3. Ghana

3.1 National policy and regulatory context

Ghana has demonstrated its commitment to responding to the global call for climate action through adaptive and mitigation strategies. It is a signatory to several regional and international protocols that focus on environmental sustainability and the need to adapt or mitigate the impacts of climate change. At the regional level, it has aligned with initiatives such as the West African Alliance on Carbon Markets and Climate Finance, the West Africa Science Centre on Climate Change and Adaptive Land Use and the ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE). At the global level, Ghana joined the UNFCCC in 1995 and is a signatory to the Paris Agreement, which provides a global framework to reduce global temperatures to well below 2oC and pursue efforts to limit it to about 1.5oC. It has subsequently submitted its NDC, which outlines adaptive and mitigation strategies to meet the Paris Agreement target, and has advanced in its implementation.

Ghana’s commitment to climate action has led to the development of legal, regulatory and policy frameworks that outline the country’s laws, strategies and roles of responsible state and non-state institutions. The 1992 Constitution is the principle law of the republic around which all other laws of the country revolve. For climate change and environmental conservation, the Constitution is explicit about safeguarding the environment for posterity. Article 36 (9) states that “the State shall take appropriate measures needed to protect and safeguard the national environment for posterity; and shall seek cooperation with other states and bodies for purposes of protecting the wider international environment for mankind”. The government of Ghana has enacted several legal frameworks to broaden the scope of the regulations on climate change and environmental sustainability. These laws span various sectors, including energy, forestry, agriculture and land and water management. Some of the key legal frameworks and regulations are indicated in Table 3.1.

Between 2010 and 2019, Ghana’s government outlined several key policies that set targets, action plans and financing strategies for climate action. The energy sector has received much attention in these policy documents. Most documents outline the energy sector’s role in reducing greenhouse gas emissions. The technologies highlighted in the energy sector include renewable energy integration, clean cooking technologies, biogas and reduced gas flaring. Other vital sectors include agriculture, forestry, land use, water resources and disaster management.

Many of these policy documents have associated strategies for raising finance. Finance for these policies is mainly raised through government funding, private sector investment and funding from bilateral and multilateral institutions. The sources of funding highlight the applicability of various approaches for climate financing. For the government of Ghana, the financial strategies for climate action cannot be based on funding from development partners alone but must come from a plethora of funding sources in which the government and private sector play a significant role. Table 3-2 summarises the relevant policy documents with their various sectoral roles.

Table 3.1 Legal frameworks on climate change and environmental sustainability in Ghana

Source: Authors’ construct based on official sources (2022)

Table 3.2 List of policies that address climate action

Source: Authors’ construct (2022)

3.1.1 Regulatory framework

No single body manages the implementation of Ghana’s climate change policies, and the government of Ghana has outlined several implementation bodies responsible for policy making, implementation and regulation of laws.

• Ministry of Finance: The Ministry is responsible for implementing, monitoring and evaluating macroeconomic, fiscal and financial policies for sustainable development. It also ensures an effective mobilisation of domestic and external resources.
• Ministry of Energy: The Ministry is responsible for energy policy formulation, implementation and supervision of energy sector agencies.
• Ministry of Environment Science, Technology and Innovation: The Ministry is responsible for ensuring accelerated socio-economic development of the nation through the formulation of policies to promote the use of appropriate environmentally friendly technologies.
• Ministry of Food and Agriculture: The Ministry promotes sustainable agriculture and thriving agribusiness through research and technology development, effective extension and other support services to farmers, processors and traders for improved livelihood.
• Forestry Commission: The Commission coordinates, implements and enforces policies, laws and regulations on the management and utilisation of forest and wildlife resources.
• Energy Commission: The Commission licenses public utilities for the transmission, wholesale supply, distribution and sale of electricity and natural gas. It provides a database for national decision-making for the efficient development and utilisation of energy resources.
• Environmental Protection Agency: The commission is responsible for protecting and improving environmental standards in Ghana.

3.2 Climate change situation

The 2010 National Climate Change Adaptation Strategy outlines four areas that manifest Ghana’s climate change situation – rising temperatures, declining rainfalls and intense variability, rising sea levels and a high incidence of weather extremes and disasters. Ghana’s average temperature has steadily increased over the years. The average temperature rose by 1 degree Celsius between 1990 and 2021 (See Fig 3.1). The current temperature trend indicates that temperature will keep rising if urgent action is not taken towards mitigating climate change.

