perennial crops, and increasing areas under to reach NZE by 2050. The late action scenario analyzes irrigation schemes—modernize Ethiopia’s how the trajectory of key indicators changes if the NDC agriculture systems, maintain and increase the targets cannot be achieved due to global increasing number of jobs, provide opportunities for the energy prices and inflation induced by the COVID-19 young rural labor force, and potentially boost pandemic. Therefore, this scenario illustrates how NZE agriculture exports. could be achieved if the fiscal space for early action is not available. V. Waste sector interventions—such as reducing waste per capita, waste at source, and In the BAU scenario, total country CO2e emissions are wastewater emissions as well as significantly projected to increase from 299 Mt in 2020 to around increasing the waste collection and recycling 558.7 Mt by 2050. The BAU scenario hereby does not rates—provide a better quality of life for envisage any additional mitigation or adaptation actions. the people of Ethiopia, create more local The development of total country CO2e emissions is businesses and jobs compared to the BAU presented in Figure 4.1 for all four scenarios presented. scenario, improve the quality of urban areas, and reduce increased flood risk from clogged For the NZE scenarios, the most important actions for drainage systems. reaching the net-zero target while delivering numerous additional socioeconomic benefits are: VI. IPPU-related interventions, such as improving the efficiency of product use and utilizing I. The creation of a carbon sink in the land use advanced technologies like carbon capture and sector, particularly through reforestation, storage (CCS). afforestation, forest restoration, and reduced deforestation. In the NDC-aligned scenario, total CO2e emissions reach around 118.5 Mt by 2030 before declining to 61.9 Mt II. The electrification of end-use sectors—such per year in 2040 and –1.2 Mt per year by 2050. The as transport, residential, commercial, and cumulative avoided emissions relative to the BAU industry—and replacing fossil fuels combined scenario total 10,018 Mt for 2020–2050, or 332.5 with expanding renewable power production. Mt per year on average over 30 years. This scenario constitutes medium-term action, with ambitions being III. The reduction of livestock-related emissions spread out during 2030–2040. This scenario reaches using a range of interventions, such as increased net-zero in 2050 but emits fewer emissions in the productivity of livestock. medium and longer term. In particular, the energy sector interventions create In the late action scenario, total CO2e emissions synergies in the short, medium, and long run, given that are projected to reach around 176.7 Mt per year in they reduce emissions, unlock additional growth, and 2040 before declining to –1.5 Mt per year in 2050. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) create employment at the same time as well as contribute Cumulatively, the reduction in emissions achieved in the to the achievement of SDGs 7 (affordable clean energy), late action scenario, compared to the BAU, totals 7,911 8 (decent work and economic growth), and 13 (climate Mt for 2020–2050. The cumulative reduction reflects action). Furthermore, land-based interventions are the late phase in the decarbonization ambitions, as highly needed as they create a significant number of well as establishment of the land sink, leading to lower green jobs, thus contributing to enhanced reforestation cumulative reductions relative to the other two scenarios. and carbon sinks, an increased provision of ecosystem services, and the achievement of SDGs 8, 13, and 15 Lastly, in the maximum ambition scenario, total emissions (life on land). reach NZE around 2035 and remain below zero due to the continued implementation of ambitions. The Furthermore, additional actions should be implemented cumulative avoided CO2e emissions in the maximum in other sectors with high ambition targets constant in all ambition scenario, compared to the BAU, total 11,709 net-zero scenarios: Mt, equivalent to 390.3 Mt in avoided emissions per year for 2020–2050. This scenario represents the early IV. Agriculture-related interventions—such as action scenario in which NZE is reached by 2035, after enhancing sustainable agriculture practices, which additional ambition is only required to ensure that reducing preharvested losses, expanding net zero is maintained. 29 FIGURE 4.1 Total annual CO2e emissions 600 500 400 300 Mt CO2e 200 100 0 -100 2010 2015 2020 2025 2030 2035 2040 2045 2050 BAU Late Action NDC Aligned Maximum ambition GDP outcomes of the different pathways for reaching NZE which is an increase of 64.4% relative to the BAU scenario. The maximum ambition scenario projects an In the BAU scenario, the total real GDP is expected to average real GDP growth rate of 9.07% per year for reach around USD 606 billion in 2050 with an average 2020–2050, with total real GDP reaching USD 1.013 annual growth rate of around 7.3% for 2020–2050. In trillion in 2050 (+67.2% vs. BAU scenario), indicating the NDC-aligned scenario, total real GDP is projected that early action for decarbonization benefits overall to increase to approximately USD 1.01 trillion by 2050, economic growth. which is 66.1% higher compared to the BAU scenario. The average real GDP growth for 2020–2050 is Total real GDP and real GDP growth in the BAU scenario indicated at 9.05% per year. and all NZE scenarios is presented in Figure 4.2, and an overview of the average real GDP growth rate for For the late action scenario, the results indicate an selected periods is provided in Table 4.1. average annual growth rate of 9.02% for 2020–2050, resulting in a total real GDP of USD 996 billion in 2050, Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) FIGURE 4.2 Total real GDP in bn USD (left) and real GDP growth rate (right) 1 200 14% 1 000 12% 10% 800 8% 600 6% 400 4% 200 2% 0 0% 20 20 20 20 20 20 20 20 20 20 2020 23 26 29 20 25 30 35 40 45 50 20 20 20 2032 35 38 20 20 2041 44 47 50 BAU Late Action BAU Late Action NDC Aligned Maximum ambition NDC 2030 Maximum ambition 30 TABLE 4.1 Average real GDP growth rate for selected periods Real GDP growth Unit 2020–2030 2030–2040 2040–2050 2020–2050 Late action %/year 11.34% 9.09% 6.76% 9.02% NDC aligned %/year 11.29% 9.09% 6.91% 9.05% Maximum ambition %/year 11.26% 9.11% 6.97% 9.07% BAU %/year 9.16% 7.52% 5.30% 7.30% The additional growth induced in the decarbonization In the BAU scenario, total employment is projected scenarios is the result of various feedback loops in GEM to increase from 50.4 million jobs in 2020 to around that capture the beneficial impacts of decarbonization 83.3 million jobs by 2050. In the NZE scenarios, total strategies and related interventions. Relevant feedback employment in 2050 is projected to reach 85.4 million loops capture, for instance, the effect of energy costs jobs (maximum ambition, +2.5% vs. BAU), 85.3 million or the impact of energy related GHG emissions on jobs (NDC 2030, +2.4% vs. BAU), and 86.7 million jobs total factor productivity. Energy costs are related to (late action, +4% vs. BAU). The difference in job figures the competitiveness of the economy, whereas energy between the NZE scenarios derives from the phase in of related GHG impacts capture productivity impacts from assumptions related to decarbonization, with increased air pollution. effort affecting the total number of jobs provided in 2050. Employment implications of the NZE pathways Furthermore, while the unemployment rate in the BAU scenario averages 5.66% for 2020–2050, average Along with the additional real GDP, the ambitions unemployment during the same period is 1.2% (NDC envisaged for the decarbonization scenarios generate aligned), 1.3% (maximum ambition), and 1.4% (late additional jobs relative to the BAU scenario. Total action) lower relative to the baseline. The results show employment and the unemployment rate in the BAU that the maximum ambition scenario has significant and NZE scenarios are presented in Figure 4.3. short-term employment benefits relative to the other two scenarios, whereas the late action scenario reduces unemployment during 2040–2050. FIGURE 4.3 Total employment and unemployment rate Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 0,12 85 0,1 Unemployment rate 75 0,08 Employment rate 65 0,06 55 0,04 45 0,02 35 0 20 20 20 20 20 20 20 2010 15 20 10 20 30 40 50 20 20 2025 30 35 20 20 2040 45 50 Late Action NDC Aligned Late Action NDC Aligned Maximum ambition BAU Maximum ambition BAU 31

4.2 ENERGY TRANSITION TOWARDS NET-ZERO AND CLIMATE-RESILIENT PATHWAY Sectoral background Energy Policy Frameworks The GoE formulated its new National Electrification Plan (NEP and NEP II) in 2017 and 2019, which strives for universal electrification by 2025 through a mix of on- and off-grid electrification (MoWIE a, 2019). Already today, the grid covers a significant share of the country. Moreover, via its National Energy Policy and the Energy Efficiency Strategies for various sectors, the government is committed to building a climate-resilient green economy by expanding electricity generation from renewable sources and leapfrogging to energy-efficient technologies. This is to be achieved through a) increasing the use of clean/renewable power in all sectors, including fuel switching to clean and modern energy in all economic sectors, and b) improving energy efficiency and maximizing benefits by utilizing clean energy efficiently in the residential, industrial, and transportation sectors. The measures specific to the energy sector include development of hydropower plants, production and integration of variable renewable energy into power systems, electrification of the residential sector in urban areas and beyond, adoption of clean and efficient cooking technologies in rural areas, electrification of industrial processes with clean energy, electrification of agricultural machinery, and irrigation with clean energy. Business-as-usual scenario > Requirements for commercial energy will rise. Indigenous energy resources would be Energy is used in Ethiopia’s agriculture, transportation, developed at an accelerated rate, and the industry, commerce, and household sectors, all of which balance would need to be met by imports. significantly contribute to national-level emissions. The energy BAU scenario is mainly driven by expected GDP > To pursue the goal of energy security, the growth as a driver for energy demand. Moreover, the extraction of gas and coal reserves will be following assumptions apply: prioritized. > Ethiopia would face no pressure to reduce CO2 > Biomass energy consumption remains an emissions during 2020–2050. The country’s important source of energy in both rural and current annual per capita CO2 emissions is less urban areas and is expected to grow as fast as Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) than 0.2 tons, which is low. But according to the population, increasing pressure on natural Ethiopia’s updated NDC report (July 2021), the resources. country’s GHG emissions will double from 247 million tons of CO2 in 2010 to 403.5 million Energy demand: the results obtained for 2010–2050 tons of CO2 by 2030 in the BAU scenario. show that the primary energy requirement in the Ethiopia BAU scenario is expected to increase to 2 million TJ > A rapid rise in energy demand for solid fossil per year (Figure 4.4). Increased economic activities, fuels in industry, particularly for the cement population growth, and transport needs are the major and metal industries. contributors to such an increase. In the BAU scenario, the total power generation capacity will reach 38 GW > Increased use of petroleum in the agriculture by 2050, with around 28 GW being from hydropower. sector. Energy requirements (mainly for diesel) for irrigation, cultivation, and other farm activities will rise due to an expansion of large commercial farms. 32 FIGURE 4.4 BAU projections of total energy demand by sector (upper), and total power generation capacity (lower) 2 500 000 2 000 000 1 500 000 TJ/year 1 000 000 500 000 0 2010 2020 2030 2040 2050 Residential Commercial Industrial Transport 30 000 27 849 25 000 20 000 16 154 15 000 MW 10 000 6 764 6 677 5 000 3 529 1 574 1 711 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 1 551 1 358 1 217 850 159 124 153 320384 739932 556 110 0 9 0 0 110 110159 110302 87 0 2010 2020 2030 2040 2050 Diesel and fuel oil Solar Geothermal Biomass Wind Hydropower CO2e emissions: energy-related CO2e emissions are increment of 3.24% per annum until 2050. The transport expected to increase throughout 2010–2050 due sector is the major contributor (to be emphasized in to increased use of fossil energy resources. The total section 4.3). Figure 4.5. Total CO2e emissions under emissions in 2020 from the energy sector (including BAU scenario from the below shows the emissions from transport) were 11.9 Mt. This is expected to increase to the energy sector in Ethiopia under the BAU scenario. around 31 Mt in absolute terms, resulting in an average 33 FIGURE 4.5 Total CO2e emissions under BAU scenario from the energy sector 35,0 30,0 25,0 Mil. ton CO2e 20,0 15,0 10,0 5,0 0,0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 Low-emission scenarios To reduce carbon emissions, the MoWE considers the expansion of renewable energy (i.e., solar and wind) The measures chosen to achieve GHG emission both off- and on-grid as a key factor for achieving the reductions are consistent with Ethiopia’s national required electrification rate in Ethiopia. Therefore, in the development priorities, objectives, and circumstances. power generation sector, all electricity will be generated Ethiopia considers the updated emission reduction from renewable sources, primarily hydropower targets to reflect the highest possible ambition in light plants, as well as solar PV. The use of energy-efficient of national circumstances and as a fair contribution to technologies will also help reduce emissions in other the long-term global mitigation goal. The low-carbon sectors. In the household sector and industry, the emission pathways of Ethiopia’s energy sector reflect use of liquified petroleum gas must be reduced by a future in which explicit policies and measures are applying efficient cooking stoves and biogas, and the adopted to reduce the sources of GHGs. They should transportation sector will need to transition to zero not simply reflect the current plans but assess what emissions. Table 4.2 provides a high-level summary of would be achievable based on the goals of the scenario. the planned interventions per scenario, indicating the The low-carbon emission scenarios take into account nature of the mitigation effect of Ethiopia’s energy sector 1) specific national and regional development priorities, policy intervention and targets. The figures indicate objectives, and circumstances and 2) the common but that the highest net reduction in emissions and energy differentiated responsibilities of the parties of the Paris consumption revolve around mitigation interventions Agreement. The key inputs to mitigation targets were focused on improving energy efficiency, expanding the the validated sectoral targets of the GoE communicated rail transport sector, and electrification of vehicles. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) through the Ministry of Water and Energy (MoWE). 34 TABLE 4.2 List of mitigation measures for Ethiopia LT-LEDS in the energy sector Energy: high-level interventions 2020 2030 2050 Electrification of households (petroleum demand reduction) Maximum ambition scenario 0% 15% 75% NDC-aligned scenario 0% 10% 75% Late action scenario 0% 7% 75% Electrification of households (biomass demand reduction) 0% 14.5% 60% Electrification of industry (petroleum demand reduction) Maximum ambition scenario 0% 30% 50% NDC-aligned scenario 0% 20% 50% Late action scenario 0% 14% 50% Electrification of transport Maximum ambition scenario 0% 15% 75% NDC-aligned scenario 0% 10% 75% Late action scenario 0% 7% 75% Energy Annual energy efficiency improvements +8% +8% +8% Sustainable biomass production 100% 100% 100% Share of renewable energy in total capacity Maximum ambition scenario 86% 100% 100% NDC-aligned scenario 86% 100% 100% Late action scenario 86% 90% 100% Transmission losses 19% 10% Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Strategic actions for the energy sector The industry sector’s actions include expansion of efficient and clean production technologies; The energy uses in households, transport, industry, and electrification in process heat and boilers and in power commercial contribute to the total country’s emissions. in all industries (fuel switch from petroleum demand As per the 2021 updated NDC assessment, the below to electricity); the intervention of green fuels (waste, sectors contribute to emissions in ascending order. electricity, and hydrogen) for thermal processes in the industries; and the introduction of electric technology In households, the changes include the electrification and for process heat in heavy industries (cement and brick). promotion of efficient technologies in all end-use services in urban areas, the promotion of clean and efficient The transportation sector will need to transition to cooking stations with low emissions in rural areas, zero‑emissions transportation for intracity, intercity, and electrification in water heating, and lighting in rural areas. freight travel across private and public modes. Specific actions include promotion of electric mass passenger In the agriculture sector, Ethiopia must increase transport, switching fuel to clean energy (electricity, biofuels electrification in farm machinery and water pumping and in aviation), electrification in freight transport, and installation promote solar PV pumping. and expansion of charging stations (also see section 4.3). 35 Enhance and maximize power generation and usage in lines, and maintenance and/or upgrading of the the industry, agriculture, and commercial sectors with electricity distribution lines. renewable energy. In the power generation sector, all electricity will be generated from renewable sources, Figure 4.6 exhibits energy demand in the low-emission primarily hydropower plants (including the Grand scenarios. It is similar across scenarios and projected to Ethiopian Renaissance Dam and Koysha Hydro) with decline to 1.52 million TJ per year. As Figure 4.6. Total the appropriate generation mix as well as development energy demand in LT-LEDS scenario reveals, while carbon and integration of renewable energy technologies, intensity of energy production is expected to increase including mini- and micro-hydropower, solar (including in the BAU scenario, it will fall in the low-emission the Metahara, Metema hurso, and Weranso), wind, scenarios. For the carbon intensity of GDP, there is a bioenergy, and geothermal (including Tulu Moye and falling secular trend, even in the BAU scenario. The low- Corbetti Geothermal). This also requires the development emission scenarios will bring down the intensities faster of policy on regional power sector integration and grid and to a lower level due to the planned interventions. flexibility, expansion of the high‑capacity transmission FIGURE 4.6 Total energy demand in LT-LEDS scenario 2,8 2,5 TJ/Year 2,2 1,9 1,6 1,3 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 Late Action NDC 2030 Maximum ambition BAU 36 FIGURE 4.7 Carbon intensity of energy production in tCO2e/TJ (left) and in tCO2e/USD million (right) 12 10000 10 8000 tCO2e/USD million 8 6000 tCO2e/TJ 6 4000 4 2000 2 0 0 -2000 20 20 20 20 20 20 20 20 20 20 10 20 30 40 50 10 20 30 40 50 Late Action NDC 2030 Late Action NDC 2030 Maximum ambition BAU Maximum ambition BAU Additional economic growth and the electrification renewable energy generation, assuming that fossil fuel ambitions assumed for the LT-LEDS scenario increase generators are used to compensate until renewable the required power generation capacity. By 2050, a total capacity is fully established. The total emissions in generation capacity of 116.3 GW is projected for the 2020 were 11.9 Mt. By 2050, these are expected to LTS-LEDS scenario, which is three times the amount increase to 31 Mt for the BAU scenario and decrease projected for the BAU. to around 3.1 Mt in the low-emission scenarios. The results show that the mitigation interventions During the transition period toward full renewables, identified by the GoE will play a critical role in achieving the additional electricity demand resulting from a low‑carbon development pathway for the transport interventions temporarily reduces the share of sector in Ethiopia. FIGURE 4.8 Total power generation capacity under LT-LEDS scenario 120 000 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 100 000 80 000 MW 60 000 40 000 20 000 0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 BAU Maximum ambition NDC 2030 Late Action 37 FIGURE 4.9 Total CO2e emissions under the BAU and the low-emission development scenarios in the energy and transport sector 35,0 30,0 25,0 MtCO2e/Year 20,0 15,0 10,0 5,0 0,0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 Late Action NDC 2030 Maximum ambition BAU Climate resilience of the energy sector seasons is offset by electricity from diesel generators, which increases the overall emissions of the energy The impacts of climate change in Ethiopia’s energy sector during these periods. Figure 4.10 depicts the sector considers a) the impact of water scarcity in missing generation capacity as the difference in the reservoirs as a result of rainfall variability and b) the load factor of the hydropower plants when rainfall impact of increasing temperatures on the efficiency of thermal power plants and power distribution systems. variability due to climate change in the RCP4.5 scenario Currently, in Ethiopia, missing generation capacity from is considered, as opposed to a scenario without climate hydropower plants during droughts or reduced rainfall consideration (i.e., BAU scenario). FIGURE 4.10 Load factor of hydropower plants in scenarios with and without climate impacts 0,6 0,5 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 0,4 Dmls 0,3 0,2 0,1 0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 Without climate impact With climate impact 38 Regarding the reduction in efficiency of thermal power > Improve energy efficiency to reduce overall plants, historical data indicates an average annual demand for electricity. reduction of 4% in generation in past periods for fossil fuel-powered plants. Simulation results from GEM > Improve efficiency of biomass use to reduce show that the annual reduction in generation of fossil the overall demand for biomass. fuel‑powered plants and hydropower plants varies around 4–12% annually until 2050. > Accelerate non-grid energy access to improve electrification of rural areas. The long-term strategy of a climate-resilient energy sector in Ethiopia has been previously discussed and Based on a discussion with the power sector working defined in Ethiopia’s Climate-Resilient Green Economy: group, two key climate adaptation measures for the Water and Energy. As a long-term strategy for LT-LEDS, power sector, as listed in Table 4.3, are identified and the following priorities are identified, which align with modeled in GEM to assess their contribution in reducing the actions defined in the CRGE strategy: the adverse impacts of climate change in the energy sector. The modeling of these measures represents the > Diversify the energy mix to reduce the potential benefits of diversifying the energy mix and dependency of hydropower plants on rainfall improving energy efficiency in the power system. variability. TABLE 4.3 Adaptation interventions and their respective targets in the energy sector that are modeled in GEM Adaptation intervention Indicator Baseline 2030 2050 Target indicator 2018 Target Increasing the share of PV, wind, and % of renewable electricity biogas to replace the share of fossil generation, excluding 9% 80% 100% fuels in electricity generation hydropower plants Reduction of transmission losses in % of transmission losses 19.6% 12.5% 10.0% the electricity distribution system The modeling results show that increasing the share This is a significant reduction in total primary energy, of non-hydro renewables to cover the shortfall in resulting in lower costs and increased resilience of the generation reduces total emissions by an average of power system. 16.1% for 2020–2050, which would otherwise be Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) emitted by diesel generators. The differences in the In the energy sector, in addition to the quantitative share of non-hydro renewables in the BAU (without adaptation benefits of adaptation actions that were adaptation measures) and LT-LEDS (with adaptation modeled, there are important adaptation co-benefits measures) scenarios are shown in Figure 4.11. of the mitigation actions. The following table illustrates Regarding reducing transmission losses in the the analysis results, identifying the most important electricity distribution system, on average, 7.5% less adaptation synergies and trade-offs of the energy electricity is generated annually during 2020–2050. mitigation actions. 39 FIGURE 4.11 Share of non-hydro renewables in electricity generation with and without adaptation interventions 0,6 0,5 0,4 Dmls 0,3 0,2 0,1 0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 Without adaptation actions With adaptation actions TABLE 4.4 Adaptation co-benefits and trade-offs of mitigation actions in the energy sector Mitigation action Adaptation co-benefits Adaptation trade-offs Electrification of households > Resilience can be increased due to the Renewable energy (petroleum demand reduction) connection to distributed grids, given that energy infrastructure that security standards will be in place. does not follow security standards can Electrification of industries > Reduction of exposure to fluctuating fossil fuel increase vulnerability (petroleum demand reduction) costs and escalating carbon costs for vulnerable Electrification of transport populations disproportionately impacted by (petroleum demand reduction) climate change. > Increased energy security and less reliance on primary energy imports (e.g., fuels, coal) Energy efficiency Reduction of energy consumption and improvement Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) improvements of grid reliability Increased share of renewable More resilient energy system toward extreme events energy in total capacity Transmission losses Reduction of primary energy demand and increased resilience of the power system 40

