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Poverty, Energy and the Millennium Development Targets

By

Bereket Kebede


Introduction

Many studies looking at energy consumption focus on electricity.  This short piece will attempt to look at the mix of energy sources used by households rather than considering only electricity.  This approach has many advantages.  First, most of the energy needs of the poor in developing countries currently are satisfied from other energy sources than electricity; this condition is expected to persist for sometime to come.  Second, due to substitution among different energy sources demand and supply of one form of energy will affect others; for instance, the supply and price of biomass fuels will affect how much electricity is used for cooking.  Third, households usually access modern fuels, including electricity, by re-allocating budget from traditional fuels.  Hence, the amount expended on traditional fuels indicates the potential budget that can be used to purchase modern fuels.

The demand for energy is derived demand; production units and households consume energy either to produce commodities or to satisfy consumption demand.  Hence, if production and consumption changes the demand for energy also changes, of course, mediated by efficiency.   This underscores that changes in energy conditions are intimately related to changes in the overall economy.  The significant economic changes implied by the Millennium Development Targets (MDT) will also have significant effect on energy consumption.

The remaining paper is divided into two main parts.  The next section examines the implications of the MDTs to energy consumption particularly focusing on the poor.  There is now a general consensus that the accomplishment of the MDTs requires significant structural transformations in developing countries (including the energy sector).  Section 3 focuses on issues in energy sector reforms affecting the poor.  Most of the examples used to illustrate arguments are drawn from Ethiopia.  Since Ethiopia is one of the poorest countries in the world the illustrations will give a ‘lower benchmark’ for most developing countries.


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