Domestic carbon market comes of age

Panellists at the 2024 Sustainability Summit expressed confidence in Ghana’s domestic carbon market, describing it as robust after a decade of meticulous policy development and collaboration with both local and international partners.

A strong carbon market – pricing mechanisms enabling government and non-state actors to trade greenhouse gas emissions – is critical for attracting global funding to accelerate the country’s growth in sustainability initiatives.

The country, they said, is however yet to fully capitalise on carbon market benefits because the necessary investment has been lacking. This investment is crucial to facilitate local inter-industry trading, provide alternative livelihoods, create sustainable jobs and incentivise the private sector to make additional efforts needed within their industries to drive progress.

Speaking under the sub-theme ‘Carbon markets: The New Currency for Sustainable Growth’, a panel of climate change experts concluded that government’s efforts in deepening interventions and policies for an attractive carbon market – for both compliance and voluntary types on the part of private businesses – are well situated to benefit investors in the long-term, despite a few challenges.

Director-Climate Change Directorate, Forestry Commission of Ghana, Roselyn Fosuah Adjei emphasised that the carbon market framework has made significant strides with the country accessing some funding of over US$21million, but further investment is necessary to drive growth and achieve sustainability goals.

“Ghana is the first in sub-Saharan Africa (SSA) to come out with a framework on how to trade in carbon. Setting the framework and creating an enabling environment is the first thing for whoever wants to engage; and now we have created a conducive environment to attract global funding while the private sector is putting targets in place to benefit soon.

“We have a whole Article-Six Framework that defines our market and non-market approaches for dealing with carbon in Ghana. The Environmental Protection Agency (EPA) brought together all the different sectors to put this together and we are piloting it for both local and international trading

“However, we are yet to reach is the stage where we have sectors such as Energy trading with the Forestry Commission or Agriculture at the local level, but at the moment we just have foreign buyers purchasing from here.”

She envisions a moment when, just like Costa Rica, the Forestry Commission can sell carbon credit to the Energy Commission and the agriculture sector to manufacturing industries, among others.

Deputy-Director of Environment, Ministry of Environment, Science, Technology and Innovation (MESTI), Raymond Ohene-Ofori, on his part argued that the carbon market has come a long way and has begun to see a significant increase in demand for carbon credits. However, to realise the carbon market’s full potential, the country needs to see more investment in projects and initiatives that reduce greenhouse gas emissions.

“We have set the rules and regulations, the guiding technologies that look at how the calculations of emission reductions are generated. This is to ensure whatever one is doing is backed by robust science and the latest technology to make sure that one is not just quoting figures but providing proven figures which are scientifically accurate – to ensure that one carbon unit is indeed one unit of emission reduction,” he said.

Challenges

Touching on challenges, Madam Adjei mentioned that with alternatives such as galamsey and illegal logging delivering more lucrative benefits than carbon offers in the forestry area, there is a need to increase the price of carbon on the global market to make it an economically reasonable venture.

Dynamics of carbon field

The experts highlighted that trading carbon is very complex; therefore, it requires high skills, standards, traceability and leakage prevention.

They describe this as very complex and unfortunately smeared with speculations which make it difficult to verify; and unfortunately, in the forestry areas of the country, people want to treat carbon credit as timber – hence comparing the gains with illegally logging timber.

“The sector’s dynamics are huge; therefore, we need multiple skills and several years of practicing to prove additionality, permanence and prevent leakages – but people plant two or three trees and think they should be paid, making the work difficult,” she said.

Ways for businesses to capitalise on carbon market

Manager, REDD+ Government and Technology Coordination for the Africa Region, Jacob Amoako Ph.D., shared that participation in the carbon market enhances corporate reputation; protects and safeguards the local operating environment for sustainable business operation; and creates trust with regulators.

Nonetheless, businesses must first analyse their carbon footprint before entering the carbon market to determine how much carbon dioxide is produced and can be reduced to identify what they can contribute.

Businesses also need to look at their project or scope of work and align it with respective sectors under the nationally determined contributions (NDCs), be it in forestry, agribusiness or plastic production.

Additional efforts must be made, because what the carbon market pays for is additional efforts to mitigate climate impact.

Which area of work are you in and what are your activities doing to bring additionality? Within the carbon market space, what we pay for is what we call the additional effort that you are making to reduce emissions. That is, in the absence of the carbon money that activity would not have existed.

Partnerships

The Forestry Commission currently has a partnership agreement with some private sector organisations, including Tullow Oil, to deliver net-zero carbon by 2030. The state also has greenhouse arrangements with Switzerland, Singapore, South Korea and Sweden, among others, to create more opportunities and a conducive environment for the market to attract more players.

“So, we need more skills, players, investment and support to achieve the targets we have set for ourselves,” Madam Adjei concluded.