4.3 TRANSPORT SECTOR DECARBONIZATION PATHWAYS Sectoral background Transport policy frameworks To achieve decarbonization, the transport sector requires the adoption of clean, secure, and connected mobility, including a shift to electric mass transportation and an increase in the use of clean fuels. To this end, the most important policy documents are the Climate Resilience Transport Sector Strategy document, the National Transport Policy, and the National Non-Motorised Transport Strategy as well as the 2nd National Communication of the Government of Ethiopia, the Global Fuel Economy Initiative Study in Ethiopia, the Transport Sector Annual Statistics Bulletin, and the Intergovernmental Panel on Climate Change (IPCC, 2006) guideline. These policies envisage the expansion of the required infrastructure to enable the structural transformation of the transport system. This involves the construction of additional railway kilometers and bus rapid transit lanes as well as bicycle and pedestrian lanes in urban areas. Moreover, car-free zones shall be promoted and road parking replaced by underground parking. The number of both public and private electric vehicles is aimed to be increased while, at the same time, promoting the expansion of charging stations. Regulations are becoming stricter by limiting and then banning the import of used vehicles to increase vehicle efficiency. This outcome shall be supported by granting tax reductions to low-emission vehicles and incentivizing more efficient fuels. The transport sector in Ethiopia primarily comprises of road, rail, water, and air-based modes of transport. The GoE (FDRE, 2018) reveals that among the different modes, land-based transport contributes the largest share of transport emissions. Furthermore, road transport accounts for over 90% of the total transport sector emissions, excluding public transport, freight transport, and nonmotorized transport. Within the road transport sector, freight vehicles account for over 50% of road transport emissions while public transport vehicles with more than 12 seats account for over 20% of emissions. Regionally, Addis Ababa accounts for 63% of the total road emissions. The GoE, through the Ministry Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) of Transport and Logistics, underpins the importance of transport for its citizens and seeks to employ best practices to support the sustainable implementation of policies. The National Transport Policy (FDRE, 2020) was developed to address the increasing infrastructure demand and the need for sustainable transportation in the country. The strategy, as depicted in the National Transport Policy, aims at using stakeholders both externally and internally to ensure a coordinated and sustainable development.   Business-as-usual scenario The BAU scenario estimates the total emissions from the Ethiopian transport sector are 4.81 million tons of CO2e in 2020 and are expected to increase to approximately 15.63 million tons of CO2e by 2050, as shown in Figure 4.12,., left. Energy consumption in the transport © GClay Knight, Unsplash sector is expected to increase from just over 66.08 PJ in 2020 to 214.63 PJ in 2050 (see Figure 4.12, right). 41 FIGURE 4.12 Total transport sector emissions (left) and energy consumption (right) 20 20 16 16 12 12 MtCO2e PJ 8 8 4 4 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 10 15 20 25 30 35 40 45 50 Low-emission scenario transport—shows the highest projected emissions reduction in 2050. Based on the targets defined in the existing transport policy reports in Ethiopia, the impact of the Figure 4.13 on the left shows the result for carbon implementation of those targets on energy demand emission reductions in each policy combination relative and carbon emissions can be estimated. The policy to the BAU scenario, while Figure 4.13 on the right on nonmotorized transport (NMT) offers the least reveals how energy consumption responds to the projected emissions reduction, whereas promoting same policies. These policy actions cannot simply be mass transit—which comprises interventions dealing aggregated, as they would lead to negative emissions with an increase in passenger and rail freight in the transport sector. FIGURE 4.13 Low-carbon emission pathways (left) and energy consumption pathways (right) in the transport sector 16 250 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 200 12 150 MtCO2e 8 PJ 100 4 50 0 0 2010 2020 2030 2040 2050 2010 2020 2030 2040 2050 BAU BAU Promote NMT Promote NMT Vehicle Electrification Vehicle Electrification Energy efficiency Energy efficiency Promote mass transit Promote mass transit 42 Based on this information, the LT-LEDS targets in accessible, affordable, sustainable, and climate resilient. the transport sector are defined in a way that they Currently, the government has set its 10-year targets can be modeled for the long-term scenario. Table 4.5 with objectives of the FDRE (2020). The table shows shows the intended interventions and developmental specific transport‑sector climate mitigation intervention objectives of the GoE for the transport sector. The policies and validated targeted levels of implementation GoE is working to make the transport sector easily by 2030, 2040, and 2050, as compared to 2020. TABLE 4.5 Transport policy interventions and targets Transport: high-level interventions 2020 2030 2040 2050 Source Transport (shift from petroleum to 10YDP hybrid and electric vehicles) Maximum ambition scenario 0% 15% 44.5% 75% NDC-aligned scenario 0% 10% 34.5% 75% Late action scenario 0% 7.5% 15% 75% Enhance NMT (bicycle, walking) 5% 60% 100% NMT strategy and 10YDP Improve mass transport (BRT, rail, 10YDP 34% 70% 100% trolley bus) Fuel quality and efficienc Outside the purview of the 0% 16% 18% transport ministry Vehicle age limit Excise Tax Proclamation No. 1186/2020 new proclamation on February 13, 2020. From 5% 0% 100% to 300% excise tax adding Draft vehicle age limit regulation Improve transport mobility (reduce Expert judgement is used given congestion, parking, pricing) the ongoing construction of 0% 50% Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) parking facilities, BRT, and intelligent transport systems Increase share of rail transport 10YDP 7% 7% 50% Freight 20% 2% 10% 50% Passenger 43 Based on these policy ambitions, the low-emission scenario presents itself as follows, in terms of energy demand and carbon emissions: Shift from petroleum to hybrid and electricity. There is significant emission reduction potential in hybrid and electric vehicles. The latter has already been demonstrated in the electricity-powered Addis Ababa Light Rail Transit (AALRT) service. As electricity can be used for all transport types, the GoE intends to extend this policy to other subsectors and modes of transport. The GoE will support this intervention by focusing on increasing the generation of electricity from local clean sources, like hydro and wind (currently main sources of generation), to support the expansion of the rail network and services. Meeting the demand for additional electricity in the transport sector by 2030, as captured in the NDC scenario, would require an additional 300 GWh yearly, which corresponds to 2% of the current annual consumption of electricity. Therefore, this extra demand can be accommodated in the current power generation plans. The recent implementation of different tax exemption levels for the importation and local manufacturing of all electric vehicles is expected to boost the growth of the electric vehicle sector, thereby reducing the reliance on imported petroleum products to power the transport sector. Enhance NMT (bicycle, walking). Nonmotorized transport modes play a fundamental and unique role in the efficiency of transport systems, providing a low- carbon travel option. The main implementation activities of the GoE that will enhance the adoption of NMT include the following: Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Design and implement high-quality walking and cycling facilities in secondary cities and towns > Update national street design standards > Prevent encroachments on NMT facilities > Conduct audits and surveys to monitor progress on implementation of the strategy > Develop safe pedestrian access in school zones > Repair faulty streetlights and expand street lighting into new streets > Develop dedicated cycle tracks along major streets © Jake Weirick, Unsplash 44 Improve mass transport (BRT, rail, trolley bus). Efficient efficiency. This policy intervention will be achieved public transport greatly mitigates GHG emissions and through sustained development of biofuels, such as reduces energy use. With this policy, the GoE recognizes ethanol-blended gasoline and biodiesel. Ethanol fuel, the crucial role of mass transport in the aim to achieve when blended with gasoline, is an attractive alternative low-carbon economic development in Ethiopia. The to fossil fuels, not only because of environmental and main actions of the GoE that will encourage the health benefits but also because it is competitive in implementation of the mass transit improvement policy terms of cost. A key strategy proposed in this document include the following: focuses on developing micro-distilleries that could produce 1,000 to 5,000 liters per day and would be > Expand the infrastructure coverage of bus rapid designed to fit farm-scale operations and exploit niche transit (BRT) and light rail transit (LRT) networks feedstock. The National Biofuels Policy plan promotes ethanol both for stoves and for blending with gasoline > Improve the frequency of services as a transport fuel. > Improve the safety and comfort of public Increase the share of rail transport. The GoE intends transport terminals and services to further to grow the rail sector because of the potential of rail attract commuters transport to support the increased movement of people and goods, thus expanding the economy. From a low- > Introduce policies like prioritizing public transit carbon emission perspective, the rail sector does not vehicles at signalized intersections contribute to emissions in the transport sector since it > Increase both fleet size of road-based services is powered by low-carbon electricity. Therefore, the and the rolling stock of the LRT policy intervention’s focus on the upgrade expansion and maintenance of passenger and rail freight sectors will Fuel quality and efficiency. Since the transport sector significantly contribute toward achieving the NDC 2030 in Ethiopia is highly dependent on fossil fuel imports, low-emission scenario in line with the GoE’s drive for the government is developing an initiative to reduce low‑carbon development, particularly when the electricity the carbon content of fuel by improving fuel quality and mix is based primarily on renewable energy sources. FIGURE 4.14 Low-emission scenarios for transport energy demand (left) and transport emissions (right) 180000 12 160000 10 140000 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 120000 8 TJ/year TJ/year 100000 6 80000 60000 4 40000 2 20000 0 0 2020 2030 2040 2050 2020 2030 2040 2050 BAU BAU NDC 2030 NDC 2030 Late Action Late Action Maximum ambition Maximum ambition 45 Climate resilience of the transport sector maintenance due to deterioration of materials. For rail transport, temperature increases can raise the danger of Climate change is expected to significantly impacts rail buckling, and it is highly exposed to surface runoff various phases of the transportation sector—including and potential landslides. planning, design, construction, and operations—with the greatest impacts on the design of new roads primarily To address the climate impacts in the transport sector, affecting slopes, with an expected increase in localized the GoE sees multiple opportunities to decrease damage. The main triggers will be increases in the emissions and jump-start the development of sustainable intensity of short, extreme rainfall events and more transport. The climate-resilient transport sector strategy severe flash flooding, which could affect the stability also envisages the contributions of the transport sector of slopes due to surface runoff and increased erosion. to the resilient development pathway through the Other affected road infrastructure assets or components include pavement, road geometry, vegetation, bridges transport long-term strategies of building sustainable and protective structures, signage, and barriers. transport systems for resilience through enhanced access to mobility and increasing climate-resilient In addition to road transport, impacts are also expected designs and safety standards for transport systems. on rail and air transport, with the latter experiencing the strongest impacts from severe weather events, which Favorably, there are many synergies between the will have a profound effect on the operational aspects of mitigation and adaptation actions that have been defined aviation, overall air traffic, and airspace management. In for implementation in the country, as Table 4.6 exhibits. addition, the increasing frequency of very hot days will In fact, most of the actions defined in Ethiopia’s Climate mean that asphalt pavements (although some pavement Resilient Transport Sector Strategy have high mitigation materials cope better with temperature extremes than potential and have also been selected as mitigation others) and buildings and structures will require more actions in the LT-LEDS. TABLE 4.6 Adaptation co-benefits and trade-offs of mitigation actions in the transport sector Mitigation action Adaptation co-benefits Adaptation trade-offs Transport (shift from Resilience can be increased due to petroleum to hybrid the connection to distributed grids, and electric vehicles) given that energy security standards will be in place Enhance NMT > Users/pedestrians are vulnerable to climate (bicycle, walking) conditions, such as heavy rainfall or heat waves, Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) which might have health impacts > To improve this, more climate-proofing investments in the urban sector are required. Improve mass > Greater use of public transport transport (BRT, rail, enables more mass exit Highly ICT-dependent public transport may not be trolley bus) strategies from disasters resilient during disasters, but this can be managed via local shared mobility systems related to local social > Cities can re-urbanize in ways capital that promote transport sector adaptation and mitigation Improve transport mobility (reduce Relieve pressure from the transport sector and congestion, parking, reduce its vulnerability pricing) Increase share of rail Greater use of public transport Vulnerable to certain climate impacts (rising transport enables more mass exit strategies temperatures and extended heatwave periods from disasters can increase rail buckling), which can be managed through proper adaptation actions 46 In the transport sector, apart from the synergies and reduce surface runoff. Implementing these measures between mitigation and adaptation, there are also near transportation‑related infrastructure will thus great synergies between other sectors, especially the reduce the likelihood of landslides and soil erosion and forestry sector. Increased reforestation and reduced significantly contribute to improving the resilience of the deforestation will ultimately increase water retention transport sector.

