Economic Implications of Climate Change in Ethiopia: A Computable General Equilibrium Analysis
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Date
2011-06
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Addis Ababa University
Abstract
Climate change has become one of the pressing problems worldwide as it affects socio-economic
activities - agriculture being one of the most vulnerable sectors. Specifically, this study has
attempted to evaluate the short-run economic impacts of climate change (change in the levels of
temperature and precipitation) with a focus on the Ethiopian economy. In so doing, it uses a
computable general equilibrium model based on the 2005/06 Ethiopian Social Accounting
Matrix. The results show that climate change has a dampening effect on economic growth and
many key macroeconomic indicators. Investment is the only macroeconomic variable that
increases despite the changes in climate. It has also a negative impact on sectoral growth and
trade, and the effect varies across agro-ecological zones. The findings further revealed that
household livelihoods (measured in terms of income and welfare) have declined, and the effect is
unevenly distributed across different household groups. The highest losses are likely to be
incurred by the poor households that are residing in smaller urban centers. Thus, the results of
the study calls for improved climate adaptation actions to reduce both economic decline and
welfare deteriorations
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Climate Change