Impact of renewable energy expansion and access policy on sustainable development performance in Ethiopia: A policy evaluation study

Abstract

This study analyzes the impact of renewable energy expansion and access policies on Ethiopia's sustainable development performance using dynamic stochastic general equilibrium (DSGE) modeling. The findings indicate that Ethiopia has made significant strides in renewable energy, achieving grid parity by 2021 and lowering costs of renewable electricity. However, sustainable development indicators have not advanced in tandem, revealing ongoing challenges in translating energy transitions into broader outcomes. The study finds a strong linkage between renewable energy generation and sustainable development performance, underscoring the critical role of renewable energy in driving overall sustainability. The complex, nonlinear relationships revealed through impulse response function (IRF) analysis highlight the inherent trade-offs and feedback loops between economic growth, energy use, and sustainability objectives. The key policy implications address both the supply and demand sides of the energy system in Ethiopia. On the supply side, the study emphasizes the need to further expand renewable energy generation to better align with sustainable development goals. On the demand side, it suggests strategic use of policy instruments like fossil fuel taxes and fossil fuel subsidy reforms to improve energy efficiency and manage the trade-offs between economic growth, energy use, and sustainability.