Being the water tower of Africa, Ethiopia has been embarking on generating hydropower energy from its water sources, wind, geothermal and other related ones, with a view to lifting its citizens from the poverty they have found themselves in. Energy plays a pivotal role in driving economic growth by fueling industrial production, supporting infrastructure development, and empowering technological advancements. Access to abundant and affordable energy sources enables countries to expand their manufacturing capabilities, boost productivity, and create employment opportunities.
Taking the nexus between energy consumption and economic growth into account, The Ethiopian Herald approached Demeke Muluken, an agro-economist graduated from Dilla University, to have a piece of professional information about the close ties between energy consumption and economic growth coupled with the fundamental advantages of energy for economic growth.
He said, “Energy is a decisive component of economic development. It is widely utilized in industries, manufacturing, agricultural production, and farm machinery, among others. It is also necessary for homes for cooking, lighting, and warmth. As energy demand is derived from the multiple activities like economic or non-economic aspects, the country needs energy to accomplish its target set of promoting all rounded activities like industrial use, household, and individuals, running of equipment, cars and machines.”
As to Demeke, energy is a key source of economic growth because many production and consumption activities involve it as a basic input. Energy is one of the most important inputs for economic development. From a physical viewpoint, the use of energy drives economic productivity and industrial growth and is central to the operation of any modern economy.
Energy is not consumed for the sake of consuming but for another purpose such as for mobility, producing goods and services, and obtaining a certain level of comforts, he added.
“Energy conservation policies should be such that they curtail the consumption without affecting economic growth. Since the consumption of energy fosters economic growth and development, Ethiopia has to promote the energy sector utilizing all its energy sources for reliable economic growth. After all economic growth depends upon the interaction of opportunities and choices. Ethiopia needs to grow either because there are many opportunities or steps to be taken for the growth and progress of Ethiopia,” he opined.
As to him, it is assumed the more energy is consumed the more it expands the economic progress in the country, all things being equal. In general, it can be stated that economies with higher per capita energy consumption are more developed than those with low level of consumption. Yes, it is necessary to add the caveat because there are countries that serve only as route to smuggle energy to other countries, such country’s consumption pattern cannot be relied upon to measure energy consumption.
It is recurrently stated that energy consumption and economic growth do have positive correlation. Energy demand also relates to the amount of energy required in the country within a given period of time i.e. primary energy demand or to the amount supplied to the consumers within the same period, final energy demand.
“Energy demand describes a relationship between price and what quantities will be purchased at a given price and how price changes will affect the quantities sought.Following ample energy consumption, a growing economy is witnessed and needs stable and efficient energy supply system to move national growth forward,” he said.
True, he said, in view of the rapid evolution of urbanization and industrialization, economic growth is increasingly dependent on the energy consumption, the development of the two is difficult to coordinate, and the internal contradictions are becoming increasingly serious, which hinders the sustainable development of economic growth.
Ethiopian economy has witnessed significant increase in the level of energy consumption in the years to come. The increasing dependence of energy requirements of the Ethiopian economy on fossil fuel energy sources proposes progress and industrial growth. If our postulation is correct that energy consumption could be used to gauge the health of an economy, it suffices that an undulating figure of energy consumption will certainly translate to a cyclical growth.
Energy is important to achieve the interrelated economic, social and environmental ties aiming at bringing about sustainable development. Electricity consumption has been found to be positively related to economic growth in Ethiopia, the government should establish more refinery industries and renewable energy funding/financing agencies.
Here, the government should give more attention to coal production and its consumption for a better economy, the government, as a matter of urgency should establish and implement the existing renewable biomass as a fuel in highly efficient cook stoves and proficient production of charcoal as a fuel in homes and small and medium enterprises.
Energy is critical to the survival and expansion of any economy. In Ethiopia, energy consumption has been skewed towards household use, and below thresholds for sector-driven growth. The variables considered are real GDP, energy consumption decomposed into electricity and petroleum consumption, labor and capital. The energy sector would encourage industrialization and move energy demand towards increasingly productive uses. Here, a strong institutional framework is needed to ensure energy policies achieve their objectives and targets.
Without a shadow of doubt, energy plays a crucial role in socio-economic development, industrial breakthrough, health, education, employment and overall welfare of a country citizen. Sufficient amount of energy supply as well as its efficient utilization of the energy is needed for an economy to completely experience growth and development.
Though the presence of energy is not by itself an answer to the social and economic problems facing developing economies like Ethiopia, the very lack of access to affordable and reliable energy services is recognized as a major problem to the development of the country. Energy plays a crucial role in socio-economic development, industrial breakthrough, health, education, employment and overall welfare of a country citizen.
As to Demeke, sufficient amount of energy supplyas well as its efficient utilization of theenergy is needed for an economy to completely experience growth and development. Though the presence of energy is not by itself an answer to the social and economic problems facing developing economies like Ethiopia, the very lack of access to affordable and reliable energyservices is recognized as a major problem to the development of the country.
Economic growth requires cost-effective, efficient, clean and renewable energy, and the burning of fossil fuels, which results in greenhouse gas emissions, is the primary human activity affecting the amount and rate of climate change. Providing the energy needs for growth when mitigating its effects on agricultural production.
As to Demeke, as an important material basis for the development of human society, energy is also the main driving force of economic growth. However, while energy promotes the economic growth, it also brings pollution problems to the world environment and gradually becomes the bottleneck hindering the sustainable development of the economy.
Cognizant of the fact that the pace of China’s modernization and urbanization is intensifying, environmental pollution has become the main problem restricting Ethiopia’s economic development, and the demand for energy consumption continues to increase.
In view of this, realizing the coordinated development of energy consumption and economic growth and clarifying the future economic development direction of the country are the main breakthroughs in building a moderately prosperous society in an all-round way, he added.
“The energy consumption and economic growth, the contradiction between energy consumption and economic growth has become an important breakthrough direction to achieve sustainable economic development. Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.”
A renewable energy cost subsidy frameworks to serve as a powerful incentives for the deployment of renewable energy technologies such as the use of solar energy panels at homes and business places to power basic appliances and machineries as against relying heavily on premium energy consumption. The government is expected to encourage means for growth and development in the renewable energy sector so that innovation can be fostered to tap into alternative energy sources such as solar, water, wind, biogas as against the use of fossil fuels.
Owing to the fact energy plays fundamental role in driving economic growth, and promoting sustainable development, the government and all stockholders should work hand and glove for further economic benefits of the country. The relationship between energy consumption and economic growth is undeniable as urbanization rate, industrial structure, per capita income and other factors has been well articulated along this line.
BY MENGESHA AMARE
The Ethiopian Herald August 13/2023
