Concentrate on renewable energy — Expert
A senior economic analyst at the Natural Resource Governance Institute (NRGI), Dr Alex Ampaabeng, wants the government to accelerate the shift from its reliance on fossil fuels to the adoption of clean energy sources such as solar and wind technology.
He also advised against the country’s over dependence on crude oil revenue from exports as global energy demanded shifts towards renewal energy.
He argued that with global focus on fossils fuels fast waning, Ghana stood the chance to leverage the opportunities in renewable energy to improve its revenue generation efforts.
In an interview with the Graphic Business, Dr Ampaabeng said renewal energy had the potential to reduce operational cost of industries, increase productivity while maximising profits adding that as industries make more profits, government would have more to tax to meet revenue targets.
He was speaking on the sidelines of a two-day capacity building training workshop for Civil Society Organisations (CSOs) and selectwe media practitioners on the Ghana Energy Transition Framework in Koforidua last Friday.
The training was to enhance participants understanding of the impact of energy transition on Ghana’s domestic revenue mobilisation.
It was also to strengthen the capacity of participants to engage the government on fiscal policy reforms, particularly relating to energy transition financing.
Analysts estimate that by 2035, all the wealthy countries would have to shut down virtually all fossil-fuel power plants in favour of cleaner technologies like wind, solar or nuclear power. By 2040, all of the world's remaining coal plants would have to be retired or retrofitted with technology to capture and bury their carbon emissions.
Dr Ampaabeng observed that the country generated quite substantial revenue from the oil sector.
On the average, the oil sector contributes about 16 per cent of the country’s total domestic revenue currently. This is about three per cent of Gross Domestic Product (GDP).
“It tells you that the sector is very important. However, with energy transition fast in progress with countries around the world moving from fossil fuels, it means that our oil will be less in demand on the global market in the near future.
As a result, the revenue that we are generating from our oil sales on the global markets will fall and that will impact negatively on the economy,” he said.
Already, the country is racing against time to increase its domestic revenue because the doors to the international capital markets have been shut as a result of the country’s unsustainable debt levels.
“From the time we started extracting oil to date, the economy has improved due to the foreign cash inflow. Without the oil, there will be a bigger trade deficit which will impact our economy. “With the anticipated global fall in demand, Ghana’s revenue from its oil will begin to decline in the future,” Mr Ampaabeng said.
Mitigating the impact
To mitigate the impact, Dr Ampaabeng suggested to government to capitalise on its critical mineral resources such as manganese, iron and lithium as the world transitioned from the use of fossil fuels to renewable energy.
“We now have to take full advantage of the fact that we can also contribute to the transition in terms of supplying the critical minerals,” he added.
He further proposed to the government to also invest more in renewable energy by channelling the revenues generated from oil into the energy transition process.
A Policy Analyst, Dr Steve Manteaw, said so far, Ghana’s petroleum industry had not witnessed any new investment since ExxonMobil exited in 2021.
Ghana launched its energy transition framework at the COP 27 late last year.
The framework outlines the country’s commitments and investment targets to achieve a net zero by 2070 with a total budget of $562bn. The budget averages approximately $11bn yearly investment towards cleaner energy.
Meanwhile, Ghana has a debt to GDP of about 104 per cent and recently suspended the payment of its sovereign debts.
The country has implemented a domestic debt exchange programme which has negatively affected most businesses and individuals in order to pass an IMF’s debt sustainability test for a bailout programme.