Fig 3.1 Average temperature trend in Ghana between 1990 and 2021

Source: World Bank Climate Knowledge Portal

Rainfall patterns in the past years show that rainfall is highly variable over annual and decadal timeframes. This variability makes it difficult to identify projected patterns. However, Ghana’s climatology shows a potential increase, especially in the forest regions.^[72] Generally, rainfall is expected to increase, and there will potentially be more erratic and intense flooding, especially during the wet seasons. These phenomena call for more adaptive measures to reduce the occurrence of natural disasters associated with flooding

Ghana has a coastline of about 550km, with almost a 4th of its population living along the coast. Sea level anomalies relative to the average sea level between 1993 and 2012 have increased over the past years. As of 2015, the annual sea-level anomaly was about 85.7mm. A vast population is affected by coastal erosion caused by rising sea levels. Coastal erosion occurs when the shoreline retreats inland, displacing the homes and properties of victims. For example, Fumeve was a fishing community in the Keta Municipality in the Volta Region of Ghana. In 2016, the community was displaced due to a sea surge transforming it into packs of islands.^[73] Five years on, another sea surge displaced about 4000 people in the Keta Municipality. While adaptive measures, including the construction of sea defence walls, are proffered, the threat of a rising sea level and its impact persists, requiring urgent preventive measures.

3.2.1 Greenhouse gas emissions in Ghana

In Ghana, CO₂ accounts for about 64.7% of all GHGs, followed by nitrous oxide and methane, which account for 18.3% and 15.4% of emissions, respectively. Gases with fluorine contents (hydrofluorocarbons and perfluorocarbons) account for the remaining levels of contributions. The GHG contribution to climate change increases the need to consider decarbonisation techniques as necessary mitigating actions.^[74]

The total GHG emissions as of 2016 stood at about 42.2 million tonnes of CO₂ equivalent (MtCO₂e), with an annual growth rate of approximately 2.1% between 2010 and 2016. The Agriculture, Forestry and Land Use (AFOLU) sector is the most significant contributor to GHGemissions (Fig 3.2 and Fig 3.3), followed by the energy sector, which accounts for about 36% of GHG emissions. Emission reductions from forestry and land use reduced the country’s 2016 total emissions to about 29.28MtCO₂e, of which emissions from the energy sector contribute about 51%.

Source: Environmental Protection Agency (2019)

3.3 NDC gap analysis

3.3.1 Ghana’s Climate Mitigation and Adaptation Plans

In 2015, Ghana submitted its mitigation and adaptation actions as its NDC, as required by the Paris Agreement. The NDC contains 31 action plans for climate action (20 mitigation and 11 adaptation plans), which are either conditional (i.e. actions that depend on support from international bodies or countries) or unconditional (i.e. actions based on the country’s resources). These actions were designed in line with the Ghana Shared Growth and Development Agenda II and the country’s anticipated 40-year development plan outlined by the National Development Planning Commission.

In 2015 the government of Ghana selected five sectors on which to focus its mitigation actions: energy, transport, AFOLU, waste and industry. The energy sector had the largest number of mitigating action programmes (nine actions), followed by the AFOLU sector (five actions) and the waste sector with three actions. The most notable of the programme of actions for climate change mitigation are integrating renewable energy, using clean cooking technologies, enhancing energy efficiency, scaling up institutional biogas and abating fluorinated gases. Of the mitigation actions, the government identified only two actions as unconditional. Those actions are in the energy and AFOLU sectors. In the energy sector, the government’s unconditional action was to scale up the replacement of light crude oil with natural gas for energy generation in thermal plants by about 120mmscf. The AFOLU sector’s unconditional action was to continue its annual afforestation/reforestation plans of about 10,000 ha of degraded land.

Ghana’s initial NDC indicates that the mitigation actions require about US$9.8billion, mainly conditional mitigation actions (79% of financial requirement under mitigation). Again, the energy sector forms a significant component. The financial requirement from that sector constitutes about 51% of mitigation actions and 22% of the entire financial requirement for Ghana’s NDC, followed by the transport sector with a financial requirement of approximately US$3.5 billion, representing 36% of the needed funds for mitigation actions and 16% of the entire financial requirement (Table 3-3).

Ghana’s adaptation plans focus on six core areas: agriculture and food security, sustainable forest resource management, resilient infrastructure in the built environment, climate change and health, water resources and gender and the vulnerable. In addition, the adaptation plans have 11 programme actions required to meet Ghana’s target for climate action. Seven of the 11 adaptation measures are unconditional programme actions. In its NDC, Ghana explains that it will focus more on reducing climate risk impacts due to urgent development needs and the country’s exposure to climate change risks in sectors such as agriculture, infrastructure and water. Therefore, it is not surprising that Ghana intends to focus more of its resources on adaptation plans.

Financial requirements for adaptation plans form about 56% of the total financial requirement for supporting Ghana’s NDC. The unconditional action points constitute about 52% of the financial requirements for adaptation plans and 29% of the total fund needed for the NDC. The sector that focuses on resilient infrastructure received the largest financial requirement of about US$3.9 billion, followed by the agriculture and food security sector with a funding need of about US$3.19 billion (Table 3.4).