4.4 MODERNIZING THE AGRICULTURE SECTOR THROUGH CLIMATE-RESILIENT AND LOW-CARBON PRACTICES Sectoral background Agriculture Policy Frameworks Considering its significant contribution to the country’s economic development, the GoE has focused on the agricultural sector over the past three decades. In collaboration with its development partners, it has been striving to transform the agriculture sector by designing and implementing successive policies, strategies, and programs. Since the beginning of this century, the Sustainable Development and Poverty Reduction Program (SDPRP, 2003–2005), the Plan for Accelerated and Sustained Development to End Poverty (PASDEP, 2006–2010), and the Agricultural Sector Policy and Investment Framework (2010–2020) have been implemented successively, focusing on capacity development of smallholder farmers, enhanced food security, crop diversification promotion, improvement of the livelihoods of pastoral communities and their resilience, and poverty reduction by improving rural-urban linkages, developing rural nonfarm enterprises, and prioritizing agricultural investment. In line with these programs, the Agricultural Growth Programs (AGP I and II, 2011– 2020) aimed at increasing agricultural productivity and market access for key crop and livestock products. AGP I was implemented in selected woredas across Amhara, Oromia, SNNP, and Tigray regional states. AGP II focused on enhancing agricultural research for appropriate technology generation, smallholder irrigation development, agricultural marketing, and value chain development. Meanwhile the Gender Equality Strategy for Ethiopia’s Agriculture Sector was developed in 2017 to accelerate development of the sector through added focus on women’s empowerment in the sector. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Agriculture is the backbone of Ethiopia’s economy, indicates continued government support of the agricultural accounting for more than 80% of exports and employing sector, with objectives including creating sufficient job about 70% of the workforce. Due to its diverse agro- opportunities in rural areas, improving the supply of ecological zones, several crop types grow on about 13 raw materials for agro-industries, and ensuring food and million hectares, including cereals, pulses, oilseeds, roots nutrition security by transforming agri-food systems in the and tuber, fruits, and vegetables. Ethiopia has the largest country. Consequently, agriculture is projected to grow at livestock population in Africa, and millions of farmers an annual average rate of about 6% over the next ten years. and pastoralists depend on livestock for their livelihoods. However, agriculture in Ethiopia is a subsistence-oriented Despite appreciable achievements in increasing farming system, and more than 95% of crops are produced agricultural productivity, several challenges hamper efforts by smallholder farmers. toward transforming the country’s agriculture sector. Food production has not kept pace with the country’s According to the Agricultural Development Led population growth rate. Some of the systemic constraints Industrialization strategy, agriculture is a driver of national in Ethiopian agriculture include a shortage of improved economic growth and has enabled the country to achieve seed, dependency on rainfall, limited mechanization, rapid growth in agricultural production and improve agricultural land degradation, shortage of livestock feed, the livelihoods of rural households. The current 10YDP poor soil fertility, and prevalence of pests and diseases. 47 Business-as-usual scenario > An increase in the quantity of synthetic fertilizers used for crop production. Based on past trends in Climate Smart Agriculture (CSA) data, the BAU scenario considers an increasing trend of > An increase in the quantity of pesticides used areas of land under annual crops, perennial crops, and rice for crop production (herbicides, insecticides, production. Likewise, the projected livestock generally fungicides). shows an increasing trend for all livestock species. The main driver of this trend will be population growth, which > An increase in the quantity of lime application triggers agricultural land expansion to ensure food and to treat agricultural land affected by soil nutrition security. In sum, the major factors that increase acidification. GHG emissions from the Ethiopian agriculture sector over the next 30 years include the following: On the other hand, there will be an increase in the area of land under perennial crops cultivation, such as > An increase in the livestock population (cattle, coffee, tea, enset, and several types of fruit orchards sheep, goats, mules, donkeys, horses, camels, (e.g., mango, avocado, orange, banana, papaya), which and poultry). will mitigate GHG emissions. It is estimated that national GHG emissions from the agriculture sector will > An increase in the area of land under annual be 333 MT CO2e/year by 2050. Specifically, emissions crop cultivation (e.g., cereals, root crops, pulses, from the livestock subsector will be the largest (304 and rice), mainly in lowlands. MT CO2e/year), as indicated in Figure 4.15. FIGURE 4.15 Estimated annual GHG emissions for the agriculture sector, without considering perennial crops. 350 300 250 MtCO2e 200 150 100 50 0 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 2030 2040 2050 Total Livestock Managed soils The estimation of GHG emissions from managed soils and N2O gases from annual crops production, CO2 from shows carbon sequestration, even under the BAU limestone application, and N2O from nitrogen fertilizers. scenario, when perennial crops (e.g., coffee, fruits, chat, and tea plantation) are considered (Figure 4.16). When perennial crops such as fruits and coffee are Emissions from managed soils refers to emissions from considered, there is accumulated carbon sequestration annual crop production, fertilizer use, lime application of -18 MT CO2e/year by 2050. As part of the Green for the amelioration of acid soils, and pesticides to Legacy Initiative, which has demonstrated Ethiopia’s bold control weeds, insects, and bacterial and fungal diseases. leadership in climate action, planting fruits and coffee Therefore, emissions from managed soils consist of CH4 has been given appreciable attention. This initiative is expected to continue for the next decades. 48 FIGURE 4.16 Estimated annual GHG emissions for the agriculture sector, considering perennial crops (BAU scenario) 400 300 200 MtCO2e 100 0 -100 2030 2040 2050 Total Livestock Managed soils Low-emission scenario To develop the low-emission pathway for the country’s agriculture sector, promising and high-level mitigation interventions are proposed, as depicted in Table 4.7 below. TABLE 4.7 High-level mitigation measures for low-emission pathways for Ethiopia’s agriculture sector Agriculture: high-level Interventions 2020 2030 2050 Manure management 0% 20% 40% Feed management (oil seed feeding) 0% 10% 25% Improved livestock productivity 0% 14% 40% Substitution of poultry for cattle 0% 10% 20% Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Agricultural mechanization 0% 10% 25% Production of fruits and other perennial crops 1.5 million ha 3.5 million ha (ha of land) Integrated soil fertility management 0% 15% 25% Improved rangeland management 0% 20% 40% Manure management: methane emissions from livestock Feed management: considering the local farming production will be significantly reduced through proper conditions, the adoption of appropriate feeding management of manure, including aeration of manure strategies (e.g., corn or legume feeds) that reduce GHG stockpiles and using manure to prepare compost emissions will be fostered among livestock keepers, together with other materials. Given the large livestock mainly in intensive and mixed crop-livestock farming population in the country, effective management of systems. Promotion of feasible cattle feed additives will manure is needed to reduce methane and enhance also be made to reduce methane production based on crop productivity by leveraging organic fertilizers, such research recommendations. as farmyard manure and compost. Furthermore, biogas generation will be promoted to reduce GHG emissions under dairy farms in urban and pre-urban areas. 49 Improved livestock productivity: through improved However, rangelands are highly degraded, primarily animal nutrition and breeding programs, the country’s due to unsustainable grazing management, fire, and livestock productivity will be enhanced to eventually land conversion, leading to increased GHG emissions. reduce GHG emissions. To this end, agricultural The livelihoods of agro-pastoralists and pastoralists that extension and advisory systems will be strengthened, live in the degraded rangelands are also threatened. improved livestock feeding systems will be widely To restore the degraded rangelands, improved grazing promoted, and breeding programs will be designed management approaches will be promoted to enhance and implemented, tapping into the opportunities that quality forage production and increase perennial species innovations in science and technology offer. through appropriate technical and social innovations. Restoration of the degraded rangelands will also increase Substitution of poultry for cattle: the country has great aboveground and belowground soil carbon stocks. potential to gain environmental and economic benefits from poultry production by reducing its dependency on The following interventions will be implemented to cattle production. Expansion of poultry production will be realize the agriculture sector low-emission pathway: prioritized, particularly by small and medium enterprises. The supply of improved poultry breeds will also be > Expanding agricultural financial services enhanced to be adopted by smallholder farmers, coupled with good management practices. Furthermore, an > Developing sustainable land-use and spatial enabling environment will be created for the private sector planning to actively engage in a large-scale poultry production. > Strengthening public-private partnerships Agricultural mechanization: currently, agricultural > Promoting market-oriented agricultural mechanization development is at an infant stage in production the country. Smallholder farmers largely depend on animals to carry out agricultural activities, such as land > Strengthening research and extension systems cultivation, crop threshing, and transportation. Expansion to foster the adoption of mitigation measures of agricultural mechanization technologies that fit among farmers smallholder farmers’ context will be prioritized to reduce the reliance on animal traction, which contributes to the > Developing institutional and technical reduction of GHG emissions from the livestock sector. capacities needed to switch to low-emission pathways Production of fruits and other perennial crops: the country has tremendous potential to produce a vast > Transitioning from diesel-based irrigation to array of fruits (e.g., mango, avocado, and citrus) and solar-powered irrigation systems other perennial crops (e.g., coffee). These crops have considerable potential to reduce GHG emissions by > Expanding agroforestry practices and enhancing soil carbon sequestration. Furthermore, the Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) restoration of degraded agricultural land expansion of perennial crops will foster efforts toward improving food and nutrition security by reducing climate > Promoting regenerative agriculture to enhance change risks. The government will continue to strongly soil carbon sequestration support the production of fruits and other perennial crops through initiatives such as Green Legacy. > Promoting green energy innovations along agricultural value chains Integrated soil fertility management: this involves the combined application of organic fertilizers (e.g., compost In connection with the expansion of solar-powered and farmyard manure) and chemical fertilizers. On top of irrigation, appropriate technologies will be adopted to mitigating GHGs by increasing nitrogen use efficiency, this enhance water use efficiency. Furthermore, integrated approach is more economical than the sole application watershed management will be implemented to increase of chemical fertilizers in maintaining sustainable crop groundwater recharging, reduce siltation in dams and productivity. Thus, an integrated soil fertility management reservoirs, and enhance soil and water conservation, approach will be promoted to be widely adopted by which will contribute to achieving SDG 6.4.1 and ensure millions of smallholder farmers in the country. sustainable water management. Under the low-emission pathway, GHG emissions will be significantly reduced from Improved rangeland management: Ethiopian rangelands Ethiopia’s agriculture sector, as indicated in Figure 4.17. support several million households and a significant Compared to the BAU scenario, emissions in 2050 will be proportion of the country’s livestock population. 163 Mt CO2e lower in the low-emission scenario. 50 FIGURE 4.17 Projected GHG emissions from Ethiopia’s agriculture sector (under low-emission pathways). 350 300 250 200 MtCO2e 150 100 50 0 2020 2025 2030 2035 2040 2045 2050 BAU Maximum ambition NDC 2030 Late Action Climate resilience of the agriculture sector month-to-month rainfall. A water scarcity impact threshold is applied, calibrated based on information The agriculture sector in Ethiopia is highly vulnerable from the historical data on average temperature and to the impacts of climate change, with droughts precipitation as provided by the National Meteorology becoming more frequent and severe. Ethiopia has a high dependence on rain-fed agriculture and relatively Agency of Ethiopia. The impacts of water scarcity low adaptive capacity to deal with climate impacts. The in cereals and pulses for two selected regions are analysis of the climate change impact on agriculture shown in Figure 4.18 based on the modeling results. in the LT-LEDS considers the consequences of water The downward spikes show that the impacts of water scarcity due to precipitation variability in crop yields. scarcity occur only in certain months. The figure also Lost value in agriculture is calculated by multiplying shows two important observations: water scarcity the lost crop production by the average profitability impacts different crops differently, and the impacts per crop. Water scarcity impacts are assessed by are not uniform across the country, instead varying comparing net crop water demand by crop type and by region. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) © Keith Lobo, Pexels 51 FIGURE 4.18 Impact of water scarcity on the yield of cereals and pulses in region 1 (top) and region 7 (bottom) 1 0,8 0,6 Dmls 0,4 0,2 0 20 20 20 20 20 20 20 20 20 20 20 00 05 10 15 20 25 30 35 40 45 50 Region 1; pulses Region 2, cereals 1 0,8 0,6 Dmls 0,4 0,2 0 20 20 20 20 20 20 20 20 20 20 20 00 05 10 15 20 25 30 35 40 45 50 Region 1; pulses Region 2, cereals As shown in Table 4.8, several climate adaptation to empirically analyze their role in minimizing the losses actions are defined and modeled in the NZE scenarios and improving the resilience of the agriculture sector. TABLE 4.8 Adaptation interventions and their respective targets in the agriculture sector that are modeled in GEM Adaptation Indicator Baseline indicator 2030 Target 2050 Target Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) intervention 2020 Reduce preharvest % of losses in losses in crop yield 25% 23% 10% production Increase climate- Share of land smart agriculture that has CSA 0% 25% 80% practices practices Increase irrigation Area under schemes irrigation 0.49 mil. ha 1.2 mil. ha 3.6 mil. ha schemes 52 TABLE 4.8 Adaptation interventions and their respective targets in the agriculture sector that are modeled in GEM (cont.) Adaptation Indicator Baseline indicator 2030 Target 2050 Target intervention 2020 Diversify crops by Share of land Teff: 31,000 ha Teff: 100,000 ha Teff: 250,000 ha using improved that uses climate-resilient improved seeds Barley: 70,000 ha Barley: 193,000 ha Barley: 400,000 ha seeds Wheat: 413,000 ha Wheat: 673,000 ha Wheat: 1,500,000 ha Corn: 438,000 ha Corn: 823,000 ha Corn: 1,800,000 ha Sorghum: 360,000 Sorghum: 720,000 Pulses: 85,000 Pulses: 190,000 Oilseeds: 50,000 Oilseeds: 120,000 Potato: 110,000 Potato: 260,000 Utilize climate- Annual smart, technology- increase in based mechanical mechanization NA 1%/a 1%/a agriculture rate in crop production Diversify livestock % of improved using genetically dairy cattle 2.7% 17% 30% improved breeds Cumulatively, the forecasted crop production losses due and their respective targets are capable of completely to climate change in 2020–2050 total 202 million tons offsetting the negative impacts of climate change with (10.5% of maximum potential yield) in the BAU scenario. respect to crop production in the agricultural sector. In the NZE scenarios, total crop production in 2020–2050 The results of the total crop production, along with the Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) is 3.5 million tons higher than in the BAU without climate monthly variability, is shown in Figure 4.19 The results of impacts, implying that adaptation measures—in the all NZE scenarios are similar as the ambition levels for the form of sustainable practices and expanded irrigation— adaptation actions were not varied across the scenarios. 53 FIGURE 4.19 Reduction in crop production in the NZE scenarios with and without climate impacts 350 300 250 200 Mt/Year 150 100 50 0 20 20 20 20 20 20 20 20 20 10 15 20 25 30 35 40 45 50 NZE scenarios BAU - Without climate impact BAU Besides the adaptation actions that were modeled in > Developing a sustainable marketing system for GEM, several long-term adaptation strategies are defined crops and livestock in the LT-LEDS to enhance the resilience of Ethiopia’s agriculture sector to the changing climate. These > Strengthening climate information services for strategies were selected based on various discussions farmers in the Agriculture Working Group and workshops and then validated in a larger group of national stakeholders > Expanding soil and water conservation through national consultation processes. The long-term measures climate adaptation measures for the agriculture sector > Enhancing conservation of agro-biodiversity are defined as follows: > Reducing post-harvest losses and food waste in > Expanding (solar) irrigation-based crop the country’s agri-food system production > Expanding agricultural extension services > Enhancing integrated crop disease and pest to smallholder farmers on climate-resilient management agriculture > Strengthening and expanding animal health Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Promoting conservation agriculture in services appropriate agroecological zones > Promoting early maturing and drought-tolerant > Developing the capacity of agricultural crop varieties cooperatives and strengthening agricultural > Improving the water supply to livestock marketing systems production > Expanding agro-processing > Improving irrigation-based forage and fodder In addition to the quantitative adaptation benefits production of adaptation actions in the energy sector, there are > Developing an insurance system for crops and important adaptation co-benefits of the mitigation livestock actions in the agriculture sector. Table 4.9 illustrates the most important synergies and trade-offs of the > Strengthening seed systems agriculture mitigation actions. 54 TABLE 4.9 Adaptation co-benefits and trade-offs of mitigation actions in the agriculture sector Mitigation action Adaptation co-benefits Adaptation trade-offs Manure management   > Combined use of manure and mineral fertilizers leads to greater yield responses > The application of manure from livestock waste serves to improve soil fertility and soil organic matter Feed management (oil seed > Improved animal performance > Some secondary compounds can inhibit feeding) optimal performance, such as high fat content that can lead to milk fat depression > Proper processing and management of feed can mitigate these anti-nutritive components Improved livestock > Improved resilience > Increased productivity of livestock systems productivity generally increases overall food production > Reduced feed requirement and absolute GHG emissions, albeit at lower during drought emissions per unit of food Substitution of poultry for > Improved resilience; reduced cattle feed requirement during drought Agricultural mechanization > Improved resilience > Not applicable in the context of scattered and fragmented landholdings, undulating and steep slopes, or terraced and nonuniform shape of crop fields > Agricultural intensification that improves crop productivity can increase incomes but undermine local livelihoods and well-being Production of fruits and > Improved resilience other perennial crops Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Integrated soil fertility > Improved resilience > It increases the incidence of pests and management diseases and soil waterlogging > Improved soil moisture > Minimum/zero tillage could also lead to > Flood risk protection lower yields, especially if solely adopted > Improved soil fertility > Reduced soil erosion > Enhanced soil carbon storage Improved grassland/ > Improved resilience > Shifting to rangeland for feed can strongly rangeland management increase tropical deforestation > Improved soil moisture > Flood risk protection > Improved soil fertility > Reduced soil erosion > Enhance soil carbon storage 55 Although the adaptation co-benefits of the mitigation At a much smaller sectoral level, limitations preventing actions are many, several barriers prevent these synergies these synergies from being fully utilized include limited from being fully achieved. For example, increasing the farmers’ skills in operating mechanized equipment; share of perennial crops production, which contributes to limited access to irrigation water in dry areas; and additional carbon sequestration and improved resilience, limited technical skills of agricultural extension workers faces resistance as the focus in Ethiopia remains on in diversified crop production, disease management, annual major food crops (e.g., wheat, maize, and teff) and post-harvest handling. These can be addressed by due to food insecurity. One plausible way of addressing enhancing the supply of seedlings, fostering adoption of this would be to widely promote production of perennial improved crop varieties among farmers, and improving crops, like fruits, by developing robust strategies and a farmers’ and extension workers’ skills by providing reliable market system for smallholder farmers. customized capacity building and raising awareness.

