How Ghana can map its energy transition journey


All countries have a vital role and interest in avoiding catastrophic climate impacts and safeguarding a liveable planet. Like the citizens of most developing countries, Ghanaians are increasingly affected by climate change, despite bearing little responsibility for the emissions which have caused it.

At the COP26 climate conference last year, governments reaffirmed its commitment to the goal of limiting global warming to 1.5°C. Achieving this will require a colossal and unprecedented shift away from fossil fuels to renewable energy sources like wind and solar – as well as provision of clean, affordable and reliable energy for the nearly one billion people currently living without it.

The wealthiest countries that have polluted the most should hold the primary responsibility for tackling climate change, both in cutting their emissions first and fastest and in providing climate finance and support to countries like Ghana. Ghana’s President Nana Akufo-Addo emphasised this responsibility during COP26, when he called for a fair and equitable solution that “recognises the historical imbalances between the high emitters and low emitters”.

To date, however, wealthy countries have under-promised and underdelivered. They have yet to reduce emissions to the extent necessary to avoid warming beyond 2°C, let alone 1.5°C. And as President Akufo-Addo also mentioned, they have failed to honour their 2010 promise of US$100billion per year to support developing countries’ responses to climate change. Tragically, the consequences will be felt by all for decades to come.

Ghana’s agency in the energy transition
Despite these compounded injustices and broken promises, Ghana’s future ultimately depends on its own leadership and effective planning. Ghana is still a resource-dependent country, with more than a quarter of its export earnings coming from oil and gas alone. Over the past decade, the oil sector has contributed around US$6.5billion of direct revenue to Ghana’s budget. Without a plan for responding to the global energy transition, a significant decline in oil revenues could plunge Ghana into a deep crisis.

At a minimum, government should avoid making bad decisions – those that threaten the country’s economic and fiscal outlook. But Ghana’s record does not inspire confidence. In the last decade, the government has allocated US$2billion to the Ghana National Petroleum Corporation (GNPC). These investments have financed equity stakes in exploration, development and general operations in oil-producing fields. NRGI’s Risky Bet report shows that, globally, oil and gas projects currently in the pipeline worth an estimated US$400billion run the risk of not breaking even. Against the backdrop of global energy transition, GNPC’s ambitions of becoming an operator are risky.

In July 2021, Ghana’s Ministry of Energy and GNPC declared their intention to sink an additional US$1.65billion of public money into shares of Aker Energy’s oil project – yet another ‘risky bet’ given the increasing pace of global energy transition, which would result in poor returns on such a large-scale investment.

Furthermore, such a decision would divert precious capital that the government could invest in more socially beneficial programmes such as education or cheaper and more diverse energy sources which could power development in Ghana. Thankfully, after severe criticism from civil society organisations, the public and industry oversight bodies in Ghana, government paused its investment plans in the Aker shares.

No doubt, Ghana’s economic and fiscal outlook is uncertain. The 2018/19 oil-licencing round remains unconcluded and oil production is projected to decline. International companies are redirecting their investments, and projects have been delayed. State oil revenues peaked in 2018 at 10 percent of total government revenue, and dropped to seven percent in 2020 due to the coronavirus pandemic. The ongoing war between Russia and Ukraine and the related global energy crisis now present huge uncertainties for the oil sector, including the prospect of a global recession.

The good news is that Ghana now has a golden opportunity to develop a comprehensive and context-specific plan for navigating the global energy transition. In response to COP26 and Ghanaian CSOs’ demands for a national energy transition policy, government launched the National Energy Transition Committee (NETC) in December 2021. The committee is tasked with developing a national policy document on steps the country can take to successfully navigate global energy transition.

The NETC is also tasked with conducting a nationwide consultation on Ghana’s energy transition. At the first regional forum organised by the Ministry of Energy on behalf of the NETC, Vice President Dr. Mahamudu Bawumia said the NETC’s nationwide consultations are key to success: “We need to develop plans and implement options that people can relate to”. He also stressed the importance of equal opportunities for all citizens to enjoy benefits of the energy transition and ensure social justice in the process.

Essential elements for Ghana’s approach

Establishment of the NETC is an important and valuable first step. The following recommendations, if adopted, will put the committee on track to deliver a successful energy transition plan:

Include all voices. Ghana’s plan should be inclusive and leave no citizen behind. The plan should address how government will support local economies with relevant training, technology and finances to take advantage of new opportunities in the transition.

Enlist experts. The NETC should engage sector experts working on the energy transition to help ensure the plan is informed by data and technical analysis.

Promote open dialogue. Open and honest engagement between all relevant stakeholders will help build consensus and ownership around a transition pathway that is widely considered by citizens as viable and necessary. A shared understanding of the risks and opportunities in the energy transition is critical to agreement on a shared strategy.

Plan in harmony and coordination with existing policies. The energy transition plan should harmonise existing policy objectives and remedy the systemic inefficiencies in existing policy implementation.

Improve governance of climate finance. The Ministry of Finance should spell out the role of international climate finance in energy transition planning, and interrelate the energy transition plan with Ghana’s (conditional) nationally determined contributions under the Paris Agreement. Across the board, this requires building the state’s capacity to receive and deploy international climate finance.

Take a critical and dynamic approach to energy options. The transition plans must address Ghana’s growing energy needs. Decisions about energy sources and related services should be based on analysing different solutions over the long-term – mindful of the likelihood that many factors (such as the competitiveness of renewables and gas) may change quickly over the coming decade. Accordingly, the NETC should review the role of fossil gas over the course of the transition – and not assume from the outset that gas will be a constant.

Assess implications for existing institutions. Ghana’s energy transition plan should consider the role of existing institutions such as GNPC in light of the long-term macro pathway, rather than starting with assumptions about their purpose and role. Making the right investment decisions will require transparency and robust risk assessment.

Nafi Chinery, is the West Africa (Anglophone) Regional Manager at the Natural Resource Governance Institute (NRGI).  Photo by Bhupi74 for Shutterstock.

This commentary was originally published as a post on the blog of the Natural Resource Governance Institute (NRGI) on 4 April 2022.

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