Table 3.3 Mitigation measures for climate action

Source: Authors’ construct (2022) based on data from Ghana’s NDC submissions to the UNFCCC

Table 3.4 Adaptation plans for climate action

Source: Authors’ construct (2022) based on data from Ghana’s NDC submissions to the UNFCCC

Financing is a significant factor contributing to attaining the NDC objectives. As indicated, Ghana’s 2015 NDC in 2015 has a financial requirement of about US$22 billion, which has to be obtained from various sources. The government of Ghana has stated its commitment to mobilising funds to support the unconditional NDCs. This commitment suggests that other sources of finance are necessary to fund the remaining part of the conditional NDCs. Potential domestic funding sources include corporate social responsibility activities from corporate bodies and commercial facilities from financial institutions. In addition, Ghana has identified the GCF as a key source for climate financing, providing up to about US$5 billion, representing 17.3% of the total financial requirement (Table 3.5).

Table 3.5 Financial requirements for updated NDC

Source: Authors’ construct (2022) based on data from Ghana’s NDC submissions to the UNFCCC

Ghana’s updated NDC

n 2021, Ghana announced its updated and enhanced NDC under the Paris Agreement. The updated NDC includes 19 policy actions, classified under eight socio-economic outcomes (see Table 3.6), which translate to 47 programmes of action (of which 13 are adaptation and 34 are mitigation actions). Seven of the 13 adaptation actions are unconditional, requiring financial mobilisation from the government of Ghana. Nine of the 34 mitigation actions are unconditional.

The revised NDC requires less financing, although the programme of actions has increased. Financial needs to support the programme of actions range between US$9.3 billion to US$15 billion (about 12% to 19% of the country’s 2021 GDP). The reduction in the financial requirements could be due to clarity in cost assessment and developments after the initial NDC in 2015. For example, before the implementation of NDCs, natural gas was not a major fuel source for powering Ghana’s thermal plants. In 2016, about 3.6 million barrels of Light Crude Oil (LCO) and 26.9 bcf (billion cubic feet) of gas were consumed for power generation. However, natural gas has significantly replaced liquid fuels in recent periods. In 2020, the consumption of LCO fell to about 360,000 barrels, whereas gas consumption increased to about 95 bcf. The statistics show that Ghana has been on track with its NDC target of switching from liquid fuels to gas, which reduces the financial commitment required to meet the NDC target.

Table 3.6 Socio-economic outcomes for Ghana’s updated NDC

Source: Authors’ construct (2022) based on data from Ghana’s NDC submissions to the UNFCCC

3.3.2 Monitoring, Reporting and Verification mechanisms

Monitoring and reporting mechanisms are crucial in tracking and assessing the country’s commitment to meeting its NDC targets. Articles 12 of the UNFCCC and Article 13 of the Paris Agreement mandate countries to provide inventory reporting of anthropogenic emissions in line with methodologies adopted by the IPCC. These reporting frameworks deepen transparency in implementing climate change adaptation and mitigation actions.

In 2013, Ghana adopted the Climate Ambitious Reporting Program (CARP) as its measurement, reporting and verification (MRV) framework to democratise the climate data in support of the global report on greenhouse gases. The CARP is a base with four connected components: institutional arrangements; data handling;, methods, tools and protocol; and skills development.

Like other countries, Ghana has created a reporting platform where a contact person represents each sector responsible for a particular NDC. The contact person is responsible for the data collection, processing and documentation of specific mitigation actions. The document is archived, and all contact persons’ submissions are sent to the Environmental Protection Agency for additional analysis. The analysed and relevant data are subsequently sent to the Greenhouse Gas Abatement Cost Model developed by the United Nations Environmental Program. The model allows for emission projections, setting emission reduction targets, and compiling the collection of individual mitigation actions. It also helps to assess climate actions contributions toward meeting the national target. Table 3.7 details key government institutions responsible for the data collection on specific mitigation items.

Table 3.7 Key institutions responsible for MRV under the NDCs

Source: Authors’ construct (2022)

3.4 Mapping Climate financing flows in Ghana

3.4.1 Evolution of climate finance and investment in Ghana

Climate financing in Ghana has generally followed commitments made in the various climate strategies, plans, frameworks and policies developed by the relevant sector agencies. Several efforts have been made to track the flow of climate finance and investments into Ghana over different periods. For example, Ghana’s Third National Communication Report to the UNFCCC (2015) tracked and reported on the financial flows from 2011 to 2015, while the Fourth National Communication Report to the UNFCCC (2020) mapped financing flows from 2011 to 2019. The Forest Trends REDDX Report (2016) also mapped REDD+ finance flows from 2009 to 2014.

These tracking and mapping efforts reveal six key channels of climate financing in Ghana:

• Bilateral channels
• Multilateral
• Global projects
• National funds or government co-financing
• Global Environmental Facility
• Private Funds (private foundations, private sector and technical cooperation)

Ghana’s Fourth National Communication Report to the UNFCCC (2020) estimates the total financial inflows for climate action between 2011 to 2019 at about US$1.3 billion. This estimate excludes the US$14.2 billion financial investment to develop Ghana’s natural gas industry. Ghana has received the largest share of climate financing from bilateral channels. Between 2011 and 2019,[75] bilateral financing contributed 45.1% of the total US$1.3 billion financing received (Fig.3.4). This sum is followed by 29% receipts from multilateral funding and 11.6% from globalprojects, as shown in Fig. 3-4. It is essential to highlight that while the Global Environment Facility (GEF) contributed 4.4% of the financing flows for the period, it was one of Ghana’s traditional climate financing sources even before Ghana’s Initial National Communication to the UNFCCC in 2000.