4.5 CLIMATE ACTIONS IN FORESTRY AND OTHER LAND USE FOR ENHANCING CARBON SINKS Sectoral background Forestry policy frameworks As part of the CRGE framework, Ethiopia developed its National REDD+ Strategy to improve management of forests and agricultural areas. The implementation of REDD+ programs contribute to significant emission reductions from land use, including forestry by reducing the rate of deforestation and forest degradation (MEFCC, 2018). The National REDD+ Strategy aims to implement the following actions (MEFCC, 2018): scaling up the areas under participatory forest management; enhancing appropriate afforestation; enhancing the timber supply to reduce pressure on nature forest; rehabilitation of degraded pastureland, farmland, and highlands to increase fertility and carbon sequestration; and encouraging communities to engage in sustainable wood biomass production for charcoal and firewood. With the aim to operationalize the CRGE and the REDD+ Strategy, the National Forest Sector Development Program (NFSDP) was initiated by Ethiopia’s Ministry of Environment, Forest and Climate Change (MEFCC) as the main guiding document for coordinating strategic policy interventions and sector-wide investments for the coming ten-year period. The proposed actions with the most transformative potential include attracting private investment in commercial forestry and establishing Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) industrial clusters for manufacturing timber and other industrial wood products for domestic consumption and export. This would help Ethiopia’s transition to a green growth strategy that replaces energy-intensive construction materials, such as steel and concrete, with high-quality wood-based buildings and infrastructure. Further, the NFSDP aimed to establish payment for environmental services schemes to better valorize the forest’s contribution to watershed management and carbon sequestration. Forests regulate ecosystems, protect biodiversity, play With forestry in Ethiopia being primarily a rural activity, an integral part in the carbon cycle, support livelihoods, the sector has enormous potential to transform the rural and supply goods and services that can drive sustainable economy. The sector also adds value through harboring growth. Their role in climate change is twofold: biodiversity resources and other ecosystem services, deforestation and forest degradation are both a cause such as climate regulation, fertile soil, water, and clean and an effect of the changing climate. Forests are also air. Ethiopia’s diverse forest resources—including high one of the most important solutions to addressing the forests, woodlands, and trees on farms—have among the effects of climate change. highest biodiversity in the world and provide a wealth of goods and services to ensure a green economic growth pathway while maintaining rapid infrastructure development and urbanization. 56 However, Ethiopia’s forests face several challenges and deforestation and forest degradation. Deforestation threats: small- and large-scale agricultural land conversion, correlates with the expansion of agricultural land increased wood extraction for fuel and construction, needed for crop production, which is essential to pressure caused by increased livestock grazing and gaps ensure food security and poverty alleviation in the in the application of forest policy and regulations; tenure/ face of demographic pressure. Additionally, Ethiopia’s unclear forest user rights; lack of private investment in rural energy needs are predominantly satisfied by forestry development; population growth; and inadequate biomass (>90%) (Federal Democratic Republic of land use planning and participatory forest management Ethiopia, 2011). The development of fuelwood (MEFCC, 2018). Consequently, the forestry sector is consumption is primarily influenced by population the second largest contributor of GHG emissions in the increase. Finally, authorized and unauthorized, logging country after agriculture. is currently a relatively minor driver of deforestation and forest degradation. Since 1990, forest cover has progressively declined while other wooded land Historical land use change has remained the same, as seen in Figure 4.20. The Land use and land cover changes in Ethiopia are main difference between forest and other wooded primarily influenced by increases in population and land is their tree density, with the former having an agricultural product demand, as well as low-efficiency average of 124.7 trees per hectare and the latter only combustion in rural households, which translate to presenting 21.1 trees per hectare (MEFCC, 2018) FIGURE 4.20 Forest and other wooded land (left) and natural and planted forest (right) (Source: FAO, 2020) 23 000 20 000 18 000 22 000 16 000 21 000 14 000 20 000 12 000 Thousand ha Thousand ha 19 000 10 000 8 000 18 000 6 000 17 000 4 000 16 000 2 000 15 000 0 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 29 20 2090 00 10 29 20 2090 00 10 20 20 2015 16 17 20 20 2015 16 17 20 20 2018 19 20 20 20 2018 19 20 Natural regenerating forest Forest Other wooded land Planted forest Not only is forest suffering degradation but natural forest potential to mitigate the totality of its emissions and is being lost (see Figure 4.21). From a GHG emissions contribute to Ethiopia’s carbon neutrality goal while perspective, this b ecomes even more important since a supporting sustainable economic development. higher amount of carbon stocks are lost and the period to recover them is longer. The rate of deforestation for 2000–2013 and 2014–2020 was 91,735 ha/year and Business-as-usual results 38,194 ha/year, respectively. The rate of afforestation and reforestation for 2000–2013 and 2014–2020 The results from the aggregation of the five-year-long was 18,928ha/year and 34,283 ha/year, respectively. models indicate that emissions from the forestry sector A comparison of the panels in Figure 4.21 indicates a will reach 771.04 million tons of CO2e (Mt CO2e) declining trend in deforestation and an increasing trend by 2050 while also capturing 859.99 Mt CO2e by in afforestation and reforestation efforts (EFCCC, 2017, the same year. This would amount to net emissions 2021). Although the forestry sector, along with the (emissions minus carbon captures) of -88.95 Mt CO2e agricultural sector, is a main emitting sector, it has the in 2050 Figure 4.21. 57 FIGURE 4.21 National BAU GHG emissions for the forestry sector, 2020–2050 (cumulative) 1 000 500 0 MtCO2e -500 -1 000 2025 2030 2035 2040 2045 2050 BAU Deforestation BAU Afforestation BAU Net 1 000 500 MtCO2e 0 -500 -1 000 2025 2030 2035 2040 2045 2050 BAU Deforestation BAU Afforestation BAU Net The four biomes Acacia-Commiphora, Combretum- been estimated (Table 4.10). The GoE could use these Terminalia, Dry Afromontane, and Moist Afromontane indicators as a reference to set emission reduction goals are net sources of emissions given their positive of the different policies of interest. Additionally, when deforestation rates. Nevertheless, forest gains applied to the regional model, it would direct the focus Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) compensate these emissions. Additionally, average toward efforts on those with higher emissions per emissions per hectare and yearly average emissions have hectare. TABLE 4.10 National average emissions for 2020–2050 (tCO2e/ha & tCO2e/yr) Average annual Average annual Average annual net emissions, reductions, emissions, tCO2e/yr Total emissions, tCO2e/ Region ha tCO2e/yr tCO2e/yr National 25,701,568 -28,666,535 -2,964,967 -1.3 58 Low-emission scenarios These interventions were selected because they galvanized emission reduction and carbon sequestration Based on the review of existing policy documents activities currently being implemented and planned. and considering the opinion of the national experts These interventions were validated by an expanded of the established agriculture working group, three group of experts (leaders and forestry program managers) decarbonization interventions were selected to invited by the Ethiopian members of the FWG during be modeled: reduction of the deforestation rate, a workshop that also determined the ambition of each afforestation and reforestation, and forest restoration. decarbonization priority. TABLE 4.11 Quantitative targets of Ethiopia’s forestry sector decarbonization and adaptation interventions Total Forestry: high-level interventions 2020–2030 2030–2040 2040–2050 (2020–2050) 25% 12.5% 12.5% deforestation deforestation deforestation 50% rate reduction rate reduction rate reduction Reduced deforestation deforestation rate reduction 2.5% annual 1.25% annual 1.25% annual reduction reduction reduction Afforestation and reforestation 0.27 million 0.27 million 0.27 million Maximum ambition scenario 8.2 million ha ha/year ha/year ha/year 0.27 million 0.18 million 0.33 million NDC-aligned scenario 8.2 million ha ha/year ha/year ha/year 0.09 million 0.1 million 0.63 million Late action scenario 8.2 million ha ha/year ha/year ha/year Forest restoration 1.1 million 0.45 million 0.45 million Maximum ambition scenario 20 million ha ha/year ha/year ha/year 0.4 million 0.4 million 0.8 million NDC-aligned scenario 16 million ha ha/year ha/year ha/year Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 0.15 million 0.15 million 1.3 million Late action scenario 16 million ha ha/year ha/year ha/year As can be seen, the FWG and the expanded group of priority considerably reduces emissions. From 2020 experts determined that the reduced deforestation and to 2050, reduced deforestation would diminish GHG forest restoration decarbonization interventions would emissions by 220.66 Mt CO2e, or 7.35 Mt CO2e yearly. have a steadfast implementation rate during the first 10 years (2020–2030) and a less vigorous one the following Afforestation and reforestation target: Ethiopian forest 20 years (2030–2050). would only cumulatively emit 225.1 Mt CO2e and would capture 4,110.92 Mt CO2e, with net emissions Reduced deforestation target: deforestation is amounting to -3,885.52 Mt CO2e for 2020–2050. The reduced at a faster rate until 2030 and continues increase of forest cover would produce a significant being reduced afterward but at a slower pace. With the amount of emission reductions when compared with reduced deforestation target, Ethiopian forest would the remaining emissions. These emissions are the result cumulatively emit 550.39 Mt CO2e and would capture of the continuous deforestation suffered by other 859.99 MtCO2e, with net emissions amounting to wooded land. Compared to the BAU scenario, this -309.61 Mt CO2e during the 30-year analysis period. decarbonization priority considerably reduces emissions. Compared to the BAU scenario, this decarbonization From 2020 to 2050, afforestation and reforestation 59 capture 3,796.87 Mt CO2e, or 126.56 Mt CO2e yearly. wooded land to forest are not enough to counter its Since the late-action scenario first delays afforestation effect. When contrasted with the BAU scenario, this action, the ambition after 2040 must be correspondingly decarbonization priority produces the highest number higher to still achieve the overall target. of emission reductions. From 2020 to 2050, it captures 3,953.17 Mt CO2e, or 131.72 Mt CO2e annually. Forest restoration: the intervention of forest restoration causes emissions of 88.09Mt CO2e—higher than the BAU scenario—but would capture 4,941.22 Mt CO2e, Mitigation potential of the forestry sector with net emissions reaching -4,042.12 Mt CO2e for To estimate the potential of the implementation of the 2020–2050. The higher level of emissions occurs three decarbonization interventions, their emission because of the amount of degraded land in each biome reductions were summed and contrasted against the and their different carbon content factors. Although considerable areas are restored, they are allocated in BAU scenario. The addition of the individual emissions the Acacia–Commiphora biome, which has the lowest of all decarbonization interventions amount to 1,674.58 carbon content factors among Ethiopian ecosystems. Mt CO2e, with their removals reaching 9,912.13 Mt CO2e Additionally, given that deforestation is kept as an and net emissions reaching -8,237.55 Mt CO2e along the underlying driver, the areas transferred from other 30-year period (Figure 4.22). FIGURE 4.22 Emissions pathways for decarbonization forestry intervention actions, 2020–2050 5 000 0 -5 000 MtCO2e -10 000 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) -15 000 2025 2030 2035 2040 2045 2050 Decarbonization interventions emissions Decarbonization interventions net emissions Decarbonization interventions reductions When compared with the BAU scenario, all decarbonization interventions produce 14,466.93 Mt CO2e of carbon removals, or 482.23 Mt CO2e per year (Figure 4.23). 60 FIGURE 4.23 Emission pathways and mitigation potential for BAU and decarbonization intervention actions 10 000 5 000 Mt CO2e 0 2025 2030 2035 2040 2045 2050 -5 000 -10 000 Year Mitigation potential BAU net Decarbonization interventions net emissions Additional mitigation actions for increased ambition Climate resilience of the forestry sector Using forests to help mitigate climate change globally Increasing forest cover in the highlands of Ethiopia involves finding ways to increase their potential to be will dramatically improve their hydrological functions carbon sinks. Due to the complexity of some mitigation through infiltration and soil protection, thereby reducing actions, a lack of data to model their emissions, or floods while increasing availability of surface water and linkages with other emitting sectors, the LT-LEDS did groundwater across the country. Water is a strategic not include the following actions, which should be resource for Ethiopia as it could be harnessed to generate considered for future climate efforts: hydropower sustainably, used for irrigation agriculture, and even exported to nearby dry land countries for I. Reduction of fuelwood consumption through generating hard currency. Forest development can also improved cooking and baking technologies positively impact other sectors, such as tourism and Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) wildlife development, besides its role in conservation of II. Shift from unsustainable biomass energy animal and plant diversity (MEFCC, 2018). demand to electric stoves and renewable biofuels while establishing safeguards to avoid Investment in the forest sector is a strategic move carbon leakage from a high-emitting energy to mitigate the impact of climate change and is a matrix in the power generation sector key component in Ethiopia’s national growth and transformation plan (MEFCC, 2017). Ethiopia recognizes III. Improved forest management in commercial that its forests are ideally placed to produce multiple plantations to enhance their carbon capture dividends in the fight against climate change. The potential Forestry Working Group has decided to adopt the same strategies from the Ethiopia’s NDC update for IV. Fostering the rehabilitation of degraded the long‑term climate resilient strategies of the forestry pastureland, farmland, and highlands, leading sector in the LT-LEDS. to enhanced soil fertility and thereby ensuring additional carbon sequestration V. Implementing Payment for Environmental Services schemes to better valorize the forest’s contribution to watershed management and carbon sequestration. 61 TABLE 4.12 Mitigation and adaptation actions of the forestry sector according to the updated NDC Mitigation actions Adaptation actions Forest restoration Perform restoration and reforestation through tree planting Increase national forest coverage Afforestation and reforestation Implement forest protection and health enhancement measures in natural forest ecosystems Enhance sustainable forest management Reduce residential biomass use Improve sustainable utilization of forest Mitigation and adaptation measures in the forestry sector Working Group. Table 4.13 illustrates the results of the likely have the greatest synergies among all sectors, which assessment, showing the main adaptation synergies and were also identified and assessed in detail by the Forestry trade-offs of the forestry mitigation measures. TABLE 4.13 Adaptation co-benefits and trade-offs of mitigation actions in the forestry sector Mitigation Adaptation co-benefits Adaptation trade-offs action > Ecosystem services conservation > Reduced food security Reduced deforestation > Improvement of water-related ecosystem > Potential land competition services > Local benefits, especially for > Reduced impact of heat island effect in urban indigenous communities, Afforestation/ areas will only be accrued if land reforestation tenure is respected and legally > Income diversification (nontimber forest protected products) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Creation of green jobs > Carbon offset funds provide opportunities for protection and restoration of native ecosystems, with corresponding gains for biodiversity and reductions in carbon Forest restoration > Reforestation connecting fragmented forests reduces exposure to forest edge disturbances > The use of fertilizer-fixing trees can improve soil fertility through nitrogen fixation by increasing the supply of nutrients for crop production Several climate adaptation actions are also identified for These actions are listed in Table 4.14 and are assessed the forestry sector to increase its capacity to adapt to based on their potential synergy and trade-offs in terms climate change and to ensure its future sustainability. of mitigating emissions. 62 TABLE 4.14 Mitigation co-benefits and trade-offs of adaptation actions in the forestry sector Adaptation action Mitigation co-benefits Mitigation trade-offs Perform restoration and > Avoided emissions Potential emissions leakage in the agriculture reforestation through tree sector (use of fertilizers to increase crop planting > Carbon capture productivity in lesser cropland) Increase national forest coverage Carbon capture Potential emissions leakage in the agriculture sector (use of fertilizers to increase crop productivity in lesser cropland) Enhance sustainable forest Increased carbon capture Emissions from logging equipment management based on sustainable forestry practices Improve sustainable utilization of Increased carbon capture Emissions from forest resources transport forest resources based on sustainable forestry practices Implement forest protection and Avoided emissions - health enhancement measures in natural forest ecosystems The question arises why the synergies resulting from the such as reducing food waste, promoting the production implementation of these measures are not fully exploited of durable wood products, and promoting no-till systems in Ethiopia when there are clearly significant additional and agroecological practices can reduce pressure on co-benefits. Better institutional arrangements, such as potential land competitors. In addition, the introduction greater coordination between forestry and agriculture of regulations to reduce the fuel consumption of timber sector institutions, and efforts to promote a holistic and harvesting machinery and equipment will help reduce integrated approach to forestry projects are essential to potential additional emissions that could result from maximize synergies. In terms of potential trade‑offs, efforts adaptation measures in the forest sector. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) © GGGI in Ethiopia 63

4.6 IMPROVING WASTE MANAGEMENT SYSTEMS Sectoral background Waste Policy Frameworks Waste sector policies are generally based on several overarching policy documents, starting with national environmental and health policies. At a lower level, there are more specific strategies, such as the Urban Development Policy, which aim at ensuring environmental conservation and sanitation in cities to avoid overcrowding and pollution as the urban population grows. This includes collaboration between the public and private sectors in solid and liquid waste management. Solid Waste Management Proclamation No. 513/2007 is mainly concerned with promoting community participation to prevent the adverse effects of solid wastes, while the Solid Waste Management Strategy emphasizes ways to reduce, reuse, and recycle waste; composting of organic solid waste; energy production from incineration; and waste disposal. Regarding practical implementation, the Solid Waste Management Standard defines the requirements in the waste management chain, ranging from institutional and financial aspects to issues of waste storage, waste collection systems, recycling, and recovery. The main GHGs emitted from the waste sector in Ethiopia 22% recyclable/reusable. The study also indicated that are methane, due to the anaerobic decomposition of municipal solid waste collection and disposal coverage is organic matter within municipal solid waste (MSW) estimated to be 40% nationwide. at disposal sites, and carbon dioxide resulting from incineration and open burning of waste. Domestic Currently, limited segregation of waste occurs at the and industrial wastewater treatment and discharge household level and most of the waste is sent to landfills, also contribute to large methane and nitrogen oxide which are generally open dump sites. Apart from landfills, emissions. In the updated NDC (2021), it was estimated waste burning, and dumping are common, at least in that the waste sector would contribute 3% of total BAU smaller towns. Formal recycling is estimated to be as low emissions in 2030. as 2%. There is an ongoing open window composting project in six cities (Adama, Bahir Dar, Bishoftu, Dire The increasing urban population and changing Dawa, Hawassa, and Mekelle) that reached 29,000 tons consumption patterns in Ethiopia have resulted in a in 2020. A thermal waste-to-energy facility was set up steady increase of MSW generated in the country. at the Koshi landfill with a capacity to treat 1,400 tons Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Several studies have been conducted on the quantity of per day of MSW. MSW being generated in the country, with estimations varying widely from 0.31–0.46 kg/capita/day.2, 3 A recent Wastewater is generated through both domestic and government study of 55 towns in Ethiopia4 indicated industrial activities in the country. Published studies5 a per-capita solid waste generation rate of around indicate that the quantity of wastewater generated 0.31 kg/day with an average density of 241.8 kg/m3. in Ethiopia is about 4.2 m3/capita/year (which is The composition was estimated at 73% organic and 11.5 l/capita/day). While this is low, it sits well with 2 Hirpe, L., and Yeom, C. “Municipal Solid Waste Management Policies, Practices, and Challenges in Ethiopia: A Systematic Review.” Sustainability 13, (2021) 11241. 3 https://www.mdpi.com/2227-7080/9/3/48. 4 Government of Ethiopia. Solid Waste Generation, Composition, Collection in 55 cities, 2020. 5 https://essd.copernicus.org/preprints/essd-2020-156/essd-2020-156-manuscript-version2.pdf 6 https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/53371/IDL-53371.pdf, page 136 64 other longterm studies, which indicate6 only about from 65% in 2020 to 55% in 2050, with plastic increasing 25 l/capita/day is available for domestic use. Even when from 6% to 11% and paper increasing from 6% to 11%. sewer systems are present, the large-scale treatment of Other components remain relatively stable. wastewater is still limited. The UNICEF and WHO data warehouse on water and sanitation presents the following For MSW landfill disposal, a value of 40% nationwide figures for sanitation services in the country in 2019:7 was used, with the following distribution. (1) unmanaged shallow: 10%, (2) unmanaged deep: 70%, and > Unimproved sanitation: 58.5% (3) uncategorized solid waste disposal sites (SWDS): 20%. Referring to the values for the methane conversion > Open defecation: 25.7% factor for SWDS given in the IPCC 2006 Guidelines, the calculated weighted methane conversion factor > Limited services: 6.1% (MCF for the country was determined as 0.72. For the wastewater sector in the BAU scenario, emissions will > Basic services: 2% continue to rise due to increased population growth but wil decrease in open defecation and enhanced treatment facilities releasing methane. Business-as-usual scenario The BAU scenario is centered around parameters including Low-emission scenario projected change in the volume of waste generated, the evolving composition of waste, and improved Based on the existing policy documents and expert waste management practices. For the development of discussions with the relevant ministries involved, the BAU scenario, MSW is expected to increase from seven actions have been selected to decarbonize the 0.45 kg/ capita/day in 2020 to 0.65 kg/capita/day in waste sector. They are distinguished by solid waste 2050. Organic waste content is assumed to decrease management and wastewater management. TABLE 4.15 Ambition levels for the low-emission interventions in the waste sector (for all scenarios) Waste: high-level interventions 2030 2040 2050 Processing of organic municipal waste 20% 40% 50% Landfill gas reduction 5% 20% 35% 4R measures: reduce, reuse, recycle, and recover energy of 10% 20% 25% inorganic/dry waste Solid waste collection and management 80% 85% 90% Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) GHG emissions reduction from urban wastewater management 10% 40% 80% GHG emissions reduction from rural and industrial wastewater 10% 30% 70% management Fecal sludge treatment 4% 15% 30% 7 https://data.unicef.org/resources/resource-type/datasets/ 65 Solid Waste disposal Disposal sites are a significant source of GHG emissions in the waste sector due to the large organic fraction that decomposes under anaerobic conditions to emit landfill gas (LFG). LFG consists mostly of methane (50–60%) and carbon dioxide (40–50%). As waste collection rates increase over time, GHG emissions will increase if waste ends up in landfills that are not well managed. A landfill can emit GHG for many years (up to 30 years), even after closure. To minimize such emissions, two main actions are proposed: divert organic waste from landfill for subsequent reuse and manage LFG emissions. Accumulation of waste in landfills that are not well managed also increases the risk of fire, which releases carbon dioxide, fine particles, and toxic materials. In addition, the lack of established waste minimization strategies and collection systems in some cities and in most rural areas can lead to the burning of waste as the main disposal option. Improvement actions include waste collection services and source separation of recyclables, improved management of landfills, and implementation of the 4R measures: reduce, reuse, recycle, and recover energy of inorganic/dry waste. Actions are detailed as follows: 1. Organic waste processing: to achieve this target, multiple aerobic and anaerobic interventions are available. The resulting compost can be used as soil amender on agricultural land, returning valuable nutrients and carbon to land while decreasing reliance on synthetic fertilizers. This intervention is well aligned with existing government policies. Commercial centralized facilities will capture the bulk of the organic waste in urban areas, about 100–200 tons per day. Composting will be completed by other types of smaller-scale aerobic Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) processing, such as vermiculture and black soldier flies, which also generate proteins for animal feed. In rural areas, actions will focus on promoting smaller-scale household- or community-level processing, such as pit or pile composting. Developing markets and community acceptance for compost will be a critical component of this intervention. The other main technology is anaerobic digestion (AD). AD is a bio-chemical treatment process involving microbial anaerobic digestion of pretreated and homogenized organic materials to produce biogas that contains 50–60% combustible methane. The biogas is then converted to electricity using gas engines to produce about 30–35% of energy from the biogas generated. Additionally, 35–40% of energy can be © Krizjohn Rosales, Pexels recovered as heat to be utilized for maintaining the digestor temperature as well as the pretreatment of feedstocks. The resulting digestate can be further treated and used as fertilizer, enhancing agricultural 66 soil productivity and reducing the need for synthetic 4. Improved waste collection services and source fertilizers. The aim will be to set up medium-sized separation of recyclables: solid waste collection will (1–3 MW) biodigesters in urban areas and industrial be increased throughout the country by improving parks, close to the waste generation source. In the longer infrastructure, equipment (e.g., bins and trucks), and term, the biogas can be converted to other valuable logistics; strengthening waste collection contracts materials, such as bio-compressed natural gas‑which with the private sector; improving fee collection and can be more easily transported‑bio‑methanol, or subnational institutional arrangements; and raising biohydrogen. awareness and developing/implementing regulations. Value chains of recyclable materials at the household 2. Landfill gas (LFG) management: LFG can be and commercial levels (source separation, storage, extracted using a series of wells and pipes to direct the collection, and transport) will be strengthened to ensure collected gas to a central point where it can be flared the materials arrive at the recycling centers with minimal or beneficially reused (similarly to biogas in action cross-contamination. The 90% target includes collection 1). Because retrofitting is more expensive, installation and source separation of waste for organic processing should be considered a priority for new landfills, in (actions 1 and 3), with the residual waste going to line with the government plan to construct up to 200 well-managed landfills, where LFG emissions and open sanitary landfills. Active gas management systems burning are minimized (action 2). (flaring or recovering) rely on expensive technology and should be considered mainly for the larger landfill sites such as Koshi. Wastewater treatment and discharge In urban areas, it is expected that household Other lower-cost actions will also be prioritized, such as connections to sewerage systems will increase, improved operation and maintenance (O&M), including together with downstream treatment at wastewater proper compaction, cover of waste, and the use of treatment plants (WWTP). Operating WWTPs can biofilters to reduce LFG emissions. Together with the increase emissions, especially if O&M is deficient, thus development and implementation of O&M procedures, interventions largely focus on the smooth operation of these actions will also decrease the risk of fires with these systems. In rural areas, septic tanks and pit latrines associated emissions. are large contributors of methane, and interventions focus on improved decentralized sanitation. 3. Reduce, reuse, recycle, and recover energy of inorganic/dry waste: avoiding the waste in the first 5. Improved urban domestic wastewater management: place is the best way to minimize emissions. Efforts will as per government policy, sewerage and WWTP be targeted at reducing the consumption of single-use infrastructure will be developed throughout the country. items (e.g., plastic bags and containers) through policy, Already, Addis Ababa manages 34% of its wastewater, regulations, and awareness-raising interventions. For with some other towns also having access to small waste already generated, the next best option is reusing WWTPs. A poorly maintained and operated WWTP and recycling. Feasibility studies will be conducted and Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) can generate significant emissions due to wastewater partnerships with the private sector will be explored to stagnation and lack of aeration, which can result in establish processing facilities for wastes, such as plastic, anaerobic conditions. It is important that once the paper, batteries, and e-waste. infrastructure is built, necessary institutional and financial arrangements are made—such as proper training of staff, Finally, residual waste that cannot be recycled can be regular desludging, and regular maintenance—ensuring targeted for energy recovery. There is one existing water discharge standards are met. thermal waste-to-energy (W2E) facility in Addis Ababa. The country is learning about these expensive and 6. Improved rural and industrial wastewater complex technologies and hopes that in the medium management: an open-defecation-free (ODF) Ethiopia, term (around 2040), more W2E plants can be built for including through public and community toilets, should the larger cities. In addition, refuse-derived fuel (RDF) be a key target but may result in increased emissions will be considered as another W2E option, with the if not managed properly. The standard of household waste replacing coal in cement factories. This is a more septic tanks and latrines will be improved. Desludging affordable option than purpose-built thermal facilities. at regular intervals will be required to reduce methane RDF is produced from the mechanical processing gas emissions, including the strengthening of desludging of MSW to recover recyclable materials, remove service provisions. In denser rural and peri-urban areas, contaminants (glass, stones, etc.), remove moisture, and increase the calorific value. 67 community-level sanitation systems will be established, on the contamination profile, opportunities for reuse as such as anaerobic baffled reactors and nature-based soil amender will be investigated. Centralized treatment systems (e.g., constructed wetlands), with appropriate facilities will be built, either anaerobic digesters (the O&M. Household biodigesters connected to toilets will sludge can be combined with animal manure in rural be promoted as an efficient way to reduce methane areas or organic waste in urban areas—see action 1) emissions while producing gas for energy supply. or aerobic options (drying beds, planted beds, etc.), to generate soil amender. Industrial wastewater emissions are potentially important sources of methane emissions and pollution, especially Figure 4.24 shows how the policy actions for solid waste from the food and beverage and agro-processing management and wastewater treatment contribute to sectors. These also have high potential for value-added the decarbonization of the waste sector. Whereas the opportunities, such as methane capture and nutrient actions initially manage to slow the increase in emissions, recovery. Efficient decentralized industrial wastewater the pattern still shows upward trends due to the growth treatment units will be installed, appropriately monitored of population and the economy. However, in the 2030s, by the government. the actions also manage to overcome those tendencies and strongly reduce emissions. Even with ambitious 7. Improved fecal sludge management (rural and actions, full decarbonization is not achieved in the waste urban): both actions 6 and 7 will lead to the production sector, meaning that negative emissions in other sectors of large volumes of fecal sludge at different stages of are required to achieve economy-wide NZE. But as stabilization. Sending this sludge to landfills or letting Figure 4.24 reveals, emissions in 2050 are just a fraction it build up leads to the release of methane. Depending of what they would be in the BAU scenario. FIGURE 4.24 GHG emissions from waste sector (left) and maximum ambition emissions from waste sector (right) 12 30 10 25 8 20 6 15 4 10 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 2 5 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 25 30 35 40 45 50 20 25 30 35 40 45 50 GHG emissions from wastewater Total emissions from Waste sector in BAU in LT LEDS Scenario GHG emissions from SWDS Total emissions from Waste sector in LT LEDS in LT LEDS Scenario 68 Climate resilience of the waste sector strategies have been identified in the LT-LEDS as the long-term climate change adaptation strategies to There are various climate impacts that could threaten underscore Ethiopia’s commitment to a climate-resilient the waste sector in Ethiopia, including increased rates of waste decomposition, deterioration, and impacts of and low-carbon development of the waste sector. These odor and dust in settlements. The increasing likelihood adaptation strategies are: of flooding also has major implications for the waste sector, as infrastructure, facilities, and suppliers may > Building a climate-resilient urban infrastructure be disrupted or low-lying, flood-prone areas may with a sustainable solid and liquid waste be inundated. Equally critical is the waste sector’s management system dependence on the transportation sector, as any disruption to road infrastructure affects the ability > Engaging urban administration and management to transport waste and creates bottlenecks in limited programs in promoting an efficient urban waste storage capacity at many sites. management system The NAP-ETH combines long-term strategies for An analysis of adaptation co-benefits examined the the waste sector with the strategies for the urban or waste sector and related mitigation actions in the industrial systems. Closely based on this, two long‑term LT‑LEDS, with the results reported in Table 4.16. TABLE 4.16 Adaptation co-benefits and trade-offs of mitigation actions in the waste sector Mitigation action Adaptation synergies Adaptation trade-offs Improved solid > Prevented surface water and groundwater contamination > Possible decreased waste collection from toxic waste components that are higher in periods job opportunities in and disposal of intensive rain the informal waste collection sector > Reduced risk of flooding due to uncollected solid waste (including waste blocking drainage systems, especially during extreme pickers at the landfills) weather events. These floodwaters can also carry pathogens Biological > Improved crop yields through using compost treatment of solid waste > Improved moisture retention of soil (resulting in lower irrigation requirements) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) > Increased soil fertility and replenished organic matter and nutrients > Reduced soil erosion, which is higher during periods of intense rain and will become more common due to climate change > Biogas can increase energy security and reduce reliance on energy imports. It can also provide a valuable energy source in remote areas Wastewater > Reduced exposure to pathogens, including by > Increased energy treatment and overflowing treatment plants and drains during extreme requirements for an discharge weather events urban, centralized wastewater treatment > Adaptive water management in wastewater treatments system due to can help regulate uncertain hydrological changes due to pumping and aeration climate change and their impacts > Wastewater that is properly treated can be used for irrigation purposes, reducing reliance on fresh water 69

