Expansion of Sugarcane Production in Ethiopia: Welfare Opportunity or Devastation?

Abstract

The government of Ethiopia is aiming to boost sugarcane and ethanol production, together with cogeneration. To achieve this goal, enormous sugarcane production strategies have been undertaken without there being concrete evidence as to theirs benefits or detriments to the welfare of households. Here, we used a computable general equilibrium model and SAM dataset to provide useful insights into this story. The results of the study indicate that the average aggregate income and consumption expenditure of households compared to the baseline scenario are negative, although the magnitude of the loss is small. We further find strong evidence that the average aggregate economic welfare of households has deteriorated by 3.43 percent and we conclude that the strategies that the government has been implementing are detrimental to welfare and devastating. Thus, we suggest that the government should cease sugarcane expansion that succeeds at the expense of food crops and policies that favour the use of marginal and barren lands for upcoming sugarcane projects should instead be implemented.