It is also important to highlight that about 92% of the financing received from 2011 to 2019 went through government institutions, including ministries, public corporations and regulators. Beyond these institutions, international non-governmental organizations operating in the country received 3.3%, while universities received 2.6% of the funding.

Fig 3.4 Share of total financing from the key channels (2011-2019)

Source: Ghana’s Fourth National Communication Report to the UNFCCC (2020)

3.4.2 The flow of financing and Ghana’s climate priorities

Ghana’s National Climate Policy, developed in 2013 to provide strategic direction and coordinate climate action in Ghana, spells out three key objectives for climate action for the country: effective adaptation, social development and mitigation. They can be surmised to be Ghana’s key priorities for climate action. From the strategies outlined to drive the realisation of these objectives, it can be observed that there is a significant focus on delivering effective adaptation, albeit interlaced with mitigation measures. In addition, four key thematic areas are identified for attention: energy and infrastructure, natural resource management, agriculture and food security and disaster preparedness and response. Prior to the National Climate Policy, Ghana’s climate priorities were established in the Ghana Shared Growth Development Agenda II – GSGDA 2, its medium-term development plan, and the national communications to the UNFCCC.

However, in 2015 Ghana submitted its initial INDC to the UNFCCC, which shifted focus from the adaptation actions to mitigation by outlining 20 mitigation and 11 adaptation measures proposed for implementation in seven priority economic sectors over 10 years (2020-2030). Moreover, Ghana’s updated INDC reaffirms the country’s focus on mitigation through the proposed 13 adaptation measures and 34 mitigation measures. The strategies outlined are expected to draw financing into these key areas to support Ghana in achieving its climate objectives.

A review of the climate financing received between 2011 and 2019 shows a significant allocation towards mitigation rather than adaptation actions.^[76] Of the US$1.3 billion received, about 93% was allocated towards mitigation activities. In comparison, adaptation efforts received about 5% of the inflows (Fig. 3.5). While it is essential to finance mitigation actions, similar attention must be paid towards financing adaptation activities. This attention is important, especially considering that Ghana, like other African countries, remains vulnerable to the impacts of climate change. The approximately 2% remaining was earmarked to support other initiatives not classified under mitigation or adaptation. The adaptation and mitigation activities also included Means of Implementation (MOI) activities, especially for capacity development of the receiving institutions.

Fig 3.5 Share of financing received by climate action areas (2011-2019)

Source: Ghana’s Fourth National Communication Report to the UNFCCC (2020)

About 94%^[77] of the funding received over the 2011 to 2019 period went to four sectors: energy, forestry, agriculture and transport (Fig 3-6). The energy sector received the largest allocation of 57.8% to implement several mitigation measures in the sector, including the promotion of energy efficiency and conservation, improving access to clean cooking solutions and scaling up the penetration of renewables on the national grid. The forestry sector received the second largest allocation of 25.7% to increase forest cover, restore degraded lands and promote sustainable cocoa and shea production.

Further data disaggregation shows the sectoral focus on mitigation and adaptation financing. For example, Fig 3.7 shows agriculture, education and the environment as the largest recipients of adaptation financing. Similarly, Fig 3.8 shows that mitigation financing was focused on the energy, forestry and transport sectors. Together, they receive 96.5% of the total disbursements for mitigation measures, with the energy sector receiving 61.8%. It is essential to highlight that about 30% of the funding received for adaptation was allocated for MOI activities: US$16.51 million was for MOI activities, particularly for the education sector.

Fig 3.6 Sectoral receipts of climate financing (2011-2019)

* This includes environment, education, finance, development planning, interior, water and health.

Source: Ghana’s Fourth National Communication Report to the UNFCCC (2020)

* This includes water and forestry

Source: Ghana’s Fourth National Communication Report to the UNFCCC (2020)

3.4.3 The role of local banks in climate financing

Climate financing by local commercial banks in Ghana is still at its nascent stage of development, mainly because the banks have traditionally prioritised yield and risk. However, the Bank of Ghana (BoG) has been instrumental in driving the innovation of local Ghanaian banks to sustainable financing, including climate financing. In November 2019, the BoG, in collaboration with the Ghana Association of Bankers, launched the Ghana Sustainable Banking Principles^[78] to provide a framework for sustainable banking that promotes effective environmental and social risk management for Ghanaian banks. By 2020, 24 local commercial banks had signed on to the principles to contribute to sustainability through their financial products, models, marketing services and business operations. Even before the Ghana Sustainable Banking Principles, six commercial banks, Fidelity Bank, Absa Bank, Access Bank, Guarantee Trust Bank, Ecobank and Zenith Bank, had signed onto the UN Environment Program Finance Initiative to apply the industry frameworks and developed practical guidance and tools that positioned their businesses for the transition to a sustainable and inclusive economy

