The Economics of Biodiesel Production in East Africa: The Case of Ethiopia

Book Chapter
1 January 2016

This is a chapter in a book entitled “Bioenergies in East Africa between challenges and opportunities” Edited by Marco Setti, Daria Zizzola, 2016.

This paper analyzes the economics of biodiesel production in East Africa by taking Ethiopia as a case in point. Specifically, the study analyzes the viability of biodiesel from various feedstock in the context of East Africa, and suggests an oil price threshold beyond which biodiesel may be economically viable for Ethiopia through a case study using estimates based on field visits. We draw on investment theory as our underlying conceptual framework and employ unit cost analysis for our empirical analysis. Our findings reveal that the biodiesel production in East Africa in general and Ethiopia in particular is not viable (at least currently), and the viability and competitiveness of biodiesel production will largely depend on the cost/price of feedstock. This suggests that the viable alternatives of coproduction through value addition from by-product seedcake and intercropping options need to be considered to enhance the economic viability of biodiesel production. Moreover, R&D (research and development) effort/knowledge support to the biofuel industry, including a search for better adaptive/higher-yielding biofuels crops with quality oil-producing varieties, as well as better regulatory framework and follow-up studies. 


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Publication | 28 December 2016