Ethiopia Bans Gas Cars to Save Foreign Currency

Decarbonisation efforts worldwide have popularised the concept of a “just transition”, especially in emerging and developing economies shifting away from fossil fuels. Globally and nationally, emissions targets drive the energy transition, with climate policies needing to balance environmental and social goals. However, reducing emissions is not always a deliberate process, as many emerging and developing countries are now driven to abandon fossil fuels due to economic necessity and energy security concerns, fueled by the decreasing cost of renewables.

Foreign currency reserves under strain

In early 2024, Ethiopia stopped allowing new petrol and diesel cars to be brought into the country, effective right away. This decision stood out because it wasn’t presented as an environmental pledge but instead aimed to cut the nation’s yearly fuel import costs exceeding $5 billion—a massive drain on its limited foreign currency. Given that Ethiopia was building Africa’s biggest hydroelectric dam, continuing to rely on costly fuel imports for transportation made little financial sense.

After the ban, Chinese electric vehicles filled the void in the market, with BYD models now common on Addis Ababa’s roads. Tax breaks and waived duties on EVs, combined with the rising prices of used gasoline-powered cars, pushed consumers toward electric alternatives. The Grand Ethiopian Renaissance Dam, which began full operations in September 2025, now generates extra hydropower that powers these EVs at a fraction of the cost.

Energy security as a catalyst

The shift away from fossil fuels in these cases was driven by financial and energy stability concerns, not formal climate agreements. Pakistan’s rapid shift to solar energy followed a similar trend, shaped by practical needs rather than environmental campaigns or government climate policies. In 2022, devastating floods submerged a third of the country and caused over $30 billion in economic losses, straining public finances and forcing households to cut spending while weakening the government’s ability to maintain essential services. As fuel prices climbed, finding a cheaper alternative to diesel-powered electricity became urgent.

China had excess solar panel production, while the U.S. had tightened import rules, creating an opportunity for Pakistan. The country seized the chance, adopting solar power at an unprecedented rate. Between late 2021 and late 2025, solar energy’s share of Pakistan’s electricity output grew five times over. Facing unique energy challenges, Pakistan gained from global market conditions that made renewables more affordable than ever.

Structural shifts in the energy sector

While South Africa has been following an emissions-reduction pathway for decades, an affordability crisis ultimately drove widespread decarbonisation. These countries are moving away from fossil fuels largely because of mounting economic and energy pressures, rather than a narrow focus on emissions reductions. But this does not mean that the question of justice disappears. Lower-income households account for a smaller share of the roughly eight gigawatts of rooftop solar installed in South Africa, reflecting high upfront costs.