The nature of climate financing from local banks has been largely private sector focused, i.e. de-risking capital flow to private businesses and entities with investments spanning across climate-resilient agriculture, clean energy and green infrastructure, as opposed to financing government climate projects. Some banks attract financing from global climate finance funds for on-lending to private businesses engaged in climate-related investments. For example, in 2020, Ecobank became Ghana’s first Accredited Entity for implementing GCF funds in Ghana. This accreditation allows the bank to finance up to US$250 million in climate projects. However, Ecobank is yet to receive programme approval to access funds. Instead, in 2021, it received US$13.25 million^[79] from the African Development Bank (AfDB) through AfDB’s GCF-administered resources for financing climate-resilient agricultural practices in Ghana. Moreover, the Agence Francaise de Development-backed €32.5 million SUNREF^[80] Green Finance Programme is run through CalBank Ghana and GCB Bank. The facility aims to support private sector investment in renewable energy technologies and sustainable energy in the country.

There are also examples of government-sourced climate financing being run by local banks as partner finance institutions. An example is the €20 million Green Credit Line^[81] secured from the German KfW Bank to deepen green investment project financing in Ghana and build the capacity of local financial institutions in green financing. Ecobank, Stanbic Bank and the Agricultural Development Bank are the partner financial institutions on-lending the funds to local businesses. In addition, through the ECOWAS Refrigerators and Air Conditioners Initiative^[82] implemented by the Energy Commission, four banks – Fidelity Bank, Ecobank, Absa Bank and CalBank – are running the Green On-Wage financing mechanism to unlock at least US$11 million financing to support the purchase of more sustainable cooling appliances in Ghana.

Moreover, some other banks, such as the Access Bank,^[83] have been able to integrate sustainability into their traditional lending operations to make room for providing flexible funding for climate related projects in efficient green buildings, sustainable waste management, sustainable land use and clean transportation.

It is expected that the commitment to the Ghana Sustainable Banking Principles will accelerate the growth of green financing by local commercial banks for both private and government climate action projects.

3.4.4 Current opportunities for mobilising climate investment in Ghana

Ghana estimates between US$9.3 and US$15.5 billion as the investment required to implement its updated NDC between 2022 and 2030. The policy actions outlined in the National Climate Policy and Ghana’s NDC provide investment opportunities that could be scaled up to accelerate climate finance in some sectors of the economy. These sectors include energy, agriculture, forestry, transport and waste management.

Energy

Ghana aims to reduce GHG emissions unconditionally by 15% relative to its business-as-usual scenario emission by 2030 and a further conditional reduction of 30% when it receives external support. This ambition requires accelerating clean cooking solutions, scaling up renewable energy penetration and promoting energy efficiency. With electricity access currently at 87%,^[84] small-scale renewable energy systems provide the opportunity to achieve universal access, especially for hard to-reach areas for the national grid.

However, the Africa Centre for Energy Policy identifies the initial cost of investment as the demotivating factor for renewable technology investment among small and medium-sized enterprises (SMEs) in Ghana and households to a large extent.^[85] While the government is currently undertaking efforts to establish green credit lines to accelerate the penetration of renewable energy, more investment is required to achieve the country’s goal of scaling up the 200,000 solar home systems for lighting in urban and non-electrified rural households and establishing 55 solar minigrids towards universal electricity access. Other areas of development for climate finance include scaling up clean cooking solutions, including biofuels as a replacement for wood fuel, on-grid renewable energy generation and efficient energy consumption.

Agriculture

Ghana’s agriculture sector contributes to 24% of the total national emissions. Therefore, mitigating the emissions would significantly contribute to greening the sector. The government is implementing the National Climate Smart Agriculture and Food Security Action Plan in response to the climate challenges in the sector. However, to sustain the gains made so far, there is the need to complement and scale up these efforts, particularly in reclaiming degraded lands from illegal mining activities for agricultural purposes, sustainable cash crop (cocoa, shea, cashew) production, scaling up penetration of climate-smart technologies to increase livestock and fisheries productivity and accelerating innovations in post-harvest storage and food processing.

Forestry

The forestry sector significantly supports the sustainability of agricultural activities in Ghana and serves numerous environmental and ecological functions. Unfortunately, these benefits are threatened by deforestation from illegal mining activities, settlements, agriculture expansion, bushfires and wood fuel extraction. Ghana has made significant gains in curbing deforestation and promoting sustainable land use through REDD+ interventions. These efforts include the conservation of mangroves, increasing Ghana’s carbon stocks, wildfire management in the savannah zones and curbing the destruction of forest cover by illegal mining activities.