4.7 MODERNIZING IPPU THROUGH DECARBONIZATION INTERVENTIONS Sectoral background IPPU Policy Frameworks The Ministry of Industry has developed its official Industrial Policy, which is now under revision. The draft policy document focuses on environmental and social inclusion and sustainable industrialization, in which environmentally friendly production processes that secure social health and comply with national and international environmental standards play a great role in sectoral growth. In addition, a circular economy and cleaner production are also considered, with incentivization mechanisms being prepared for their effective implementation. Related to this, Proclamation No. 1263/2021 and the Ethiopian Cement Industry Development Strategy define environmental regulations in the industrial sector to confront increasing emissions due to the sector’s expected growth in the coming decades. While the industrial processes and product use (IPPU) private sector projects—caused an increase in cement sector’s current contribution to Ethiopia’s GHG demand. The Ministry of Industry’s Ethiopian Cement emissions is low, it is expected to increase over the Industry Development Strategy cites accelerated coming decades due to the growing population and the industrialization and increased access to infrastructure continued focus on industrialization through several through improving the capacity of the construction industrial development strategies. sector as major drivers of growth in the country. The 10YDP portrayed the share of the manufacturing Lime production: the two types of lime produced in sector as reaching a maximum of 17.2% of GDP by 2030, Ethiopia are high calcium and dolomitic lime. Lime which in turn would increase GHG emissions from the is used in the country mostly in construction, water sector in the coming years, thus different interventions and sewerage treatment, chemical industries, sugar have been proposed to reduce GHG emissions from the industries, and agriculture and metallurgical industries. sector. The industry mitigation scope corresponds to The current projections are based on historical lime the 2006 IPCC Guidelines in 1A2f on fuel combustion sector data, and statistical methods were used for the from non-metallic minerals and the IPPU subcategory 2050 projections. Existing data within the country linking 2A1 on cement production. The modeling analysis in economic activities to lime production and availability Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) the LT-LEDS focuses on the most important emission are limited, thus historical data was considered and categories in the IPPU sector: those related to cement, trends were identified. lime, and steel. Iron and steel: as the IPCC 2006 Guidelines summarize, Cement production: cement production is a major the production of iron and steel is associated with contributor of GHG emissions from IPPU in Ethiopia. carbon dioxide, methane, and nitrous oxide emissions. The number of companies has been growing rapidly in For the current LT-LEDS, only CO2 emissions were recent years, resulting in a corresponding steady rise considered, since the GHG inventory is restricted to in GHGs from cement production. Close to 100% of this GHG. These emissions occur in several types of clinker is produced locally. In 2018, the cement industry industrial units: primary facilities that produce both iron began mitigating CO2 emissions from the industry by and steel, secondary steelmaking facilities, exclusive iron decreasing the amount of clinker in Portland pozzolana production facilities, and off-site production units of cement, from 78% to 70%, which resulted in a GHG metallurgical coke. emissions decrease for 2018–2019. The iron and steel industry is an essential industry The construction of new mega-projects—such as the for achieving the development aims of Ethiopia. Grand Ethiopian Renaissance Dam, several industrial The country continues to be an importer of iron parks, sugar factories, highway and railway roads, and and steel (Getnet, 2018). The Ministry of Trade and 70 Industry (MOTI) decadal plan indicates that the country Business-as-usual scenario has an iron storage capacity of over 300 million tons, The 2050 projections for this sector are dominated by a production license for 72.5 million tons, and another the cement sector. The expanded sectors contribute 42,027 million tons under development. The plan also to raising the numbers, but only marginally, compared indicates the development of a special corridor for the to the cement sector. The projections are linked to the industry, a focus on growing coal-fired steel industries, population and GDP values of the country and their and enrichment of the steel and metal industries. respective projections. As Figure 4.25 shows, emissions in the IPPU sector are expected to grow more than eightfold until 2050. FIGURE 4.25 GHG emission projections from the IPPU sector (Mt CO2e) 50 0,70 0,60 40 0,50 30 Mt CO2e Mt CO2e 0,40 20 0,30 0,20 10 0,10 0 0,00 2020 2025 2030 2035 2040 2045 2050 Total (left-hand scale) Cement (left-hand scale) Steel and iron (right-hand scale) Lime (right-hand scale) Low-emission scenario The following three policies are proposed under the IPPU to help reduce the country’s emissions. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) TABLE 4.17 Ambition levels for the low-emission interventions in the IPPU sector (for all scenarios) IPPU: high-level interventions 2020 2030 2045 2050 Reduction of the share of clinker in cement 70% 70% 50% Incorporation of recycled high-quality scrap in iron 0% 0% 10% and steel production 0 Gg of 0 Gg of 100 Gg of 500 Gg of Long-term goal for CCS CO2e CO2e CO2e CO2e 71 Increasing the additive content in the cement sector: any In 2012, the US Environmental Protection Agency12 listed measures that reduce emissions from burning fossil fuels several energy efficiency opportunities in the iron and steel to generate the required heat in cement manufacturing industry to help reduce GHG emissions from the sector: need to be accounted for under the energy sector as per > Sintering at integrated iron and steel plants the IPCC 2006 Guidelines, rather than under the IPPU sector. For example, in 2017, the World Bank and Korea > Cokemaking Green Growth Trust Fund8 explored the opportunities, challenges, and solutions to using alternative fuels in > Blast furnace at integrated iron and steel plants the cement sector in Ethiopia, which can largely reduce the emissions from the industry. Similarly, there are > Basic oxygen furnace at integrated iron and several opportunities to improve the thermal and energy steel plants efficiency of cement manufacturing.9 > Casting This section covers emission reduction opportunities in the process steps of cement manufacturing and > Hot and cold rolling mills measures that can contribute to reducing these process emissions. Ethiopia has moved toward reducing the > Energy efficiency options for electric arc clinker percentage to 70% in the cement manufactured, furnace steelmaking meaning the remaining 30% is additives. Research suggesting that additives up to 50% can be added While Ethiopia currently lacks the raw data to evaluate the has been long explored in the scientific community.10 applicability and impacts of these measures, high‑quality Limestone calcined clay cement,11 which allows for up steel scrap recycling has been proven to reduce the to a 50% combination of calcined clay with limestone, industry’s GHG emissions. The IEA13 identifies increased results in similar mechanical properties and improvement scrap collection to enable more scrap-based production in some aspects of durability. as a short-term opportunity. Recycling high-quality steel: the International Energy Forming a carbon capture and storage unit: while CCS Agency (IEA) estimates that the short-term impacts of is still not economically feasible in developing countries, energy efficiency measures and the mid- to long-term it continues to be prominently featured in all existing impacts of scrap-based electric arc furnace and CCS approaches to achieving NZE. The expectation is that measures can help the sector contribute to the 2°C the technology will mature in the coming decades and target. Like the cement sector, the iron and steel be economically feasible for global implementation. industry also benefits from reducing its thermal Uncertainty remains regarding permanence of the and electrical energy consumption and replacing its technology, its scale of implementation, and the energy sources with less carbonintensive fuels such necessary public support. If these and other necessary as biomass. However, these are accounted for under the conditions are met, the technology can contribute to a energy sector as per the IPCC 2006 Guidelines. large-scale reduction in GHG emissions. The IEA analysis Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) also covers future CCS as a key contributor in the iron and steel industry. The low-emission scenario defines itself as a deviation from the BAU scenario due to the policy interventions: 8 Use of Alternative Fuels in the Cement Sector in Ethiopia: Opportunities, Challenges and Solutions. 9 International Finance Corporation. 2017. Improving Thermal and Electric Energy Efficiency at Cement Plants: International Best Practice. Washington, D.C. 10 Langan, B. W., Joshi, R. C., and Ward, M. A. “Strength and durability of concretes containing 50% Portland cement replacement by fly ash and other materials.” Canadian Journal of Civil Engineering 17, no. 1 (1990): 19–27, doi:10.1139/l90-004. 11 https://www.sciencedirect.com/science/article/abs/pii/S0008884617302454 12 https://www.epa.gov/sites/default/files/2015-12/documents/ironsteel.pdf 13 https://www.iea.org/reports/iron-and-steel 72 FIGURE 4.26 BAU and NZE scenarios for GHG emissions from the IPPU sector (mt CO2e) 45 40 35 30 25 Mt CO2e 20 15 10 5 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 BAU NDC aligned Late action Maximum ambition Climate resilience of the IPPU sector of climate impacts can lead to infrastructural damage, increasing the frequency of fire incidence, declining The industrial sector in Ethiopia faces the risk of productivity, and increasing production costs in the increases in temperature and rainfall variability. A main industry sector. An analysis of adaptation co-benefits challenge is that natural resource degradation can lead examined the IPPU sector and related mitigation actions to resource scarcity, affecting industrial developments. in the LT-LEDS, with the results, as discussed with the At the same time, increasing the frequency and intensity IPPU working group, reported in Table 4.18. TABLE 4.18 Adaptation co-benefits and trade-offs of mitigation actions in the IPPU sector Mitigation action Adaptation synergies Adaptation trade-offs Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Increasing the additive Replacing clinker with industrial waste or content in the cement by‑products, such as coal ash powder, reduces sector waste and land needed for disposal and landfills Recycling high-quality Reduced energy demand compared to the steel production Forming a CCS unit Additional energy demand due to cooling requirements and additional water demand 73 5 5. Macroeconomic and Cost and Benefit Implications of the Net-Zero and Climate‑Resilient Pathways

5.1 IMPLICATIONS FOR ECONOMIC GROWTH AND EMPLOYMENT The transition toward a decarbonized economy jobs generated from additional capital accumulation, the contributes to socioeconomic development in various LT-LEDS ambitions are projected to create jobs in green ways. The energy sector transition leads to lower sectors (e.g., renewable power generation, sustainable emissions and air pollution while creating additional agriculture, or forestry), which addresses the need for jobs in power generation and in the supply chain job and income generation. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) surrounding electric vehicles. Key productivity gains are achieved from the implementation of energy efficiency The decarbonization ambitions are projected to increase measures, which reduce total energy consumption and the total number of green jobs in the Ethiopian economy related costs, making the economy more competitive. and create additional green jobs relative to the BAU This process is supported by maintaining a high share scenario. The number of green jobs and the number of of renewable power generation while, at the same time, additional green jobs are presented in Figure 5.1. In the phasing out diesel generators, which keeps electricity BAU scenario, the number of green jobs increases from costs reliably low and creates synergies with the sectoral around 240,200 jobs in 2020 to 540,000 jobs in 2050. electrification ambitions. The number of green jobs in the BAU scenario averages 387,100 per year between 2020 and 2050. The changes in productivity induced by lower energy costs and reduced energy emissions lead to higher In the net-zero scenarios, the number of green jobs growth rates (see section 4.1), which in turn cause varies according to the timing at which ambitions are higher government revenues and public and private implemented. In the late action scenario, the number investment. For instance, while total government of jobs increases slowly between 2020 and 2040, after revenues in the BAU scenario are projected to increase, which it increases above the results obtained from the the higher growth exhibited in the NDC-aligned other net-zero scenarios. On average, for 2020–2050, scenario causes government revenues to increase by the number of green jobs in the late action scenario 66.1% compared to the BAU in 2050, which amounts is 1.32 million per year, which is 936,000 jobs more to an increase of USD 69.5 billion. In addition to the (on average) compared to the BAU scenario. The 74 NDC‑aligned scenario falls between the late action and jobs more compared to the BAU scenario. Finally, in maximum ambition scenarios, regarding the number of the maximum ambition scenario, the annual number of green jobs in 2050, but provides a slightly lower number green jobs for 2020–2050 averages 1.35 million, which of green jobs on average for 2020–2050 compared is 966,700 additional jobs per year compared to the with the two alternative scenarios. The annual number BAU (on average) and the highest number of green jobs of green jobs in the NDC-aligned scenario averages of the three net-zero scenarios simulated. 1.25 million per year for 2020–2050, which is 865,400 FIGURE 5.1 Total green jobs and additional green jobs Total Green Jobs Additional Green Jobs 5,0 5,0 4,0 4,0 Million Persons 3,0 3,0 Million Persons 2,0 2,0 1,0 1,0 0,0 0,0 2010 2015 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 NDC-aligned NDC-aligned Late action Late action Maximum ambition Maximum ambition BAU BAU The share of green jobs in total employment for the scenario, 1.78% in the NDC-aligned scenario, and 1.99% selected periods is summarized in Table 5.1. On average, in the maximum ambition scenario. This highlights that the share of green jobs in total employment for 2020‑2050 the earlier ambitions are implemented, the higher the is 0.56% in the BAU scenario, 1.76% in the late action average share of green jobs in total employment. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) TABLE 5.1 Share of green jobs in total employment Share of green jobs in 2020–2030 2030–2040 2040–2050 2020–2050 total employment Late action 0.94% 1.31% 2.93% 1.76% NDC aligned 1.63% 1.66% 2.02% 1.78% Maximum ambition 2.34% 1.76% 1.80% 1.99% BAU 0.49% 0.56% 0.62% 0.56% 75 Table 5.2 depicts the total number of green jobs by sink required to reach net-zero ambitions as well as the scenario and the number of green jobs by category role that electrification and renewable energy play in for selected years. The results show that the highest creating a fair transition. Additionally, the number of jobs number of additional green jobs is created by land‑based generated from waste management is also important, interventions (restoration and reforestation), followed by highlighting the benefits of additional recycling and of renewable energy and waste management. This highlights reducing the amount of waste landfilled, not only for the job creation potential of generating the net carbon emissions but also for employment generation. TABLE 5.2 Total number of green jobs and green jobs by category Total number of green jobs Unit 2020 2030 2040 2050 Late action Jobs 259,592 659,248 1,149,797 3,900,835 NDC aligned Jobs 363,222 932,560 1,422,595 1,774,906 Maximum ambition Jobs 707,976 1,000,668 1,317,742 1,518,207 BAU Jobs 240,165 311,524 431,970 539,988 Green jobs by category Vehicle electrification Late action Jobs 1,494 7,348 18,814 37,922 NDC aligned Jobs 1,989 9,303 30,315 26,279 Maximum ambition Jobs 2,972 16,736 24,662 20,284 BAU Jobs 0 0 0 0 Energy efficiency Late action Jobs -27 1,297 2,244 3,053 NDC aligned Jobs -23 1,062 2,480 3,102 Maximum ambition Jobs -14 1,307 2,458 3,150 BAU Jobs 0 0 0 0 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Land-based interventions Late action Jobs 14,438 180,727 394,867 3,037,500 NDC aligned Jobs 117,563 435,818 664,282 926,447 Maximum ambition Jobs 461,313 497,529 567,895 675,750 BAU Jobs 0 0 0 0 Waste management Late action Jobs 214,302 325,178 385,833 435,039 NDC aligned Jobs 214,302 325,205 385,857 435,073 Maximum ambition Jobs 214,302 325,221 385,873 435,098 BAU Jobs 211,725 267,875 322,852 375,520 Renewable energy Late action Jobs 29,386 144,699 348,039 387,321 NDC aligned Jobs 29,392 161,171 339,661 384,004 Maximum ambition Jobs 29,404 159,875 336,855 383,925 BAU Jobs 28,440 43,649 109,118 164,468 76

