By Geda Yoseph, Associate at DMLF
Introduction
In recent years, Ethiopia has undergone several reforms in different sectors; among these, transport and logistics. The State has taken several reforms for the effective utilization of its resources, mainly by focusing on renewable energy and the introduction of electric vehicles. In order to achieve this plan, the government has taken different regulatory and institutional measures. Among these, the government provides tax incentives for importers of electric vehicles to encourage the importation of electric vehicles into the local market. This article will examine the benefits of these EVs for Ethiopia, the challenges of introducing these electric vehicles with regard to providing necessary infrastructure, and legal and regulatory challenges.
Advantages of Electric Vehicles for Ethiopia
Electric vehicles bring several advantages for countries like Ethiopia. EVs substitute a large amount of money to import gasoline. Ethiopia does not yet have utilized oil resources. So the country is currently dependent on increasingly expensive, imported fossil fuels. Currently, Ethiopia cannot afford to import Gasoline and diesel imports are also consuming the limited foreign exchange resources of the country. Electric cars play a significant role in addressing these challenges because they use electric power. In terms of electric resources, Ethiopia has cheap, plentiful, and renewably generated electricity, with about 90% coming from hydropower and the remainder from wind and thermal sources. Hence, the replacement of gasoline by electric power plays an important role in preventing unnecessary expenses Ethiopia expends to import gasoline annually. The green transport policy of Ethiopia plans to replace gasoline automobiles in order to save money spent on petroleum imports. The other advantage is in terms of environmental protection. Gasoline and diesel-powered cars are criticized for polluting the environment. The Ethiopian government also has plans to reduce air pollution and mitigate climate change. The introduction of electric vehicles is part of the national green transport policy since electric vehicles play a significant role in reducing environmental pollution.
Incentive and Benefit for Importers and Assemblers of Electric Vehicles in Ethiopia
The Ethiopian government introduces different incentive measures to encourage importation and assembling of electric vehicles. Among them is the curtailment of tax. Taxation served not only as a revenue source for the government but also as a means of encouraging and promoting the production and importation of certain products by reducing the amount of tax or allowing them to enter the market tax-free. The Ethiopian Ministry of Finance introduces tax reform to encourage industries and importers engaged in electric vehicle investment. According to the Ministry of Finance, the purpose of the tax reform is to make the rapidly growing number of vehicles in Ethiopia compatible with environmental safety in a policy framework. In addition to this the other purposes include to implement a transportation system that does not harm the public’s health, does not affect the climate and biodiversity, and uses renewable energy sources properly, and to enable electric vehicles to be offered to the public at an affordable price.
In addition to the above incentives, the governments of Ethiopia also have to introduce various incentives and benefits for electric vehicle users in order to encourage the adoption of electric vehicles as a substitute for traditional gasoline or diesel vehicles. This incentive may include reducing the amount of the charge fee electric vehicle users pay. This approach is being used in countries like Dubai to encourage the use of electronic vehicles.
Challenges of Regulating and Utilizing Electronic Vehicles in Ethiopia
Electric vehicles are a new emerging sector in Ethiopia. As a new beginning, there are several challenges and problems. These challenges, especially the absence of legislation that guides the Electric vehicles market and the lack of infrastructure and professionals in green mobility, are among the bottlenecks. Infrastructural development is one of the most challenging issues currently. There are limitations to charging service for electric vehicles and charging stations are installed only in a few places. Without the expansion of charging stations, it’s impossible to imagine the advancement of electric vehicles in Ethiopia.
The other challenging issue is the lack of an effective and adequate legal framework to govern, set standards, and guide the new emerging electric vehicle sector. Regulatory frameworks that cover safety and performance criteria, such as protection against electrical shock, electric energy consumption, and the total range, are very essential. Providing technical specifications for electric vehicles also plays a significant role in importing electric vehicles of good quality and preventing electric vehicles of poor quality from entering the market.
On the other hand, a regulatory framework that specifies electric vehicle energy consumption in watt-hours per kilometer (Wh/Km) and range in KM is also very essential in order to prevent the importation of electronic vehicles that consume high electric power. Another challenge in importing electric vehicles is complying with the regulations and standards for the packing and transportation of lithium batteries, which are the main energy storage devices for electric vehicles. Lithium batteries are classified as dangerous goods as they pose a risk of fire or explosion. Therefore, they need strict regulation to prevent risks arising with regard to the transportation of lithium batteries. Ethiopia needs to have strict regulations to manage such risks.
Conclusion
Ethiopia has implemented several reforms in different economic sectors, including transportation. Among these reforms, Ethiopia planned to ban gasoline vehicles and introduce electric vehicles. Ethiopia has taken this measure to prevent the expense that Ethiopia incurs annually to buy gasoline. On the other hand, Ethiopia has cheap, plentiful, and renewably generated electricity, with about 90% coming from hydropower and the remainder from wind and thermal sources. Ethiopia planned to replace current gasoline vehicles with electric vehicles. This enables the country to consume the existing electric resources and reduce huge expenses incurred to import gasoline annually. For Ethiopia, the advantages of the introduction of electric vehicles are not limited to preventing unnecessary expenses Ethiopia incurs annually to buy gasoline, but also, from an environmental perspective, electric vehicles bring several advantages by reducing environmental pollution.
Ethiopia also became the first African country to take such measures to encourage the importation of electric vehicles into the local market. As a long-term plan, Ethiopia planned to replace gasoline vehicles with electronic vehicles. In order to achieve these plans, different legislative, regulatory, and institutional measures have been taken by the Ethiopian government to encourage the importation and assembly of electric vehicles in Ethiopia. As a new emerging sector, the current existing legal framework is not adequate enough to regulate electric vehicles; hence, an effective and adequate regulatory system is very essential.
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