Transport

The transportation sector contributes 17%^[86] of Ghana’s total national emissions. These emissions come from the road, rail and aviation subsectors. Road transport, which is heavily dependent on fossil-fuelled vehicles, has been the most significant contributor to emissions in the transport sector. With a growing middle class, the number of vehicles on the road is expected to increase significantly with attendant traffic congestion. Moreover, the retooling and expansion of Ghana’s collapsed rail infrastructure is expected to increase the consumption of fossil fuels in the sector, resulting in increased emissions. The domestic aviation subsector has also seen significant growth with increased flight routes across the country. The growth in the subsector is expected to increase aviation fuel consumption with its attendant emission challenges. While substantial global efforts and actions on greening transportation, including electric vehicles, have been underway, progress has been nascent in Ghana. The government recently launched a National Electric Mobility Policy and Market Readiness Framework for Ghana^[87] to drive innovation in improving public transportation and vehicle efficiency. The Energy Commission has also embarked on a Drive Electric Initiative to promote electric vehicle use in the country. However, these efforts need to be scaled up significantly to realise the emissions reduction target set for the sector.

Waste Management

Population growth and urbanisation are significantly driving waste generation in Ghana. Inefficient waste management, which results in methane emissions, is a crucial climate change concern. Moreover, improper plastic waste disposal coupled with a poor drainage system has caused floods that have destroyed lives and property. Efficient urban waste management would save lives and create the opportunity for waste-to-energy generation and organic compost to supplement the fertiliser needs of the agriculture sector. The government’s efforts in this sector have been aimed at enhancing an alternative to urban waste management, improving an effective urban waste collection system and driving innovation in Decentralised Treatment, Re-Use and Recovery Systems, including scaling up 200 institutional biogas plants in senior high schools and prisons nationwide. A key challenge to realising these objectives has been the cost of collecting and managing waste in the country. Fortunately, the private sector has been intervening to improve waste collection and management. However, these efforts need to be scaled up significantly to enable the country to manage its waste comprehensively.

3.5 Stakeholder mapping, alignment and practical realities

The study involved the selection of stakeholders from agencies relevant to climate financing. These agencies include government agencies (Ministry of Finance and the Environmental Protection Agency), development finance institutions responsible for providing climate financing, banks and green industry associations. Interaction with the stakeholders aimed at obtaining reports on practical experiences on Ghana’s climate funding architecture, especially regarding the barriers and the way forward for the country.

3.5.1 National perspectives on climate finance needs

Our interaction with stakeholders provided several perspectives on Ghana’s climate financing architecture. The stakeholders identified several available climate funds for Ghana to secure. These funds include the GEF, Special Climate Fund, the Green Climate Fund and the Climate Investment Fund (CIF)

The interaction highlighted several challenges related to climate financing, mainly in the form of capacity building to strengthen institutions and the need to redeem financial commitments of developed countries. The climate finance barriers reduce the ability of countries to access the required financing from the climate funds that provide such finance.

Limited capacity to access climate funds

The interactions identified the limited access to climate funds as the main barrier hindering Ghana’s access to climate financing. Generally, climate funds are provided on a competitive base, and adequate documentation is required to access these funding sources.

a. Project prioritisation and justification

Usually, Ghana suffers from limited capacity in project prioritisation and proposal preparation, which affects the country’s ability to access funds. The interactions also revealed that some agencies (both government and private sector) do not have specific project appraisal procedures that guide project evaluation in line with the requirements of external entities. Therefore, government and private institutions must begin to document guidelines and procedures to enable them to access and meet external requirements for funding support.

The limited capacity to access climate funds also extends to the funds’ approval processes. Countries can be disadvantaged at several stages, especially regarding project justification. Interactions with stakeholders revealed that most climate funds require that proposals are backed by scientific data, which must justify the need for funds. However, these data are rarely available on demand and would require member countries to conduct prior studies. Such studies may require substantial funding and are likely to be beyond the capacity of the entity applying for the funding.

Again, countries are required to demonstrate that the funds they receive are used to achieve climate outcomes. Thus, the funding requires transparency and accountability systems. The absence of such transparency systems also reduces the likelihood of securing financing from major climate funds.

b. The requirement of co-financing

In some cases, beneficiary institutions or countries are required to bear part of the cost of the projects for which they are securing funds. For example, the GCF has a co-financing policy that aims to create ownership and provide resources for the long-term sustainability of climate actions in developing countries. The GCF does not have any minimum requirements or ratios for co-financing. However, the Ministry of Finance (Ghana’s National Designation Authority (NDA) for GCF) requires a minimum co-financing ratio of 2:1 for mitigation or private sector proposals and 20% to 50% co-financing for adaptation projects.^[88] In addition, the Ministry of Finance indicates that co-financing could be sourced from bilateral agencies, public and private financing sources and other market investments.