5.2 COSTS AND BENEFITS OF THE DECARBONIZATION OF ETHIOPIA’S ECONOMY The implementation of the LT-LEDS gives way to many the economy in Ethiopia caused by climate change. costs and benefits that should be considered in exploring Lower emissions thus mean lower costs. However, the appropriate pathways toward decarbonizing Ethiopia’s Ethiopia’s LT-LEDS is one of the first to include climate economy. As Table 5.3 shows, benefits significantly change adaptation in its modeling analysis. Therefore, exceed the costs in all scenarios, whereas an overall climate change impacts, such as on agricultural judgment sees advantages in favor of the NDC‑aligned output and power generation, are already integrated scenario. Future costs and benefits are discounted by in the macroeconomic figures, including GDP and a rate of 7.5% to account for the higher importance of employment. Adaptation modeling, to some degree, current over future values. The main cost components accounts for the costs of climate change and how these are energy- and agriculture-related investments. Power costs can be mitigated. Additionally, including SCC generation and the electrification of the vehicle fleet and would create a risk of double counting. public transport together account for more than 50% of total investments required, while agriculture contributes While capital costs of investments mainly occur in the around 25–30% in the NDC‑aligned and late action beginning of the 30-year period, particularly applying scenarios. The maximum ambition scenario involves to the maximum ambition scenario, O&M costs are significantly higher investment in agriculture, mainly relevant throughout the lifetime of an investment. driven by costs incurred for reductions in the livestock Overall, costs occur sooner, while the stream of benefits sector. Other costs accounted for in this assessment follows the investment, even going beyond 2050. In this are the costs of reforestation and forest rehabilitation, regard, the total present value of benefits tends to be waste management, and industrial CCS. underestimated, as avoided costs and added benefits materializing during later years are heavily discounted. Avoided costs and added benefits are the main drivers Furthermore, there are further qualitative benefits, such of the net benefits derived from the implementation as positive health effects due to reduced air pollution of low-emission development. In terms of avoided and fewer accidents in the transport sector, improved costs, the energy bill is the main contributor. The main environmental quality, and time savings due to higher added benefits derived from the decarbonization of energy efficiency (e.g. from efficient cooking stoves). Ethiopia’s economy are total real GDP and additional Additionally, the LT-LEDS has important social effects discretionary spending in the economy generated including poverty reduction. The GEM estimates through job creation. The social cost of carbon (SCC) that households will enjoy an average nondiscounted has not been included in the calculations. SCC reflects increase in disposable income of between USD 2 and 3 the average damage to people, infrastructure, and billion per year. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) © Lesly Derksen, Unsplash 77 TABLE 5.3 Discounted costs and benefits per scenario relative to the BAU scenario Unit Late action NDC aligned Maximum ambition Total cost of transport electrification USD bn 11.48 13.99 17.01 Investment in chargers USD bn 0.38 0.47 0.58 Investment in electric vehicles USD bn 10.54 12.79 15.77 O&M cost of electric vehicles USD bn 0.38 0.51 0.38 Investment in electric buses USD bn 0.15 0.19 0.23 O&M cost of electric buses USD bn 0.03 0.04 0.06 Total cost of power generation USD bn 67.32 70.14 72.55 Investment in power generation USD bn 55.23 57.39 59.24 O&M cost of power generation USD bn 12.09 12.75 13.31 Investment in energy efficiency USD bn 1.36 1.33 1.31 Total investment in agriculture USD bn 32.04 35.95 128.22 Investment in sustainable agriculture USD bn 1.01 1.01 1.56 O&M cost of sustainable agriculture USD bn 6.56 6.56 19.55 Investment in crop diversification USD bn 0.15 0.15 0.24 Investment in livestock interventions USD bn 24.32 28.23 106.87 Total cost of land-based interventions USD bn 11.00 17.50 38.28 Total cost of waste management USD bn 15.09 15.09 15.09 Investment in waste management USD bn 14.05 14.05 14.06 O&M cost of waste management USD bn 1.03 1.03 1.03 Investment in industrial CCS USD bn 0.01 0.01 0.01 (1) Total investment and costs USD bn 138.30 154.01 272.47 Avoided costs Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Energy bill USD bn 231.10 245.93 254.76 Investment in Internal Combustion Engine USD bn 0.33 11.78 14.25 (ICE) vehicles O&M cost of ICE vehicles USD bn 0.01 0.57 0.75 Investment in ICE buses USD bn 0.00 0.15 0.19 O&M cost of ICE buses USD bn 0.00 0.03 0.04 Inorganic fertilizer USD bn 0.24 0.23 0.21 (2) Total avoided costs USD bn 231.45 258.47 269.98 78 TABLE 5.3 Discounted costs and benefits per scenario relative to the BAU scenario (cont.) Unit Late action NDC aligned Maximum ambition Added benefits Additional real GDP USD bn 841.15 838.21 838.65 Agriculture USD bn -12.98 -18.58 -24.25 Industry USD bn 425.75 426.84 430.64 Services USD bn 428.38 429.95 432.26 Discretionary spending USD bn 18.37 18.39 23.66 (3) Total added benefits USD bn 841.15 838.21 838.65 Net added benefits (2)+(3)-(1) USD bn 934.31 942.67 836.16 USD/USD 6.08 5.44 3.08 Total benefits per USD invested inv USD/USD 6.76 6.12 3.07 Net benefits per USD invested inv Comparing the cost-benefit analysis of the three scenarios as compared to the BAU scenario, the differences are larger or smaller depending on the metric considered. The maximum ambition scenario yields the highest benefits but also the highest investment and costs. This can be explained by the expectation that technologies mature over time such that decarbonization actions become cheaper over time, thus making early action more expensive. In line with this, the late action scenario is the least cost scenario but also leads to fewer benefits. The late action scenario has the highest efficiency in terms of both gross and net benefits (total benefits minus costs) per USD invested. Every USD invested in Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) decarbonization and adaptation on average gives rise to benefits of USD 6–7. The values are similar for the NDC‑aligned scenario with benefits of USD 5–6 per USD invested, but only at around USD 3 for the maximum ambition scenario. However, investment efficiency is not the only metric. Looking at the scenarios’ effectiveness, the NDC-aligned scenario yields the highest absolute net benefits. This scenario matches effectiveness by optimizing costs and benefits while achieving this at a relatively high efficiency and also being ambitious regarding a carbon emissions reduction. © Clay Knight, Unsplash 79

5.3 IMPACT ON THE BALANCE OF TRADE Ethiopia strongly depends on the import of essential and sustainable practices reduce reliance on synthetic inputs for its economic growth to perform well. For most fertilizer imports. The corresponding savings in foreign LDCs, limited access to foreign exchange and the burden exchange can be used to import capital goods and allow of foreign debt is one of the most important development for higher economic growth without running into a and growth constraints. This applies equally to Ethiopia, currency crisis. which has had a constantly negative balance of trade, as well as a deficit, in its overall current account during the Figure 5.2 depicts the expected savings in the imports of past three decades. Domestic economic growth usually these two major components for each scenario relative to accompanies increasing imports since a certain share the BAU scenario, assuming a fossil fuel price of USD 70 of household income is spent on imported goods from per barrel. The more ambitious the scenario, the higher the abroad. Moreover, the country depends on the import savings. With up to USD 4 billion annually for 2041–2050 of capital goods to increase its national production in the NDC-aligned scenario, fossil fuel savings compensate capacity and productivity. But foreign exchange may for the bulk of overall savings. Foreign exchange savings be unavailable because lenders are unwilling to provide from reduced demand for mineral fertilizers are still it or foreign debt servicing becomes uncontrollable considerable, with around USD 50 million annually in the as imports grow. To avoid a currency crisis, Ethiopia same period. In a similar vein, Figure 5.3 reveals that the must manage its current account. This implies that the LT-LEDS allows for significant import savings as related to country’s economic growth is constrained because fast total imports, reaching its maximum of 4.1% for 2031‑2040 growth intensifies the shortage of foreign exchange. for the NDC-aligned scenario. The growth potential The GoE aims at both substituting domestic products for arising from annual savings accumulates to a significant imports and strengthening export capacity (for instance, total growth effect until 2050. Therefore, due to the see 10YDP, section 4.2). The LT-LEDS is well‑aligned LT‑LEDS, the Ethiopian economy can grow faster without with this endeavor to the extent that renewable energy deteriorating its external balance. Alternatively, instead of and energy efficiency reduce the demand for fossil growing faster and increasing imports, the import savings fuel imports and the balance of trade improves. As a provide the GoE with resources to service and reduce its second major component, higher agricultural efficiency foreign debt. FIGURE 5.2 Average annual savings in imports of petroleum and inorganic fertilizer, in million USD 4 500 4 000 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Late action Late action Late action Maximum ambition Aligned with NDC Maximum ambition Aligned with NDC Maximum ambition Aligned with NDC 2020-2030 2031-2040 2041-2050 Fossil fuels Inorganic fertilizer 80 FIGURE 5.3 Average annual savings in imports of fossil fuels and inorganic fertilizer, combined in % of total imports Imports saved in % of total imports 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% 2020-2030 2031-2040 2041-2050 Maximum ambition Aligned with NDC Late action Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 81 6 6. Assessing SDG Co-benefits of the Net-Zero Emission Pathways NO ZERO GOOD HEALTH Policy interventions to reduce GHG emissions will POVERTY HUNGER AND WELL-BEING help achieve SDGs related to building resilient infrastructure (Goal 9, Target 9.4) and taking urgent action to combat climate change (Goal 13, Target 13.2). These interventions will help achieve not only the QUALITY GENDER CLEAN WATER climate-related SDG but also other sustainability targets EDUCATION EQUALITY AND SANITATION on efficient and sustainable resource use and natural capital protection. Linked to the Global Green Growth Index, GGGI’s Green Growth Simulation Tool (GGSim) Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) was applied to assess the progress on SDG indicators AFFORDABLE AND DECENT WORK AND INDUSTRY, INNOVATION (section 6.2), which are included in the green growth CLEAN ENERGY ECONOMIC GROWTH AND INFRASTRUCTURE framework.14 The available data for the BAU and NZE scenarios, as discussed previously, allowed for the assessment of the SDG co-benefits listed in Table 6.1. Other assumptions about the scenarios required to REDUCED SUSTAINABLE CITIES RESPONSIBLE apply the GGSim for these indicators are presented in INEQUALITIES AND COMMUNITIES CONSUMPTION AND PRODUCTION the technical annex. CLIMATE LIFE LIFE ACTION BELOW WATER ON LAND 14 https://greengrowthindex.gggi.org/. The framework consists of PEACE, JUSTICE PARTNERSHIPS four green growth dimensions: efficient and sustainable resource AND STRONG FOR THE GOALS use, natural capital protection, green economic opportunities, INSTITUTIONS and social inclusion. The SDG indicators in this framework were selected through collaborative and inclusive consultations with over a hundred of experts during the development of GGGI’s Global Green Growth Index in 2019. 82 TABLE 6.1 Description of SDG indicators assessed Sector SDG Indicator name Indicator SDG goal number unit Energy 7.3.1 Energy intensity level of MJ per Ensure access to affordable, reliable, primary energy supply 2017 PPP sustainable, and modern energy for all GDP

7.2.1 Renewable energy share Percent in the total final energy consumption Water 6.4.1 Water use efficiency USD per m3 Ensure availability and sustainable management of water and sanitation for all Agriculture 12.3.1. Food loss and food waste Percent Ensure sustainable consumption and production patterns a and b

15.3.1 Nutrient balance per unit Nitrogen kg Protect, restore, and promote area (directly linked to the per hectare sustainable use of terrestrial proportion of land that is ecosystems; sustainably manage degraded) forests; combat desertification; halt and reverse land degradation; and halt Forest 15.1.1 Forest area as percent of Percent biodiversity loss total land area

15.2.1 Aboveground biomass stock Tons per in forest hectare

6.1 CONTRIBUTION OF THE LT-LEDS INTERVENTIONS TOWARD SDG ACHIEVEMENT Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Efficient and sustainable use of energy, as measured scenario. But as Ethiopia’s performance in this SDG by energy intensity per GDP (SDG 7.3.1), has been indicator is already high, the limited policy intervention consistently declining in Ethiopia from 2010 to 2020, in energy efficiency appears to be justified. For the three with the BAU scenario showing continuation of this NZE scenarios, the key focus of policy interventions trend until 2050 (1, left). The trend indicates that less will be on renewable energy expansion, particularly energy will be used to produce one unit of economic to support sustainable electrification, thus significant output, making use of energy more efficiently in the progress will be achieved in the share of renewable country in the next three decades, from 0.87 in 2020 energy in the total final energy consumption (SDG to only 0.14 MJ per GDP in 2050. Policy interventions 7.2.1). In 2050, the share of renewables will be 10% in will contribute to additional progress in the decline of the BAU scenario and will increase to about 62% in the energy intensity for the three NZE scenarios, albeit NZE scenarios. In 2025, progress in SDG 7.2.1 will be only minimal. The relatively small progress in SDG 7.3.1 higher for the maximum ambition scenario than in the will be attributed to a less than 10% energy efficiency other two NZE scenarios, but the gap will close in 2050 improvement in the NZE scenarios vis-à-vis the BAU when all three scenarios achieve the goal of NZE. 83 FIGURE 6.1 Relevant SDG indicators for a transition to green growth in the energy sector SDG 7.3.1 Energy intensity SDG 7.2.1 Share of renewables per unit GDP in final energy consumption 2 MJ per 2017 PPP GDP 80 1,5 60 Percent 1 40 0,5 20 0 0 20 20 2010 15 20 20 20 2010 15 20 20 20 2025 30 35 20 20 2025 30 35 20 20 2040 45 50 20 20 2040 45 50 Historical Historical BAU BAU Maximum Ambition Maximum Ambition NDC 2030 NDC 2030 Late action Late action In the water sector, water use efficiency across all priority shift from the primary industry (i.e., agriculture) sectors (SDG 6.4.1) has shown an increasing trend for to secondary and tertiary industries in 2040, the 2010‑2020 (Figure 6.2). This progress is expected to progress will not be sufficient to bring the level higher or continue in the BAU scenario until 2050 and in the NZE even at par with the BAU scenario. scenarios until 2030. All NZE scenarios will follow the same trend for 2020–2050 because of the same policy interventions being implemented. Slight divergence FIGURE 6.2 among them will be caused by differences in the GDP and Relevant SDG indicators for a transition to green population growth across the NZE scenarios. The progress growth in the water sector in water use efficiency will be slightly higher in the NZE scenarios than in the BAU scenario for 2020‑2030 due SDG 6.4.1 Total water use efficiency to improvements in irrigation technology, both decreasing 30 surface irrigation and increasing drip/sprinkler irrigation Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) USD per cubic meter 25 by about 50%. 20 15 For 2030–2040, water use efficiency will stop rising for 10 two reasons. First, the expansion of irrigated areas will cause an increase in water withdrawal in the agricultural 5 sector, increasing the share of this sector to the total 0 water withdrawal, relative to the municipal sector. But 20 20 20 2010 15 20 20 20 2025 30 35 40 20 2045 50 the municipal sector has a higher water use efficiency than the agriculture sector, so this shift will reduce the Historical overall efficiency in the country. Second, the level of BAU irrigation technology (i.e., 4% sprinkler, 46% drip) and traditional irrigation (50% surface) will not be sufficient Maximum Ambition to increase water use efficiency in the larger areas of NDC 2030 irrigated land. While water use efficiency will again increase in the NZE scenarios due to a development Late action 84 In contrast to the water sector, there will be overall from cattle to poultry) and manure management will progress in the performance of SDG indicators related contribute to a decrease in the total manure availability to agriculture (Figure 6.3). Nutrient balance per hectare and application rates. These policy interventions will is directly linked to SDG 15.3.1 (proportion of land that be applied earlier in the maximum ambition scenario, is degraded). This indicator measures the total nitrogen causing the highest reduction in nutrient balance left on cropland after crop removals and fertilizer over time and achieving as low as 10 nitrogen kg applications, with atmospheric deposition assumed per hectare in 2050. This scenario will also achieve constant in the model. It also measures nutrient the most progress in reducing food loss and waste use efficiency of farm inputs, including synthetic (SDG 15.3.1), enabling the reduction trend during fertilizers and livestock manure. While these inputs 2010–2017 to continue until 2050. In this scenario, ensure productivity, in excess, they are harmful to the policy interventions to reduce food loss and waste by environment due to ammonia and GHG emissions. 50% are introduced as early as 2020. In the absence of policy interventions and in the face of a growing In Ethiopia, nutrient balance recorded an increasing population and food demand, food loss and waste will trend with some fluctuations in 2010–2020 and increase under the BAU scenario. This increase will be is expected to increase further, from 25 to almost only partially addressed in the other NZE scenarios due 40 nitrogen kg per hectare, in 2050 under the BAU to the delay in implementing the policy interventions in scenario. This negative trend will be reversed in the the NDC-aligned and late action scenarios in 2035 and three NZE scenarios, where livestock (e.g., switch 2040, respectively. FIGURE 6.3 Relevant SDG indicators for a green growth transition in the agriculture sector SDG 15.3.1 Nutrient balance DG 12.3.1 Share of food loss to production and waste to consumption 50 30 Nutrient flow (kg/ha) 40 25 20 Percent 30 15 20 10 10 5 0 0 20 20 20 20 20 20 20 20 10 15 17 20 25 30 35 40 45 50 10 20 25 30 35 40 45 50 20 20 20 20 20 20 20 20 20 20 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Historical BAU Late Action NDC Aligned Maximum ambition Finally, in the forestry sector, the historical decline in the NZE scenarios are expected to reach the same level of share of forest land to total land area (SDG 15.1.1) and progress in this SDG indicator in 2050. aboveground biomass (SDG 15.2.1) will continue in the BAU scenario in the absence of policy interventions to The increase in forest land directly impacts performance reduce deforestation and forest degradation (Figure 6.4). in aboveground biomass (SDG 15.2.1), which measures The mitigation actions to reduce deforestation the gains in forest growth through biomass stock and and increase afforestation/reforestation, while also reduction through wood removals, fire, wind, pests, introducing forest restoration in the NZE scenarios will diseases, and natural losses. Similar to the share of forest achieve significant progress in SDG 15.1.1. But progress area to total land area, the maximum ambition scenario will be less in the case of the NDC-aligned and late offers the best opportunity to achieve significant progress action scenarios due to the delay in policy interventions in improving aboveground biomass, which is a useful relative to the maximum ambition scenario. However, all indicator of sustainable forest management and a measure 85 of carbon pools. Higher levels of aboveground biomass the late action scenario is due to the implementation of per hectare will lead to higher amounts of CO2 being reforestation only in 2035 (vis‑à-vis 2030 in the case of captured by forests, enhancing the mitigation potential in the other NZE scenarios), thus allowing limited time to the forest sector as described in the strategy’s forestry accumulate biomass until 2050. section. The relatively lower aboveground biomass for FIGURE 6.4 Relevant SDG indicators for a transition to green growth in the forest sector SDG 12.3.1 Share of food loss to production SDG 15.2.1 Above-ground biomass and waste to consumption 25 150 Tonnes per hectare 20 130 110 Percent 15 90 10 70 5 50 0 30 2010 2020 2030 2040 2050 20 20 20 2010 15 16 20 20 2017 20 25 30 20 20 20 2035 40 45 50 Historical BAU Late Action NDC Aligned Maximum ambition

