In November last year, Ghana was one of the 197 nations that adopted the Glasgow Climate Pact following the conclusion of the most recent UN Climate Conference, COP26. After two weeks of negotiations, with a record number of delegates in Scotland, the international community re-affirmed its long-term goal to limit the temperature increase resulting from climate change to 1.5°C above pre-industrial levels.
Following the conclusion of the Africa Energy Forum last month, with the theme “Africa for Africa: Building Energy for the Just Transition”, and the International Energy Agency (IEA)’s publication of its Africa Energy Outlook 2022, we will be taking a closer look what the COP26 commitments mean for businesses and other stakeholders in the country and at Ghana’s progress since Glasgow.
Ghana’s Climate Change Commitments
The Glasgow Climate Pact concluded that limiting global warming to 1.5°C would require rapid, deep and sustained reductions in global greenhouse gas emissions, including reducing global CO2 emissions by 45% by 2030 relative to the 2010 level and to net zero by 2050.
A key pillar in achieving this reduction is the individual “nationally determined contribution” (NDCs) targets made by countries under the United Nations Framework Convention on Climate Change.
Ghana submitted its original NDC target in September 2015, committing to lowering its greenhouse gas emissions by at least 15% by 2030. In September 2021, shortly prior to the COP26 conference, Ghana submitted an updated NDC, reaffirming that commitment and providing further detail on how the target is to be achieved.
Funding Climate Mitigation and Adaptation Measures
Ghana’s 2022 Budget referenced Ghana’s NDC target and recalled that Ghana had committed to implementing programmes in 10 priority areas to achieve the target in the next decade, noting that implementation of these measures is expected to generate an absolute greenhouse gas emission reduction of 64 MtCO2e.
But the 2022 Budget also recognised the reality that ambitious climate change targets require equally ambitious financing. USD 9.3 billion in investments is needed to implement the Ghana Government’s policies to implement the climate change mitigation and adaptation programmes intended to achieve its NDC targets.
Exactly where this funding will come from is not clear.
The 2022 Budget stated that funding will be mobilised from public, international, and private sector sources as well as climate markets. However, the Ghana Government’s ability to fund these programmes from public funds is constrained.
In the six months following COP26, the Ghanaian economy – like many emerging market economies - has continued to face headwinds, particularly in the face of rising global energy and food prices following the crisis in Ukraine. At the end of April, year-on-year inflation reached 23.6%, the highest it has been since January 2004, and Ghana’s debt-to-GDP ratio stood at 78%.
Given this lack of fiscal space, Ghana will need to fight hard for its fair share of the limited pool of capital from international and private sector sources.
The Glasgow Climate Pact noted “with deep regret” that developed countries had so far failed to fulfil the commitment made in 2009 to mobilise USD 100 billion of climate finance annually by 2020 and urged developed countries to fully deliver on the USD 100 billion goal “urgently and through to 2025”.
President Nana Akufo-Addo had himself expressed disappointment in Glasgow at the failure of the wealthy nations to honour their USD 100 billion commitment.
Nevertheless, there have been some positive developments regarding international funding.
Off the back of this Roadmap, the GCA has committed to help the Ghana Infrastructure Investment Fund obtain accreditation by the Green Climate Fund to unlock potential climate adaptation funding to support these projects.
The 2022 Budget noted that the Ghana Government had already submitted 18 proposals to the Green Climate Fund and co-financiers and have received approval for 9 proposals totalling USD 106.9 million. If the Ghana Infrastructure Investment Fund is able to become an accredited partner of the Green Climate Fund, we would expect these funding opportunities to expand.
Under this Agreement, in exchange for two million tonnes of carbon emission reduction credits, Ghana will receive funding from Switzerland to stimulate investment in green friendly projects that will contribute to achieving its NDC target and the UN’s Sustainable Development Goals (SDGs) more broadly.
But even with these sources, there remains a significant funding shortfall and, therefore, a potential investment opportunity for private capital.
We hope that the introduction of the Public Private Partnership Act, 2020 (Act 1039) (the “PPP Act”) will help facilitate private sector funding of infrastructure development, including these critical adaptation projects. The new PPP Act provides for the development, implementation and regulation of PPP arrangements between governmental parties and the private sector and establishes institutional arrangements for the regulation of PPPs. Amongst other things, the PPP Act:
For further information on the new PPP Act and the legal regime applicable to infrastructure projects in Ghana more generally, please see our guide to Project Finance Laws and Regulations, Ghana 2022 published by International Comparative Legal Guides, available here.
With recent flooding across the country highlighting the urgent need for climate adaptation projects to be implemented, we hope this new regulatory framework, and the institutional infrastructure it creates, can be a catalyst for private sector investment.