While co-financing could be beneficial for creating ownership, our interactions with stakeholders indicated that it could limit the ability of entities to raise the co-financing required to secure the needed climate funds. Thus, institutions with limited access to finance for co-financing are left out of the funding process. The absence of internally generated funds to match climate funds reduces the likelihood of some developing countries accessing certain climate funds.

c. Accreditation challenges

Climate funds such as the GCF work through various institutions to provide funding to support programmes aimed at climate action. These institutions, known as Accredited Entities, differ from the NDA. The Accredited Entities can be private, public, subnational or non-governmental and are responsible for overseeing, supervising, monitoring and managing respective GCF-approved projects. Agencies that apply to be accredited undergo rigorous assessments in multiple stages. They must have documentation that proves their institution’s legal status and must demonstrate evidence of fiduciary status. The agencies must also have environmental, social and gender policies at their institutional level and must show a track record of adherence to such policies. These are the first-level requirements before endorsement by the agency’s NDA, assessment by an independent accreditation panel and the GCF board’s decision.

Ecobank Ghana is the only Ghanaian agency out of 113 Accredited Entities operating with the GCF. However, the interactions with stakeholders revealed that the agencies that could have been well positioned to secure accreditation do not have the necessary documentation for accreditation. For example, many banks that could have been legible for accreditation do not have most of the social, environmental and gender policies and hence do not qualify for the accreditation process. However, Ghana’s Central Bank’s (the Bank of Ghana) Sustainable Banking Principles could guide Ghanaian universal banks in implementing applicable banking principles that adhere to ESG standards. There are seven core principles:

• Principle 1: Identify, measure, mitigate and monitor environmental and social risks in our business activities. Identify environmental and social opportunities in our business activities.
• Principle 2: Promote good ESG practices in our internal business operations.
• Principle 3: Promote good corporate governance and ethical standards
• Principle 4: Promote gender equality
• Principle 5: Promote financial inclusion
• Principle 6: Promote resource efficiency and sustainable consumption and production
• Principle 7: Reporting

Adherence to these principles could open doors for universal banks to follow the example of Ecobank Ghana towards becoming Accredited Entities and working with the GCF. However, banks must become aware of the need to develop the documentation necessary for accreditation to receive multilateral funding, especially considering their role as financial intermediaries. Accreditation also needs to become a simpler process if the flow of finance to Ghanian beneficiaries is to be realised.

Financial intermediaries to support other climate action initiatives

The previous subsections have focused on assessing funding from big-ticket climate funds such as the GEF and GCF. This section focuses on the challenges faced by financial intermediaries in providing financing to green businesses that cannot access available funds from the already existing funds but can assess loans to ensure business growth.

a. Start-ups and risk of debt default

As already indicated in previous sections, local banks are essential financial intermediaries that can support green businesses and promote climate action. Local banks can provide loans to green businesses on terms that encourage such businesses to thrive. However, the banks must continually decide on the investment areas into which they should channel their funds. Generally, banks prefer to channel funds towards options that are de-risked.

The stakeholder interaction highlighted that a large portion of green businesses are start-ups, creating additional risks of debt default. Thus, there is a huge trade-off between the bottom-line concept and the public good. The critical question remains as to what extent a bank will finance a climate change intervention that carries significant investment risks and may not achieve the bottom line.

b. Creation of bankable projects

Stakeholders from the banking sector further reiterated that, to secure the needed financing and reduce the risk of debt default, green businesses need to be more intentional in creating projects that meet banks’ bottom lines. Generally, banks will not provide reduced financing only because the business supports climate action. Instead, the challenge has been the inability of such green firms to provide the necessary bankable projects that can justify the funding requirement from the banks.

3.5.2 National and international stakeholders engaging in climate finance and what they are doing

Climate finance involves local, national or transnational financing from public, private and alternative sources to support climate change mitigation and adaptation actions. The active involvement and participation of national and international stakeholders will play a pivotal role in this new sector. Key stakeholders include governments, development partners and climate financing providers.

Ministry of Finance

The Ministry of Finance formulates, implements, monitors and evaluates macroeconomic, fiscal and financial policies for sustainable development. It is also responsible for effectively mobilising domestic and external resources. Accordingly, the Government of Ghana has nominated the Economic Strategy and Research Division (ESRD) of the Ministry of Finance to be the nationally designated authority (NDA) to liaise with the GCF. The roles of the ESRD as Ghana’s NDA include:

 

• Endorsing applications for accreditation made by prospective Direct Access Entities
• Endorsing any project proposals that would be implemented in Ghana.

The Ministry of Finance has developed several guidelines and tools for climate financing, including

• GCF project prioritisation tool
• Climate change finance tracking tools
• Climate change operation manual
• Sustainable finance principles

Ministry of Energy

The Ministry of Energy is responsible for energy policy formulation, implementation, monitoring and evaluation, as well as for supervision and coordination of activities of Energy Sector Agencies. The Ministry is also responsible for implementing several renewable energy plans. The 4th communication of Ghana’s NDC shows that the Ministry of Energy implements many energy sector projects under the NDC

Environmental Protection Agency

The Environmental Protection Agency is responsible for formulating policies regarding environmental sustainability and climate change and regulates the activities of almost all the country’s other environmental organisations. The agency is also the focal point for other international bodies, such as the UNFCCC and the IPCC. In addition, it is responsible for providing information on Ghana’s emission inventory and communicating implementation updates on Ghana’s NDC.