6.2 ACHIEVING SDG TARGETS THROUGH LT-LEDS INTERVENTIONS The impacts of the climate policy interventions on energy sector. While a target of 51.40% for SDG 7.2.1 Ethiopia’s performance in achieving SDG targets in the will not be achieved in 2030, Ethiopia will significantly NZE scenarios vis-à-vis historical and BAU scenarios increase its share of renewables to about 19% in the are presented in Table 6.2. For SDG indicators without maximum ambition scenario. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) explicit targets in 2030 (i.e., SDG 7.3.1, SDG 15.2.1), the average values of the top five performing countries Performance in SDG 6.4.1 (increasing water use for the indicators were used as SDG targets.15 Ethiopia’s efficiency) will remain low across all scenarios but performance in SDG 7.3.1 on reducing energy intensity is expected to be higher considering an integrated is on par with the highest performing countries, as watershed management intervention, including soil it has already achieved the lowest average value, of and water conservation measures for sustainable

1.00 MJ/ LCU, globally since 2020. Energy intensity will agricultural development. However, these measures continue to fall, not only in the NZE scenarios but also were not included in the modeling exercise, thus their in the BAU scenario, with values better than the SDG contribution to water use efficiency can be quantified. target. Achieving the target for SDG 7.2.1 (increasing Modern irrigation methods will also be leveraged the share of renewables) will only be possible with to increase water use efficiency in solar-powered strong policy interventions to expand the renewable irrigation systems. 15 This method is used in GGGI’s Global Green Growth Index, SDSN’s SDG Index, and OECD’s Green Growth Indicators. 86 Current agricultural practices are expected to move the share of forest) was high in 2010, with a value 15.77%. country away from achieving the targets for SDG 15.3.1 But the current rates of deforestation and forest (maintaining nutrient balance) and SDG 12.3.1 (reducing degradation that continue in the BAU scenario will food loss and waste) in the BAU scenario until 2030. cause the country to move away from the SDG target of Policy interventions in the agricultural sector will help 17%. The policy interventions in the NZE scenarios will to reverse this, allowing an increase in performance for reverse this trend, with the target being reached in 2030 these SDG indicators in the three NZE scenarios. Ethiopia in the case of maximum ambition. Despite the significant will achieve the target for SDG 12.3.1, but the target policy interventions in the forest sector, the target for for SDG 15.3.1 will require additional interventions to SDG 15.2.1 will not be achieved in the NZE scenarios reach the same high level of performance. Performance as Ethiopia’s level of aboveground biomass will remain in achieving the target for SDG 15.1.1 (increasing the low relative to the top five performing countries globally. TABLE 6.2 Performance in achieving SDG targets in the BAU and low-emission scenarios SDG SDG Units Historical BAU scenario Net-zero energy scenarios number* target** data Max ambition NDC aligned Late action 2010 2020 2030 2020 2030 2020 2030 2020 2030 7.3.1 1.00(a) MJ/ 1.643 0.870 0.433 0.840 0.338 0.840 0.343 0.840 0.340 LCU 7.2.1 51.40(b) Percent 0.83 2.63 6.45 2.64 19.32 2.64 17.92 2.64 15.82 6.4.1 265.76(c) USD/ 5.84 12.75 16.87 13.32 20.81 13.13 20.75 13.13 20.83 m3 15.3.1 0 & 5(d) Kg/ha 13.69 25.34 33.93 24.81 12.45 26.07 15.90 26.07 17.13 12.3.1. 50(e) Percent 24.43 21.93 22.62 21.02 18.44 21.72 21.72 21.72 21.72 15.1.1 17(c) Percent 15.77 14.80 13.06 16.01 18.43 15.04 16.73 14.92 14.83 15.2.1 428.69(a) Tons/ 122.9 117.6 115.5 120.0 123.5 119.6 122.1 119.5 120.9 ha * SDG 7.3.1 Energy intensity level of primary energy supply (MJ per 2017 PPP GDP), SDG 7.2.1 Renewable energy share in the total Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) final energy consumption (percent), SDG 6.4.1 Water use efficiency (USD per m3), SDG 6.4.2 Freshwater withdrawal as a proportion of available freshwater resources (percent), SDG 15.3.1 (relevant) Nutrient balance per unit area (nitrogen kg per hectare), SDG 12.3.1.a/b Average of food loss and food waste index (percent), SDG 15.1.1 Forest area as percent of total land area (percent), and SDG 15.2. 1 Above-ground biomass stock in forest (tons per hectare). **Sources of SDG targets: (a)Mean top five country performers, (b)Sachs et al. (2019), (c)OECD (2019), (d)FAO (2021), and (e)UNEP (2021) 87 7 7. Ensuring Gender and Social Inclusion in the Net-Zero Emission and Climate- Resilient Pathways The LT-LEDS recognizes the critical role that women, Presented earlier, the NDC-aligned scenario, through youth, and vulnerable communities play in climate additional capital accumulation and job creation in green action, particularly in adaptation efforts linked to sectors, will create around 0.932 and 1.77 million green agriculture, food production, and natural resource jobs in 2030 and 2050, respectively. This forecasted management as well as mitigation activities (e.g., energy increase in green jobs offers opportunities for an and waste management). Addressing gender and social inclusive labor market in key sectors to drive growth in inclusion considerations during the implementation Ethiopia’s economy. of the measures envisaged under the LT-LEDS will be critical to maximize co-benefits of the strategy and The labor force participation of women in Ethiopia stands Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) ensure that the strategy contributes to the country’s at 72%,16 compared to 85%17 for men. Most of the labor national and international commitments on gender force is employed in the agriculture sector, at 60.3% and equality, including the achievement of the SDGs (SDG 76.5% for the female and male labor forces, respectively.18 1 on poverty eradication and SDG 5 on gender equality) Women form 14%19 of the workforce in transport, and the empowerment of youth and women. storage, and communication, which constitutes a small minority of the total female workforce. Fewer women The LT-LEDS proposes an economic transformation than men work in renewable energy, and the gender gap that will lead to the creation of economic opportunities is wider in leadership and STEM-related roles, though and green jobs, through paid employment and more women work in renewable energy compared with entrepreneurship and in formal and informal sectors. conventional energy sectors.20 Other factors that impact 16 https://data.worldbank.org/indicator/SL.TLF.CACT.FE.ZS?locations=ET 17 https://data.worldbank.org/indicator/SL.TLF.CACT.MA.ZS?locations=ET 18 Central Statistical Agency & World Bank. “Ethiopia Rural Socio-economic Survey 2013” (survey report). Addis Ababa, 2014. 19 https://www.ilo.org/shinyapps/bulkexplorer52/?lang=en&segment=indicator&id=EMP_2EMP_SEX_ECO_NB_A 20 IRENA.” Renewable Energy: A Gender Perspective,” last modified 2019. https://www.irena.org/publications/2019/Jan/Renewable-Energy-A- Gender%20Perspective#:%7E:text=Renewable%20energy%20employs%20about%2032,lower%20than%20in%20administrative%20jobs. 88 women’s positions in the labor markets include the pay differentials between men and women for similar jobs, which currently stands at 44%.21 Women’s financial access, key to economic activity, is lower than that of men. Furthermore, 29.08%22 of Ethiopian women have ownership at a financial institution or mobile money service provider compared with 40.94%23 of men. Access to green jobs and sustainable livelihoods is key to the equal distribution of co-benefits from the LT‑LEDS implementation. Central to the concept of “just transitions” is the preparation of the workforce for the demands of the future green labor market to ensure equal opportunities for women, men, youth, and workers currently engaged in informal and vulnerable jobs. Identifying high potential sectors for women’s empowerment—such as agriculture and food production, forestry, and certain areas of renewable energy where women are already well positioned—offer short-term wins toward 2030. The 2050 time horizon of the LT‑LEDS lends itself to addressing deeper structural barriers that will bring women and youth into sectors, high-end jobs, and viable enterprises (e.g., through technical or leadership roles in wind and solar energy, transport, or construction). This will require deliberate strategic approaches to address the barriers women face when accessing jobs and economic opportunities, including the following: > Skills mismatch. Curriculum development for the reskilling and upskilling of women, girls, and youth in STEM at all levels of the education system—from primary to tertiary— and vocational education and trainings prepare the labor force for future green jobs. Ethiopian women and girls are currently less likely than Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) male counterparts to enroll in education at all levels.24 Women also face specific challenges linked to gender roles in participating in education and training opportunities, which will require focus and support to women’s networks. 21 Ethiopia 10-Year Development Plan 22 https://data.worldbank.org/indicator/FX.OWN.TOTL. FE.ZS?locations=ET © Lesly Derksen, Unsplash 23 https://data.worldbank.org/indicator/FX.OWN.TOTL. MA.ZS?locations=ET 24 World Bank. “The World Bank in Ethiopia,” last modified 2018. https://www.worldbank. org/en/country/ethiopia/overview 89 > Informality. Women are more likely than > Limited access to productive assets, men to engage in informal, home-based, and finance, and markets is a barrier to women, unpaid sectors of the economy. In agriculture, particularly in agriculture and forestry and for example, women are more likely to be in entrepreneurship overall. In line with the engaged in subsistence and minor crops, 10YDP, LT-LEDS implementation can work while men are more engaged in paid and to eliminate pay differentials between men commercial farming.25 Indeed, an estimated and women and enhance women’s financial 65% of women engaged in agriculture are inclusion through the promotion of land and unpaid subsistence farmers.26 Targeted support asset ownership. The development of financial to incentivize the formalization of women’s products tailored to the needs of women economic activities through education and and micro, small, and medium enterprises is access to finance can help women leapfrog into instrumental both for women’s empowerment higher‑quality employment. and tackling key barriers to business start‑ups and scale-ups. Finally, addressing issues > Unpaid care work. Women spend more time of financial inclusion while also enhancing performing unpaid care and domestic work women’s access to agricultural inputs, than men do,27 which inhibits women’s roles in training, extension services, and information political and economic spheres and is caused and smart‑agriculture technologies are key by a lack of care services. Expansion of care measures to realize women’s resilience and solutions and investment in infrastructure in potential in climate action. rural and urban areas can support women’s access to opportunities created by the To maximize benefits associated with the LT-LEDS, the implementation of the LT-LEDS actions. strategy recommends the development of a Women and Youth in Green Jobs Program, which will put forward > Social norms and gender stereotypes dictate strategic actions to overcome the barriers women what are considered suitable jobs for men and youth face to access green jobs while promoting and women. In sectors where women are the inclusive formalization of informal sectors. The traditionally underrepresented (e.g., in energy program will emphasize skills development, job security, and transport), a lack of role models can inhibit support to entrepreneurs and women-led businesses, women’s access to jobs as drivers, mechanics, and promotion of social norms to change women’s engineers, and others in the green economy. participation in the green economy. Furthermore, the Creating women’s networks, such as the existing program can identify opportunities to leverage green networks for women in renewable energy, are economic policy instruments, such as through provisions key to enhancing women’s participation and for employment and investment criteria for more retention and nurturing female role models. inclusive opportunities. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 25 Environment, Forest and Climate Change Commission and the NAP Global Network. “Integrating gender considerations in Ethiopia’s National Adaptation Plan (NAP) Process: Analysis and recommendations.” 2018. 26 Central Statistical Agency. “Ethiopia 2013 Labour Force Survey.” Addis Ababa. Last modified 2014. https://www.ilo.org/surveyLib/index.php/ catalog/7142/download/43668 27 Environment, Forest and Climate Change Commission. 2018. 90 © Erik Hathaway, Pexels 91 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 8 8. Financing the Net-Zero Emission and Climate- Resilient transition This chapter provides a data-driven blueprint, aligned with and complementary to the existing national climate finance policies and strategies,28 for financing the transition to a zero-emission and climate-resilient pathway by mid-century. The objective of this chapter is threefold. First, it presents estimates of investments needed to achieve NZE by mid-century under the three selected scenarios. Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Second, it estimates the gap between the needed and available investments to meet the net-zero targets. Third, it reviews the strategy to close the financial gap by describing the financing options associated with costs estimates derived from the CBA. The technical annex shows the assumptions, modeling definitions, and interventions that guided the financing actions of the LT-LEDS. 28 The main policy documents considered for the financing strategy are Climate Resilient Green Economy (CRGE), Second Growth and Transformation Plan (GTP II) 2015-2020, Ten-Year © Emma Eikenaar, Pexels National Development Plan (10YDP) (2021-2030), Ethiopia’s Country Planning Framework for the GCF 2016-2020, Resource Mobilization Strategy for Ethiopia’s National Adaptation Plan and its Implementation Plan, Financing Strategy for Updated Ethiopia’s Nationally Determined Contribution and its Implementation Plan, and Financing the Child-Centered Sustainable Development Goals (SDGs) in Ethiopia. 92

8.1 INVESTMENT NEEDS FOR THE NDC‑ALIGNED SCENARIO Under the NDC-aligned scenario, the total investment The total investment includes capital investment of requirement is estimated at USD 154 billion over a 30- USD 133 billion and O&M costs of USD 21 billion. The year period (2020–2050).29, 30 In net present value, the power generation sector requires the highest capital required investment equals approximately USD 5 billion investment, followed by the agriculture sector, land‑based per year. The achievement of the net‑zero target interventions, waste management, electrification of the requires, on average, the deployment of 33% of the total transport sector, and CCS (see Table 8.1). investment every 10 years until 2050. TABLE 8.1 Capital investments per sector and per technology (net present value) 2020–2030 2031–2040 2041–2050 2020–2050 Technologies USD Billion Transport electrification $ 5.33 $ 4.76 $ 3.35 $ 13.44 Electric vehicle chargers $ 0.21 $ 0.15 $ 0.11 $ 0.47 Electric vehicles $ 5.05 $ 4.54 $ 3.19 $ 12.78 Electric buses $ 0.07 $ 0.07 $ 0.05 $ 0.19 Power generation $ 24.25 $ 24.84 $ 8.30 $ 57.39 Biomass $ 1.17 $ 1.10 $ 0.37 $ 2.64 Hydropower large scale $ 18.72 $ 19.66 $ 5.93 $ 44.31 Solar large scale $ 0.18 $ 0.16 $ 0.07 $ 0.41 Wind onshore $ 4.17 $ 3.93 $ 1.93 $ 10.03 Geothermal $ 0.002 $ 0.002 $ 0.001 $ 0.005 Energy efficiency $ 0.43 $ 0.53 $ 0.36 $ 1.33 Agriculture $ 7.08 $ 10.55 $ 11.77 $ 29.40 Sustainable agriculture $ 0.74 $ 0.18 $ 0.10 $ 1.01 Crop diversification $ 0.11 $ 0.03 $ 0.01 $ 0.15 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Livestock interventions $ 6.23 $ 10.34 $ 11.66 $ 28.23 Land-based interventions $ 10.18 $ 3.92 $ 3.40 $ 17.50 Waste management $ 3.23 $ 5.88 $ 4.95 $ 14.05 Waste management $ 1.60 $ 2.78 $ 2.34 $ 6.72 Recycling $ 0.59 $ 1.73 $ 1.66 $ 3.98 Composting $ 0.03 $ 0.10 $ 0.12 $ 0.25 Landfilling $ 0.48 $ 0.45 $ 0.26 $ 1.19 Waste collection $ 0.16 $ 0.18 $ 0.12 $ 0.46 Waste energy recovery $ 0.35 $ 0.31 $ 0.18 $ 0.84 Waste prevention $ 0.02 $ 0.33 $ 0.26 $ 0.61 Industrial CCS $ 0.0002 $ 0.001 $ 0.01 $ 0.01 Total capital investment $ 50.50 $ 50.49 $ 32.14 $ 133.12 29 Expressed in the net present equivalent terms. 30 The total investment required expressed is an underestimation of the total investment required for a fully sustainable development transformation. This is because only the costs of the interventions that were modeled in the GEM are included, excluding important adaptation interventions and other soft interventions with costs that were not quantifiable. 93 Consistent with the CRGE strategy, Resource from international funding sources. In line with the NDC Mobilization Strategy for the NAP-ETH, and NDC Financing Strategy, it is assumed that the total investment Financing Strategy, the investment required will be constitutes 20% as unconditional (USD 31 billion), while financed from domestic public and private sources and 80% (USD 124 billion) will be conditional.

