Since achieving peace in the early 1990s, Cambodia has undergone rapid economic growth driven by the garment, tourism, and construction sectors. The country is expected to graduate from least developed country status by 2030. This shift from agriculture to manufacturing has led not to more jobs, but to different ones, increasingly formal and urban, contributing to poverty reduction, while also deepening Cambodia’s dependence on fossil fuels and imported electricity.

To sustain growth while pursuing its climate ambitions, the Royal Government of Cambodia has outlined clear strategies for a low-carbon transition. This transformation, however, also brings new macroeconomic and fiscal challenges, against the backdrop of rising energy demand, external trade vulnerabilities, and pressures on public finances. Understanding these challenges and how they interact is essential to design a feasible and financially viable strategy for the energy transition.

The ESTEEM Cambodia project supports the Cambodian government in preparing a feasible and financially viable strategy for the country’s energy transition. Through macro-economic modelling activities, it aims to:

1. Identify macroeconomic risks that could arise during the shift to cleaner energy, such as on public debt, employment, income inequality and monetary stability.
2. Explore how different energy scenarios interact with the overall economy.

To achieve this, research teams based in Paris and in Phnom Penh are designing a macroeconomic model tailored to Cambodia’s economy. They are working closely with key ministries to make sure the model becomes an effective tool for strategic planning.  This will help policymakers, especially the Ministry of Economy and Finance, make informed decisions and design a long-term strategy towards carbon neutrality.

The ESTEEM Cambodia project marks the second phase of a collaboration between the Royal Government of Cambodia and AFD. It builds on the results of a first phase, which created a user-friendly energy model called CEPIA, designed for the Cambodian energy sector. Developed with iED Consult for the Ministry of Mines and Energy, CEPIA produced four energy scenarios based on the Royal Government’s development and climate action plans. 

In phase 2, CEPIA will be linked to the ESTEEM model, in order to study the macroeconomic impacts of the four energy scenarios and connect them with broader socio-economic goals (GDP growth, investment, job creation…).

The project is carried out jointly by AFD researchers, Université Grenoble Alpes, and iED Consult, in close collaboration with the Ministry of Economy and Finance. Key members from various local ministries are actively involved in the development of the model, as well as in workshops and training activities, helping to build local expertise in macroeconomic modelling.

The project will result in:

• An ESTEEM macroeconomic model adapted to Cambodia, incorporating the energy scenarios from the CEPIA model developed during Phase I.
• A set of simulations analyzing the macroeconomic implications of Cambodia’s four energy transition scenarios.
• An interactive tool that can be used by government officials to simulate different scenarios and policies, particularly related to the energy transition.

Download the brochure

• Guilherme MAGACHO, AFD
• Isabelle FERAUDO, Université Grenoble Alpes
• Gaëlle LE TREUT, AFD
• Seav Er HUY, AFD Phnom Penh
• Somalyneth SARBOEUN, AFD Phnom Penh