In due course of promoting the economic growth, undeniably, energy has been playing an incomparable role as encouraging economic growth helps run activities as easily and promptly as possible. Hence it is possible to deduce that economic progress and energy consumption do have a direct bearing and firm tie.
Taking this fact in mind, The Ethiopian Herald held talks to Asnake Adugna, an agricultural economist graduated from Addis Ababa University and working for a private firm as an economic consultant.
He said, “Energy is source of economic growth and agricultural development and they are very closely correlated and intertwined. If causality runs from energy consumption to GDP, it implies that an economy is energy dependent and hence energy is a stimulus to growth implying that a shortage of energy may negatively affect economic growth or may cause poor economic performance, leading to a fall in income and employment.”
“The nexus between energy consumption and economic growth in Ethiopia is highly pronounced, indeed. Technological change might enable sustainability even with an elasticity of substitution of less than one,” he said.
He further said that 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.
As to him, the relationship between energy consumption and economic growth has really determined the future trend of Ethiopia’s sustainable development and in terms of urbanization rate and industrial structure. Clearly, Ethiopia has obvious advantages in future economic development and has a late developing advantage as energy promotes the economic growth.
Therefore, he said to overcome the inherent contradiction between economic growth and energy consumption and realize the coordinated development of the two is the only way for the nation to solve the future economic development plan and establish a sustainable economic development path.
No doubt, economic development is dependent on energy. That is why it is recurrently said especially these days that the economic development is inseparable from energy. Besides, the degree and scale of energy opening and utilization are based on certain economic development conditions. Economic development can in turn promote the large-scale development and utilization of energy. Economic growth and energy consumption would provide strategic experience, he added.
He also said that energy consumption in general and consumption of renewable energy in particular may be a potential driver of economic growth. Renewable energy drives economic growth for some market conditions in Ethiopia.
“Economic benefits from increasing productivity refer to the synergies between the supply of renewable electricity and the subsequent adaption of industry production methods. The positive relationship between energy and economic growth is clear since income and energy consumption are tightly correlated on every aspect of the country. Genuinely speaking, nowhere in the world is there a wealthy country that consumes only a little energy, nor a poor country that consumes a lot,” he opined.
He further stated that renewable energy can be a moderating factor to balance the effects of trade activities and financial development on the economy and the environment via encouraging renewable energy usage, increasing trade activities and supporting further financial development within the country.
“Right now, Ethiopia is a fastest growing economy that influences energy systems at the regional, continental and/or international level. Yes, energy is a key source of economic growth because many production and consumption activities involve energy as a basic input. Energy is one of the most important inputs for economic development. However, energy consumption to economic growth implies that in energy-dependent economy energy conservation policies may harm economic growth. 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.”
According to Asnake, urbanization rate and industrial structure are bases for economic development and agricultural progress. As an important material basis for the development of human society, energy is also the main driving force of economic growth.
As to him, analyzing the relationship between energy and economic development from the perspective of economics, there are mainly two aspects; first, the economic development is dependent on energy. Besides, the economic development based on sacrificing the natural ecological environment, the goal and consensus of sustainable development should be established to ensure the sustainable development.
According to Asnake, there is a positive correlation between the financial development and economic growth. It is found that the energy consumption has a strong positive impact on the greenhouse gas emissions, too. The improvement of technical level can effectively improve the energy consumption rate, that is, the improvement of technical level can strengthen the utilization rate of energy. In addition, the optimization of industrial structure can accelerate the emergence of energy consumption turning point. At the same time, the urbanization rate can also promote the emergence of the energy consumption turning point.
The nation improves the utilization rate of energy consumption by formulating corresponding policies and statistical innovation, that is, coordinating the relationship between energy production and distribution and economic growth. It can be said that Ethiopia has a comprehensive strategic plan and vision at the level of energy policy. Furthermore, the country has formulated energy policy principles, namely, the principle of a long-term comprehensive strategy, the principle of coordinated development between clean and efficient development and environmental and ecological construction, and the principle of an effective combination of per capita living standard construction and energy and environmental policies.
As to Asnake, by analyzing the relationship between the economic growth and energy consumption in the country, it is seen that the energy consumption is the main driving force to promote economic growth. However, while energy promotes the economic growth, it also brings pollution problems to the world environment, and it gradually becomes the main problem hindering the sustainable development of the economy.
He said so as to explore the coordinated development of the energy consumption, economic growth is the only way to solve the future economic development plan and establish a sustainable economic development path.
Asnake further stated that economic development is closely related to energy demand. As an important material basis for the development of human society, energy is also the main driving force of economic growth. In view of the rapid evolution of urbanization and industrialization, the dependence of the social development on energy consumption continues to increase, leading to the contradiction between economic growth and energy consumption. In so doing, how to coordinate energy consumption and economic growth has become an important breakthrough in sustainable development. Such a lucrative means has established the economic turning point of energy consumption, explores the regularity of economic growth and energy consumption, and fosters the economic planning and economic development suitable for the road of sustainable development in the country. In addition, it is found that Ethiopia may have a turning point of energy consumption since the development of energy consumption and economic growth is of paramount importance in boosting economic progress.
As to him, Ethiopia has unveiled homegrown economic reform agenda which has aimed at achieving a lower-middle status and sustains its economic growth to achieve medium-middle and higher-middle status step by step. Optimal renewable energy mix for power generation and associated investment costs for the country to progressively achieve its mission. Ethiopia has enough renewable energy potential to achieve its economic target, indeed, though investment hurdles, financial sourcing setbacks and to some extent lack of coordination remain priority challenges. The nation’s efforts geared towards expanding energy and supporting decision-making concerning socio-economic development and investment pathways has to be well underscored and problems have to be effectively dealt with.
In a nutshell, energy is an important element in accomplishing interrelated socio-economic development and is a backbone of a modern economy. Given growing demand due to socio-economic transformations, energy resources become relatively scarce. Such shortcomings have to be well abated via fostering the proliferation of energy sources. This in turn has an impact on the future availability of resources for long-term economic development.
The pursuit of optimal supply options can thus be viewed as the backbone of any country’s long-term economic and social prosperity. Cognizant of the fact that Ethiopia is located on the Horn of Africa, its needs to boost development accompanied with adequate, reliable, affordable and environmentally friendly electricity supply options. Yes, achieving these required optimal generation capacity, indeed.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD TUESDAY 5 MARCH 2024
