Profitability of Bioethanol Production: The Case of Ethiopia

Ethiopian Economics Association (EEA)
Alemu Mekonnen, Gunnar Kohlin, Tadele Ferede, Zenebe Gebreegziabher


This research investigates the profitability of bioethanol production in Africa,
taking Ethiopia as a case in point, and suggests an oil price threshold beyond
which biofuels may be profitable. Specifically, the study analyzes the viability
of producing bioethanol from molasses in the context of Ethiopia, using data
from a biofuels investment survey by EEPFE/EDRI in 2010. We draw on
investment theory as our underlying conceptual framework and we employ
unit cost analysis for our empirical analysis. Findings reveal that bioethanol
production (from molasses) in Africa/Ethiopia can be quite viable and the
biofuels industry can be viewed as a way out of poverty. This is a case study
involving a few observations because of the small size of the universe of
producers studied, hence the need for further analysis as the sector expands.