It is finalising a national framework for international carbon credits. The framework will guide the public and private sectors in raising carbon finance to support NDC implementation and other green investments. These efforts are in response to Article 6 of the Paris Agreement.

The SUNREF programme

The SUNREF (Sustainable Use of Natural Resources and Energy Finance) programme is a scheme to mobilise public and private banks to provide finance towards private-sector green investments. SUNREF Ghana works with the Energy Commission and its local bank partners (Cal Bank and GCB Bank) to offer businesses, organisations and households an opportunity to access financing for sustainable energy projects and assistance in structuring green investments. The goals of the SUNREF programme include the following:

Developing and consolidating a financing market for green investments (energy efficiency, renewable energies, environmental services).

• Improving energy security
• Developing a viable market in sustainable energy and environmental services
• Supporting the development of eligible, innovative and profitable green projects.
• Increasing the competitiveness of businesses, especially SMEs, by reducing their energy bill.
• Facilitating access to “green” financing for companies and individuals
• Facilitating access to “green” financing for companies and individuals
• Strengthening the capacity of local stakeholders (companies, business associations, sustainable energy agencies, ministries, partner banks, among others).

Energy Commission

The Energy Commission is responsible for regulating, managing and utilising energy resources in Ghana. The Commission also provides regulatory and supervisory frameworks and is responsible for granting licenses for the transmission, wholesale, supply, distribution and sale of electricity and natural gas and related matters.

Beyond its regulatory activities, the Commission also undertakes key climate-related implementation projects. Currently, the Energy Commission is leading the implementation of Ghana’s Sustainable Energy for All (SE4All) action plan. SE4All is a global initiative with three key objectives:

• Ensuring universal access to modern energy services,
• Doubling the global rate of improvement in energy efficiency, and
• Doubling the share of renewable energy in the global energy mix.

Commercial Banks

The commercial banks involved in the climate finance stakeholders’ engagement are Ecobank Ghana, Cal Bank and GCB. Ecobank Ghana has been nominated as an Accredited Entity and can receive funds from the GCF on behalf of Ghana. The Ecobank undertakes activities related to climate change in the energy access and generation, renewable energy, transport, infrastructure and food and water security sectors. Cal Bank and GCB partner with SUNREF Ghana to offer businesses, organisations and households an opportunity to access financing for sustainable energy projects and assistance in structuring green investments. Table 3.8 provides a summary of the key stakeholders responsible for climate action.

Table 3.8 Key stakeholders responsible for climate action in Ghana

3.6 Summary

Ghana has developed the legal and policy frameworks relevant to climate action. However, beyond these frameworks, there is a need to ensure that the requisite funds are mobilised towards ensuring climate action and meeting targets under the NDC. The existing funding gap underscores why it is essential for the country to have a further plethora of approaches to secure funding in addition to current sources.

The stakeholder engagements have highlighted the essence of financing to support climate action. The main barrier, as revealed in the interactions, relates to the capacity of governments and other private sector institutions to provide the needed justification to secure funding from big-ticket green funds such as the GCF and the GEF. Generally, it was revealed that the various institutions have inadequate capacity to access these climate funds successfully. Again, the co-financing requirement presents an additional challenge for Ghana to match up investments and thus to secure the relevant funding, especially under the GCF. The supply-side challenges mainly relate to the fact that many developed countries have not fulfilled their commitment to providing the requisite financing to support climate action.

Banks and other financial institutions equally have a role as financial intermediaries in providing the relevant financing. However, green businesses, especially start-ups, must prove their projects’ creditworthiness and economic viability. Thus, these businesses must build their capacity to provide bankable projects that attract financing from financial intermediaries, which is currently lacking. Again, many local banks do not have the documentation relevant for obtaining climate funds for subsequent on-lending to green businesses. These inadequacies limit the banks’ potential to receive cheap financing to support green businesses. That notwithstanding, it is hoped that the sustainable banking principles, spearheaded by the Central Bank, will ensure that banks begin considering ESG issues as part of their operations.

COP26 ended with a renewed commitment from developed countries to increase financing flows into climate funds. There is a need for international institutions and developed countries to go beyond the promises to fulfil their pledges towards providing adequate financing for climate action. This action is relevant to ensuring that such funds are established and continuously replenished and disbursed adequately to meet the needs of developing countries. However, developing countries, such as Ghana, must ensure that private and public-sector entities have the relevant documentation that enhances their eligibility to receive funds. Again, climate funds must go beyond the development partners’ assistance to create more innovative ways of raising funds.

The government of Ghana must create the appropriate environment for investment attraction in green businesses. There must be a deliberate attempt to ensure a well-regulated environment that allows value creation among green companies. Again, government institutions and businesses must take advantage of the opportunities for trading in the carbon market, which is available to private and public-sector players, to raise the needed capital for green projects.