By Dr Samiu Kwadwo NUAMAH & George A. K. MONNEY
The recent announcement by Donald Trump, reaffirming his commitment to a “Drill, Baby, Drill” policy and rejecting international Climate Change negotiations, has sent shockwaves through global energy markets.
This policy, unveiled just a week ago, underscores Trump’s prioritization of fossil fuel production over renewable energy and his continued disengagement from global climate commitments. These decisions signal a seismic shift in global energy dynamics, with immediate and far-reaching consequences for climate action, resource-dependent economies, and energy markets worldwide.
By promoting aggressive oil and gas exploration in the U.S., Trump’s policy threatens to flood global markets with cheaper fossil fuels, undermining renewable energy investments and destabilizing oil-exporting nations. For countries like Ghana, this decision is particularly concerning.
Ghana’s economy, which depends heavily on oil revenues, could face intensified competition in global markets and further delays in its energy transition efforts due to reduced funding for renewable energy projects.
Additionally, Trump’s dismissal of international climate agreements weakens global climate cooperation, making it harder for developing nations to secure the financial and technological support needed for sustainable energy development.
The announcement has placed Ghana in a precarious position. While the policy might indirectly increase investment opportunities in oil exploration, it also exacerbates Ghana’s challenges, including oil revenue volatility, environmental risks, and delayed progress in meeting its energy transition goals. Trump’s policy direction serves as a stark reminder of how decisions in major economies can ripple through global systems, affecting nations striving to balance development with sustainability.
Opportunities and challenges for Ghana
Ghana, as an emerging oil producer, stands at a critical juncture where both opportunities and challenges converge. Oil revenues play a critical role in Ghana’s socio-economic development, contributing approximately $1.4 billion in revenue in 2022 (Ministry of Finance, 2023). However, fluctuating oil prices and limited investments threaten to undermine these gains.
- Opportunities:
- Increased financing opportunities: The relaxation of environmental restrictions in global markets could enable Ghana to attract new investments in its oil and gas sector.
- Boost in production potential: The discovery of 400 million barrels of reserves in the Western Basin positions Ghana to increase production capacity, with the potential to add $800 million in annual revenue by 2030 (GNPC, 2023).
- Infrastructure development: Increased oil sector activities may lead to the development of local infrastructure, benefiting surrounding communities.
- Challenges:
- Revenue shortfalls: Ghana experienced a cumulative shortfall of $600 million in projected oil revenues from 2020 to 2022 due to global price declines (Ministry of Finance, 2023).
- Investment losses: Delays in key oil projects, such as the Deepwater Tano-Cape Three Points block, have cost the country $2 billion in lost investments between 2018 and 2022 (Petroleum Commission, 2023).
- Environmental degradation: Expanding oil production risks exacerbating environmental degradation, including oil spills and habitat destruction, in coastal communities.
Effects of Trump’s decision on Ghana’s energy transition
Trump’s policy has created significant ripple effects on Ghana’s energy transition efforts:
- Delay in transition investments: By prioritizing fossil fuels and withdrawing from global climate agreements, Trump’s policy signals reduced global funding for renewable energy projects. This hinders Ghana’s ability to secure climate financing for solar, wind, and other clean energy initiatives.
- Shift in global energy priorities: The emphasis on fossil fuels creates a competitive disadvantage for renewable energy, reducing Ghana’s incentives to accelerate its energy transition and potentially locking the nation into a reliance on oil and gas revenues.
- Risk of policy inertia: With major global players deprioritizing renewable energy, Ghana may experience policy inertia, slowing down the development of frameworks to support the energy transition.
- Vulnerability to climate impacts: Delays in the transition to cleaner energy sources exacerbate Ghana’s vulnerability to climate change effects, including coastal erosion, rising temperatures, and unpredictable rainfall patterns that threaten agriculture and livelihoods.
Recommendations for Ghana’s energy transition
Considering these challenges and opportunities, we urge the government of Ghana to prioritize the following actions to ensure a sustainable and equitable energy future:
- Diversify the energy portfolio:
- Reinvest oil revenues into renewable energy projects, such as solar and wind farms, to reduce reliance on fossil fuels and accelerate Ghana’s energy transition.
- Strengthen policy and governance:
- Enforce transparent management of oil revenues through institutions like the Petroleum Commission.
- Establish stricter environmental regulations to mitigate the ecological impacts of oil production.
- Enhance local content participation:
- Strengthen local content policies to ensure Ghanaian businesses and workers benefit directly from oil sector activities.
- Promote skills development programs to empower local communities with expertise in renewable energy technologies.
- Promote climate adaptation strategies:
- Secure international climate financing to fund infrastructure resilient to climate change impacts, including coastal defences and agricultural adaptations.
- Actively participate in international climate negotiations to advocate for fair energy policies that support developing nations.
- Foster regional collaboration:
- Partner with other African nations to create a united front in global energy markets and climate negotiations, advocating for equitable terms and financial support for sustainable development.
Call to action
We call on the government of Ghana, E&P Companies in Ghana, and stakeholders to seize this pivotal moment to align the nation’s energy policies with global sustainable development goals. While fossil fuel investments may offer short-term benefits, the long-term prosperity of Ghana lies in transitioning to a diversified and resilient energy sector that prioritizes environmental sustainability, economic inclusivity, and social equity.
References
- U.S. Energy Information Administration (2023). “Annual Energy Outlook 2023.”
- International Energy Agency (2018). “World Energy Outlook 2018.”
- Ghana National Petroleum Corporation (2023). “Annual Report 2023.”
- Ministry of Finance (2023). “Fiscal Data on Petroleum Revenue.”
- Petroleum Commission (2023). “Investment Trends in Ghana’s Oil and Gas Sector.”
- Intergovernmental Panel on Climate Change (2021). “Climate Change 2021: The Physical Science Basis.”
- United Nations Framework Convention on Climate Change (2023). “Paris Agreement Goals and Progress.”
