The promises of the climate economy in Ghana

Anthony Kofi Kwadio
May 21, 2024

G hana's current economic models rely on an intense exploitation of natural resources. These models cause irreversible damages to the environment and exacerbate climate change. Signs of environmental degradations are visible everywhere in Ghana. Prolonged droughts are destroying agriculture and forcing people to migrate southwards. Regular floods cause erosions, land degradation, and the destruction of human habitat. Mining activities are destroying wildlife and polluting rivers. Ghana's coast line offer economic opportunities and challenges. It offers more extractives natural resources, access to international trade and also tourism. At the same time, the coast line has a fragile ecosystem, because of its vulnerability to climate change and pullution.

The United Nations (UN) has, for over a decade, been raising awareness about the potential of a climate economy. The United Nations is urging a shift of public and private investment towards this emerging economic sector¹. Ghana is heeding the call and is calibrating its economic models to take advantage of this emerging sector. The goal is to continue to improve the standards of living while preserving the environment. The government of Ghana sees the climate economy as a potential contributor to the national development strategy. In 2020, the Ministry of Labor acknowledged that this emerging model holds a huge potential for job creation and livelihood empowerment.

Defining the climate economy

Contemporary economists says that the climate economy is made of the ‟blue economy” and the ‟green economy” sub-sectors. The notion of ‟green economy” emerged in 1992, during the Rio+ 20 environmental Summit². The term gained international acceptance after the 2008 financial crisis. In 2011, the UNEP defined the green economy as ‟an economy that results in improved human wellbeing and social equity, while reducing environmental risks and ecological scarcities”. The ‟blue economy” intially knonw as the ‟ocean economy” also emerge in the 1990s. The World Bank defined the blue economy as the ‟sustainable use of ocean resources to benefit economies, livelihoods and ocean ecosystem health”³. In short, the climate economy is an approach to economic development that prioritizes the reduction of carbon emissions and pollution. It enhances energy efficiency and prevents the loss of biodiversity.

The climate economic sector has distinct factors of production (natural resources, labor expertise, capital), transformative industries (clean energy, renewable technologies) and output. The World Business Council for Sustainable Development (WBCSD)⁴ called this economic model the ‟results chain”in rough analogy to the value chain. The goal of this ‟new way of doing business” is to reduce the negative environmental effects of the current production systems.

Ghana and the climate economy

Economists at Oxford Economics and ARUP estimate that the global green economic sector will be worth US$10.3 trillion by 2050⁵. It could generate US$6.3 billion to the Ghana every year according to the World Bank. This represents a fractio of the cost of environmental degradation incurred by the country or 8 percent of the country’s GDP. But Ghana will have to convert this cost of environmental degradation into revenues. In 2015, the Environmental Protection Agency of Ghana carried out a risks diagnosis and develop a multi-year strategy action plan.

Ghana has a coast line of 550 kilometers. A quarter of its population depends on ocean resources. ‟Blue economy” activities include fisheries, extractive industries (oil and gas) and tourism. A study by the University of Cape Coast (Ghana) indicates that the country ‟significantly relies on its blue economy for income, employment and food‟. The study further indicates that Ghana earns revenues from oil and gas and fisheries which emplpy 10 percent of the national workforce. This sub-sector and handles 70 percent of Ghana’s international trade is carried by sea through its ports in Tema and Takoradi⁶. If Ghana can adapt its current productive models, then the country will abe to tap the economic potentials in its coastline. without endagering it.

The climate economic sector of Ghana has the potential to create other sources of revenues. On November 11 to 22, 2024, during the 29th Conference of Parties (COP29) in Baku of Azerbaijan, the President of Ghana revealed that Ghana raised US$800 million from carbon credit between 2023-2024. The government set up the Carbon The EPA's Climate Change Unit host the Carbon Market Office (CMO) as part the implementation of the Paris Agreement treaty on climate change (COP21 in 2015). The CMO works under the supervision the Ghana Environmental Protection Agency (EPA). The government also set up The Ghana Carbon Registry (GCR), which serves as a database for collecting and tracking transactions from mitigation activities at sector, city and corporate levels.

The emergence of these two institutions has spunned a host disruptives economic activities in the climate economic sector.

Emerging disruptive activities

The government of Ghana says that it has a holitic approach to the fight against the effects of climate change. This approach seeks to balance economic prosperity with climate adaptation and mitigation. In this context, the authorities presented the Ghana Energy Transition and Investment Plan in 2023. This plan outlined steps towards de-carbonization. The planalso highlights three disruptive strategies that have potential to boost climate economic activities.

• AgriTech and biotechnology

The government of Ghana believes that science can help tackle many of the challenges of climate change. In this context it sees AgriTech and biotechnology as opportunities for innovations in agriculture and forestry. For example, Ghana is losing vast areas of primary forest every year according to Global Forest Watch. Total area of humid primary forest in Ghana also decreased by over 12 percent over the past decade. Equally, Ghana lost 37 percent of its coastal land to erosion and flooding between 2005 and 2017⁸. Ghana is targetting mangroves for the application of agritech and use of modern biotechnology to create new economic activities.

The government has teamed up with a Helmholtz-Zentrum Hereon, a German environmental research institute to develop scientific solution to marine degradation in a project called the Mangroves as Nature-based Solutions to Coastal Hazards in Eastern Ghana (MANCOGA). MANCOGA will develop ‟a Digital Twin to assess the potential of mangroves for coastal protection and sustainable ecosystem services”. The project will explore alternative livelihood options, especially in the emerging climate economy, to reduce the depletion of mangrove resources ⁹. In 2012, Institute for Environment and Sanitation Studies (University of Ghana) estimated that traditional informal mangrove economic activities generate US$20 million per year¹⁰. MANCOGA will also yield environmental benefits. According to the United Nations mangrove forests sequester carbon at a rate up to 4 times faster than tropical forests on land and by acting as a natural coastal defence against storm surges, tsunamis, rising sea levels and coastal erosion, they help protect coastal communities from the various adverse effects of climate change. Mangroves can trap single-use plastics (which make up 83–93 percent of the total litter found in mangroves).

• Organic waste and power production

The climate economic sector is also disrupting traditional practices is waste management and power. Ghana produces 22,500 tons of waste per day, of which 65 percent are organic waste. Recyclable items account for 22 percent of the total. They include plastics, textiles and metals. Other recyclables items are glass, rubber and leather. Opportunities for disruptive innovations and technologies are emerging in plastic and e-waste recycling. Recycling single used plastics unclog drainage systems, sanitation and reduces floods risks. An overwhelming proportion of this waste end up in the sea. Thus, targeting the coastal areas for recycling activities through new technologies is vital. Also, Ghana coastal areas have a high potential for clean power generation. Research has shown that the west coast of tropical Africa is a favourable locations for floating solar¹¹.

• Renewable energy production and consumption

Renewable energy is a pillar of Ghana's green transition plans. The government has pledged to increase domestic production of renewable energy to 10 percent by 2030. The bulk of Ghana’s energy come from hydro and thermal, which together produce over 80 percent of electricity. Throughout the country, 86.63 percent (2021) of Ghanaians have access to electricity. However, the electricity system is exposed to the vagaries of climate change. Drought cause the evaparoation of hydroelectic dams during the dry season, significantly reducing water levels that turn the turbines. In households, gas is not accessible to all Ghanains and 51 percent of the population has to rely on charcoal as the primary cooking energy. This makes Ghana the highest deforested country in West Africa. In 2015, the Ghana EPA developed a plan to convert these challenges into economic opportunities.

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