Gov’t climate finance spending heavy on energy sector, sustainable forest management – Report
A recent report by IMANI Africa has shed light on Ghana’s climate finance priorities, revealing a significant focus on the energy sector and sustainable forest management. With the energy and agricultural sectors responsible for over 80% of the nation’s greenhouse gas emissions, a substantial 58% of climate finance has been directed towards bolstering the energy sector, despite the prominence of agriculture and forestry in contributing to emissions.
Ghana’s energy sector has long been reliant on fossil fuels, with natural gas production only recently offering a partial shift towards cleaner energy sources. To address this environmental challenge, the report stresses the need for substantial investments in transitioning to cleaner fuels, promoting clean cooking practices, and expanding renewable energy access to rural regions.
Surprisingly, the report highlights a discrepancy in adaptation finance, as it remains comparatively low despite grants being the primary financing instrument. In contrast to global trends, where grants have been deployed to enhance adaptation finance due to insufficient private sector involvement, Ghana has yet to fully capitalize on this avenue. An underlying factor could be the lack of significant private sector investments in mitigation-focused projects, necessitating grant funding for both mitigation and adaptation efforts.
Furthermore, the report underscores that grants have been the dominant climate financing tool over the past decade, accounting for an impressive 72% of total climate finance flows. Trailing behind are global climate funds and results-based payments, with the national budget contributing approximately 8.5%. A notable concern is the subpar private sector engagement, with meager investment – less than 1% – committed to climate projects in Ghana.
Nevertheless, analysts caution that an overreliance on grants might prove unsustainable in the long term, considering their modest representation, constituting a mere 5% of global flows. Moreover, public climate finance sources primarily favor debt and equity instruments at market interest rates, leaving grants with a seemingly limited scope.
As Ghana charts its path towards achieving its Nationally Determined Contributions (NDCs) and combatting climate change, the need for diversified and sustainable investments has become ever more apparent. Innovative financing mechanisms and increased private sector participation hold the key to ensuring a resilient and prosperous future for the nation amidst the pressing challenges of climate change.