8.2 INVESTMENT REQUIREMENTS FOR MITIGATION INTERVENTIONS The total investment required for mitigation Investment requirements for cross-cutting interventions interventions is about USD 86 billion. The largest share Ethiopia needs to mobilize USD 47 billion for cross‑cutting of the total mitigation investment will be required for interventions, supporting both mitigation and adaptation the power generation sector (67% of the total estimated objectives simultaneously. The largest investment investment), followed by the waste management sector requirements will be for the livestock sector (60%), (16%), the electrification of the transport sector (16%), followed by land-based interventions (i.e., forestry, 37%), energy efficiency solutions (1%), and upgrading sustainable agriculture, livestock interventions, and technology in the industrial sector and use of CCS crop diversification (3%). The considered cross-cutting technology (<1% of the total estimated investment). interventions focus on the sectors that have been identified as most vulnerable and in need of adaptation Ethiopia will need to raise USD 17 billion to fund based on the NDCs, namely agriculture, forestry, unconditional interventions (20% of the total health, water, and urban development. The full list of investment), and the remaining mitigation interventions cross‑cutting-related interventions considered is shown will require a further USD 69 billion to be secured in the technical annex. from international sources and the private sector for 2020‑2050. The country is facing a significant imbalance The LT-LEDS assumes that at least USD 9 billion (20%) between financing mitigation and adaptation, in favor will be financed using domestic resources (unconditional), of adaptation.31 Therefore, leveraging synergies with and international public and private sector sources adaptation interventions under cross-cutting projects is will cover the remaining costs (conditional). This aligns crucial to the overall efficiency of the interventions. with Ethiopia’s NDC Financing Strategy, which states that domestic and international funding with no conditionality must be prioritized for adaptation (over Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) mitigation) interventions to build the country’s resilient and adaptative capacity to climate change, at least during the first 10-year period of the LT-LEDS implementation. 31 The estimated ratio of adaptation and mitigation finance received in Ethiopia during 2011–2017 was 62% to 38%, see in Care. 2020. Climate Finance Adaptation Study Report Ethiopia. https://careclimatechange.org/wp-content/uploads/2021/01/Ethiopia-Climate-Adaptation-Finance- Tracking.pdf 94

8.3 INVESTMENT REQUIREMENTS OF THE MAXIMUM AMBITION AND LATE ACTION SCENARIOS The maximum ambition scenario substantially increases investments and O&M costs. For 2020–2050, the the initial investments of all interventions at an early total investment difference is about 75% between the stage to reach the net-zero target by 2035, while the NDC-aligned and maximum ambition scenarios and late action scenario reduces the early ambition of about 10% between the NDC-aligned and late action some interventions, leading to a reduction of initial scenarios (see Table 8.2). TABLE 8.2 Investment needs estimates per LT-LEDS scenario (net present value) Scenarios 2020–2030 2031–2040 2041–2050 2020–2050 USD billion NDC aligned $55 $59 $40 $154 Maximum ambition $88 $78 $106 $272 Late action $43 $51 $44 $138 Source: Total discounted investments and cost, Updated NDC Financing Strategy The financing strategy of the LT-LEDS assumes similar investment from the domestic sector (i.e., unconditional) conditional and unconditional targets as those of the and 80% of the required investment from the public and updated NDC. For both cross-cutting and mitigation international funding sectors (see Table 8.3). interventions, the target is to raise 20% of the required TABLE 8.3 Conditional and unconditional investments (net present value) Maximum ambition NDC-aligned Late action Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Scenarios USD billion, 2020–2050 Conditional (80%) $218 $123 $110 Unconditional (20%) $54 $31 $28 The LT-LEDS modeling exercise suggests the allocation transport and power generation, and reforestation, of public funds to specific interventions based on while private funds are allocated to agriculture, private historical trends of financing sources utilized for each transport, and IPPU-related interventions. However, sector and considering the existing sectoral financial as a strategy for a green economy transformation incentives. Based on historical data and assuming similar and to enhance financial sustainability, private trends, public funds are allocated to interventions in funds should be maximized for cross-cutting and urban development (e.g., waste management), public adaptation‑related interventions. 95 TABLE 8.4 Suggested potential utilization of public vs. private funds (net present value) Maximum NDC Late Scenarios ambition aligned action Cumulative USD billion, 2020–2050 Public funds $144 $117 $105 (53%) (76%) (76%) Private $128 $38 $33 funds (47%) (24%) (24%)

8.4 FINANCE GAP The finance gap is defined as the difference between the needed and available resources to implement the LT-LEDS goals. The values of the finance gap were estimated using historical public and international climate expenditure data. According to Ethiopia’s 2020 submission to the Standing Committee on Finance of the UNFCCC, the GoE has mobilized over USD 22 billion during 2011–2019 (or USD 3.2 billion per year) for climate projects. The resources were used on mitigation and adaption projects and programs in the agriculture, energy, transport, industry, forest, urban development, and health sectors. Of this, USD 6.4 billion, 8.1 billion, and 7.6 billion were invested in climate change adaptation, mitigation, and cross-cutting activities, respectively.32 Therefore, it is estimated that Ethiopia’s average annual finance mobilization for mitigation and cross-sectoral Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) interventions is approximately USD 1.96 billion. Assuming the climate finance mobilized has an annual growth rate of 13% for 2020–2030 based on the 10YDP government expenditure assumptions for climate‑related interventions, the cumulative funds available for LT‑LEDS interventions for 2020–2030 is estimated at USD 48 billion. When the cumulative funds available are compared to the required total costs of USD 86 billion 32 Government of Ethiopia. “Submission to the Standing Committee on Finance calls for evidence for the 2020 Report on the needs © aboodi vesakaran, Pexels of developing country Parties related to implementing the Convention and the Paris Agreement and the 2020 Biennial Assessment and Overview of Climate Finance Flows,” last modified 2020. https://unfccc.int/sites/default/files/resource/ CF%20Needs_Ethiopia_rev.pdf. 96 from the NDC-aligned scenario (undiscounted amount), In addition, recent geopolitical developments might an annual finance gap of USD 4 billion for 2020–2030 is further divert international financial resources away from estimated. The gap is likely to increase, particularly due implementation of the climate agenda. 35, 36, 37 Nevertheless, to external shocks, such as the COVID-19 pandemic, the rising and increasingly volatile prices of fossil fuels which has diverted resources to large emergency relief caused by various market frictions (e.g., military conflicts) programs.33, 34 Moreover, the momentum was not fully might provide some stimulus toward renewable resources. used to make the government disbursement programs Assuming a decrease in the government allocation for more conditional on environmental performance of the climate-related projects of 8%,38 an annual finance gap supported business activities. equivalent to USD 9 billion or higher could be expected.

8.5 STRATEGY TO CLOSE THE FINANCING GAP The challenge of financing the LT-LEDS interventions II. Reinforce an enabling environment for at the scale required is significant. Ethiopia’s Resource climate finance. The access and disbursement Mobilization Strategy for the NAP-ETH, NDC Financing of public, international, and private finance Strategy, and other national and regional financial in Ethiopia are influenced by the country’s assessments provide key recommendations to close financial environment. Increasing transparency Ethiopia’s climate finance gap. The following strategy on climate change mitigation and adaptation aligns with the recommendations provided by the spending, having a climate finance taxonomy, and climate finance reports in Ethiopia. The strategy follows establishing policy and regulatory frameworks three specific objectives, with each having at least one that promote private sector investments linked specific intervention. to climate and socioeconomic development are actions that reinforce an enabling environment for climate finance in Ethiopia. Objective 1. Increase mobilization of domestic—public and private—financial resources to finance climate projects with socioeconomic development co-benefits. Objective 2. Increase the mobilization of international funding (multilateral and bilateral and development) partners I. Achieve private funding leverage through with a climate focus to close the existing financing gap. blended finance. Most of the climate finance in Ethiopia comes from public funds, followed by III. Increase the capacity of the CRGE units international aid, while private sector finance and related ministries to a) develop or Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) plays a limited role.39 Under a constrained public identify bankable project proposals that are budget and decreasing overseas development attractive to international financiers and b) assistance, leveraging private resources is navigate and comply with the requirements critical to closing the finance gap. Blended of financial institutions. Despite being a finance is particularly relevant to motivate leader in climate change action in Africa, private sector-led investments focused on Ethiopia lacks comprehensive capacity mitigation and adaptation and can support development efforts for increasing access to projects to become financially viable at scale. climate finance from multilateral, bilateral, and 33 ADB. “Green Finance Strategies for Post-COVID-19 Economic Recovery in Southeast Asia,” last modified 2020. 34 Convergence. “The State of Blended Finance 2021,” last modified 2021 35 Bounds, A., and Fleming, S. “EU nations should tap recovery plan funds amid Ukraine crisis, says official.” Financial Times, last modified 2022. 36 Beckmann, A., and Vykhor, B. “Assessing the environmental impacts of the war in Ukraine.” WWF, last modified 2022. 37 Bhushan, C. “Russia-Ukraine conflict could derail the Climate Agenda.” Heinrich Böll Stiftung, last modified 2022. 38 Assumption based on the Financing Strategy for Updated Ethiopia’s Nationally Determined Contribution and its Implementation Plan and World Bank, “Draft Analysis – COVID-19: Potential Poverty and Social Impacts in Ethiopia and Policy Responses,” last 2020. 39 UNDESA. “Ethiopia’s Capacity Building on Climate Change Financing,” last modified 2022. https://www.un.org/ldcportal/content/ethiopia- capacity-building-climate-change-financing. 97 private sector financing vehicles.40 Ethiopia’s CRGE Facility,41 assessment report (2019), and NAP-ETH (2020) indicate capacity gaps in developing well‑formulated projects; in implementing, tracking, and reporting climate response interventions; and in fulfilling various financial requirements. CRGE limitations and external circumstances hinder Ethiopia’s access to international climate finance. Objective 3. Implement innovative financing instruments and climate finance policies to raise revenues domestically that can support climate financing activities (e.g., carbon market instruments, thematic bonds, payments for ecosystem services, debt for nature swaps). IV. Implement carbon pricing policies. Carbon pricing mechanisms can incentivize a fuel switch, increasing energy efficiency across all emitting sectors. They also improve the efficiency of the fiscal system, which decreases the opportunity costs of public funding channeled to carbon mitigation (and adaptation) activities in Ethiopia. To maximize the benefits, carbon pricing must be accompanied by various complementary policies. V. Mainstream the use of innovative financing mechanisms. Innovative financing instruments— specifically green, social, and sustainable bonds, debt for nature/climate swaps, and payments for ecosystem services— could be explored and piloted with a view to scale financial resources from the international capital markets and manage debt. These innovative financing mechanisms would be appropriate to deliver funding for Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) interventions that achieve both climate and development objectives. VI. The technical annex for the financial section summarizes the potential use of each intervention, the current barriers to their maximization, and specific actions to be taken to overcome such barriers. 40 UNDESA. “Ethiopia’s Capacity Building on Climate Change Financing,” last modified 2022. https://www.un.org/ldcportal/ content/ethiopia-capacity-building-climate-change-financing 41 A national financial mechanism that mobilizes and manages domestic and international climate finance to support the institutional capacity building and implementation of the country’s climate change adaptation and mitigation projects. 98 © GGGI in Ethiopia 99 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 9 9. Ensuring Implementation of the LT-LEDS: Institutional Arrangements and Monitoring and Evaluation System

9.1 INSTITUTIONAL SETTING FOR IMPLEMENTATION OF THE LT-LEDS Towards the overarching objective of integrating climate All the technical works specific to CRGE sectors into the national development planning framework, it is will be integrated and conducted at each relevant pertinent to design an institutional arrangement aligned government body and inter-ministerial management, with the primary mandates of government bodies for which is a high-level decision-making body guiding Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) an effective and integrated governance approach to the nationally integrated CRGE process. The CRGE climate-resilient green growth and development. Based technical capacities within each sector will be on lessons from the institutional setup in realization of strengthened through the Sectoral Strategic Affairs the CRGE (GTP I and GTPII) and Ethiopia’s NDC, an Executive Office (department) aligned with the spirit integrated CRGE governance structure will be utilized of integrating sectoral level climate and development for the implementation of the LT-LEDS. The new programs and plans through the establishment of integrated CRGE governance structure is based on the the Sectoral CRGE Desk. Although it is important new definition of powers and duties of government to integrate and conduct the CRGE activities at bodies in proclamation 1263/2021. The MoPD is each relevant government organ, in the event of mandated to coordinate the sectoral government bodies a requirement for collaborative technical special to effectively implement and manage the low emission undertaking, ad hoc technical committees may be and climate resilient green development strategy within established as deemed necessary. the national development planning framework. At the national level, integrating the governance of CRGE will The CRGE Development Partners Forum is designed to re-strengthen a unified CRGE Ministerial Committee, strengthen the role and participation of the development chaired and co-chaired by the MoPD and the MoF partners in their climate actions and investments in respectively. The members of the CRGE governance Ethiopia. This platform will also help unlock and mobilize include the public sector, which directly contributes to new sources of climate action support, finance, and climate change at the federal and regional level and all technology to enhance Ethiopia’s climate resilience development partners. including adaptation and mitigation. 100 The integrated CRGE governance provides a single regional governments, and development partners. Each engagement point where stakeholders can engage sector, including the relevant regional bureaus, can also and make decisions about climate change issues, thus have a separate engagement with other stakeholders, enhancing coordination, effectiveness and reducing including the development partners. For any regular fragmentation of programs and projects. Figure correspondence, each CRGE line ministry can assign a 9.1 below shows the integrated CRGE governance state minister (based on work proximity to the CRGE structure. The interaction of all actors and stakeholders matters). If regular correspondence is required, there can will be flexible and will be managed through structured, be (if appropriate) engagements and meetings with the regular meetings on cross-cutting matters, planning, represented State Ministers and Director Generals. The monitoring and evaluations. As the national coordinator main role would only be to coordinate and steer routine of the integrated CRGE, MoPD can adopt an action plan cross-cutting matters in accordance with the CRGE for the engagements and meetings with line ministries, Ministerial Committee guidance and decisions. FIGURE 9.1 Ethiopia’s integrated CRGE Governance structure Integrated CRGE Governance Structure CRGE Ministerial Committee (Co-chaired by MoPD and MoF) MoPD CRGE Sectors - Federal CRGE Sectors - Regions MoF CRGE Development Partners Forum Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Based on the new CRGE Governance structure, the and development deliveries. In the past, roles and government stakeholders’ or government bodies’ responsibilities were largely designated at technical and roles and responsibilities are identified based on their steering committee levels and institutional capacities primary mandates and expected institutional climate and memories were not able to be strengthened. 101

9.2 MONITORING AND EVALUATION SYSTEM OF THE LT‑LEDS (INCLUDING MRV) A measurement, reporting, and verification (MRV) system EPA and relevant sectors and ministries. Both external and an adaptation monitoring and evaluation (M&E) and domestic financing of growth and development are system should be developed in an integrated manner expected to be subjected to integrated and aggregated to support Ethiopia in evaluating progress toward CDR process and system which aims to aggregate the implementing the actions and achieving the aims of the progression beyond previous efforts. LT-LEDS. These aims and targets will steer the country in identifying opportunities for increasing the ambition Furthermore, the MRV and M&E framework for in its next NDC revision. The adaptation M&E system Ethiopia’s LT-LEDS, will be improved through successive will enable Ethiopia to better understand the resource NDC revision cycles, and will work toward full alignment needs and constraints of adapting to the impacts of with Article 4 (Mitigation), Article 6 (Cooperative climate change and how its stated adaptation targets in Approaches), Article 7 (Adaptation) and Article 13 the LT-LEDS are achieved. (Enhanced Transparency Framework) under the Paris Agreement. Article 13 specifies elements of reporting More specifically, an integrated climate change and in the Biannual Transparency Report, with further development planning process and framework will also flexibility for LDCs. While LDCs like Ethiopia can support the setting-up of an integrated and aggregated report “at their discretion,” Ethiopia is working toward Monitoring, Reporting and Verification (MRV) and meeting international best practices to demonstrate a Monitoring and Evaluation (M&E) system for monitoring high degree of ambition and climate policy leadership. progress of climate action. The existing climate MRV Therefore, Ethiopia will also comply with mandatory and development M&E system would eventually be integrated into the new Climate and Development reporting and accounting for market mechanisms as Reporting (CDR) System. The integrated and aggregated well as provide information on sustainable development CDR process and system will be developed by the MoPD, promotion, environmental integrity, and transparency. FIGURE 9.2 Ethiopia LT- LEDS MRV and M&E framework National Long-Term Low-Emission Development Strategy (LT-LEDS) Sectoral targets and indicators Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) Ministry of Planning and Development National Determined Contributions (NDCs) National Inventory report Based on data from national Inventory report MRV/M&E M&E report Biennial Transparency Report (BTR) Annual Emission Balance Corresponding Adjustments, based on ITMO tracking tool (registry) Ministry of Planning and Development UNFCCC 102 To this end, the MRV and M&E framework will reporting to the global community (e.g., UNFCCC and eventually be fully mainstreamed in the 10YDP, and other key processes). successive development plan targets and indicators will be provided for each sector (Figure 9.2). Therefore, In addition, the MoPD has established a modeling international support is critical in building capacity for unit that could explore and adjust targets based stakeholders who will undertake the tracking, collection, on performance using the data generated from the and reporting of data, as the integrated CDR through MRV and M&E systems. The modeling unit could the MRV and M&E systems are a prerequisite for provide the necessary analytical capacity for the successful implementation of the LT‑LEDS, including next NDC and LT-LEDS revision cycles.

9.3 MANAGING, MONITORING, AND EVALUATING INCLUSIVE OUTCOMES Based on lessons from CRGE implementation and Capacity building on MRV the NDC, LT-LEDS implementation will be governed In addition to climate finance, achieving NZE and by the Inter-Ministerial Steering Committee with sustainable and climate-resilient development will responsibilities to set policy direction and guidance require an adequate level of capacity building. Ethiopia’s to enhance coherence and collaboration across the LT-LEDS is sector-wide and has shown high ambition in national program. This includes alignment with the both mitigation and adaptation. To integrate and fully overarching national priorities for gender, women’s implement the interventions proposed, Ethiopia seeks empowerment, and social inclusion. It is recommended support on MRV and M&E capacity building in the that the Ministry of Women and Social Affairs become following areas: part of the Inter-Ministerial Steering Committee to support implementation, monitoring, and accountability > Strengthen MRV systems and their institutional for inclusive outcomes. setup with adequate infrastructure and human resources, which requires staff with the Expertise on gender and social inclusion can be secured required skills and knowledge and institutional through the technical committee, who is responsible for capacity to enhance the coordination of entities developing policy brief guidelines and tools for LT-LEDS monitoring NDC implementation and produce implementation, which also guide relevant IEs and EEs. periodic reports horizontally across sectors and The Ministry of Finance’s gender-responsive budgeting vertically at different administration levels will support target setting and achievement of inclusive Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) outcomes from the LT-LEDS implementation, including > Establish a green coding system in public the proposed Women and Youth in Green Jobs Program financial management for proper tagging and to maximize gender and youth co-benefits by promoting tracking of climate finance access to green jobs. In line with the requirement for national plans to apply sex-disaggregated data and > Integrate MRV/M&E with a national statistical information in annual plans and reports, the LT-LEDS, data management system in alignment with the NDC and NAP MRV and M&E frameworks, will be implemented with sex-disaggregated > Enhance accessibility and availability of data targets and indicators. Enhancement of the availability of through state-of-the art technology sex-disaggregated data at the sector level will gradually enhance the MRV on inclusive outcomes. > Strengthen coordination among sectors and regional counterparts for better implementation, for M&E of the LT-LEDS through successive NDCs, and for rounds of LT-LEDS updates 103 Ethiopia’s net-zero and climate resilient development strategy 272 Mt Share of renewables in electricity production 100% Annual energy efficiency improvement 8%/a Electrification of households (petroleum) 10% 75% Energy Electrification of households (biomass) 14.5% Total GHG emission (Mt CO2e) 60% Electrification of industry (petroleum) 20% 50% Electrification of transport 10% 75% Shift from petroleum to hybrid and 10% 44.5% 75% electric vehicles Improved manure management for livestock 20% 40% Feed management (oil seed feeding) 10% 25% Agriculture, livestock Improved livestock produtivity 14% 40% Substitution of cattle for poultry 10% 20% and land-use Agricultural mechanization 10% 25% Integrated soil fertility management 15% 25% Improved rangeland management 20% 30% Production of fruits and other 1.5 million ha 3.5 million ha parennial crops Reduced deforestation 25% 37.5% 50% Forestry Afforestation / reforestation 1.8 million ha 4.5 million ha 8.2 million ha (ha of land) Forest restoration 4 million ha 8 million ha 16 million ha (ha of land) Processing organic municipal waste 20% 40% 50% Landfill gas reduction Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050) 5% 20% 35% Solid Waste collection and management 10% 20% 25% 4R measures 90% 85% 90% Waste GHG emission reduction from 1. urban wastewater management 10% 40% 80% 2. rural/industrial wastewater 10% 30% 70% management Fecal sludge treatment 4% 15% 30% Reduction of the share of clinker 60% 50% in cement c Long-term goal for CCS c c 100 Gg CO2e 500 Gg IPPU c Incorporation of recycled 10% high-quality scrap in iron and steel production 2020 2030 2040 2050 0 Mt 104 © GGGI in Ethiopia 105 Ethiopia’s Long-Term Low Emission and Climate Resilient Development Strategy (2020-2050)