As Ghana takes major steps to tackle climate change by imposing a Combustion Tax [Emissions Levy Act, 2023, (Act 112)] on vehicles and machinery in important sectors, we must critically analyze the efficacy of such a tax-based method as a response to the climate crisis. While taxation can induce behavioural change and fund environmental projects, it is critical to investigate whether it effectively tackles the core causes of climate change and promotes long-term solutions.
YAFO Institute engaged Dr. Julia Baum; a Conservation and Economy Consultant and founder of PLC Network, Asamoah Kwaku Junior; a Policy Scholar at the YAFO Institute, and Justine G. Kankpeyeng; a senior researcher at the YAFO Institute in the third edition of the 2024 YAFO Policy Dialogue series on the theme; Free Market in Climate Policy: How Effective is Ghana’s Emission Tax?
Climate change refers to long-term shifts in temperatures and weather patterns. These shifts may be natural, but since the 1800s, human activities have been the main driver of climate change, primarily due to the burning of fossil fuels (like coal, oil, and gas) for energy production, which produces heat-trapping gases, usage of land for agriculture and deforestation (clearing of forest to make way for various construction projects), manufacturing and transportation. As a result of this, the UN has called for governments to reassess their energy policy.
Africa is a region that contributed little to the climate crisis. Yet, it bears a disproportionate burden of severe climate change which impacts rising temperatures resulting in extreme weather (we can talk of the floods in Kenya with a death toll of about 228) and health challenges like respiratory disease born out of pollution.
Ghana’s carbon emission has increased from 2 million tons in 2011 to 4.5 million tons in 2019 despite its shift to renewables. The emissions forecast has predicted a further increase to 18.6 million tons by 2043. In a bid to reduce emissions, Ghana has introduced an Emission Tax which will incentivize a reduction in carbon emissions, create awareness of climate change challenges, attempt to alter consumer and producer behaviour, and generate revenue to fund environmental projects.
We have come to acknowledge that although the introduction of an emission tax is for a good course, it is not without demerits. One known demerit is the financial burden that would be placed on the low-income population. There would also be the risk of relocation of businesses to countries with laxer regulations which would amount to unemployment for many.
Aside from the use of regulatory mandates, free market tools such as; investing in Carbon cap – and – trade systems a limited emission allowance, green bonds for environmental initiatives, Eco-labelling and consumer choice, voluntary carbon markets that involve carbon offset or credit, and Research and Development (R&D) incentives are all alternatives that can be employed to reduce emissions.
The dialogue began with a short presentation from Dr. Julia Baum and in summary of her presentation, we noticed that Africa contributes 5% to global carbon emissions. One can say that this 5% is not enough to warrant its contributions but, climate change affects everyone and does not choose who to affect more. Therefore, Africa is encouraged to see this opportunity as a means to invest and seek funding to undertake projects that are environmentally friendly and switch to renewable energies.
Justine Kankpeyeng a panelist, petitioned policymakers to look again at the framework of the emissions tax and try to apply the carbon cap and trade tool which would be a realistic approach since a cap could be put on the emissions of industries at large and individuals.
Dr. Julia interjected that to some extent the introduction of emissions tax would affect the behaviour of people but humans are known to adapt quickly to situations so there is a high chance of adaptation and the intended goal would not be met.
For a fair and easy calculation of the emission tax, the Emission Levy Act, 2023 (Act 1112) has imposed an emission levy on carbon dioxide equivalent emissions for specific sections and internal Combustion engine vehicles. The specific sectors comprise the construction sector, manufacturing, mining, oil and gas, and electricity and heating. These sectors have been taxed a levy of Gh¢100 per tonne of emission each month. Combustion engine vehicles include motorcycles, tricycles, motor vehicles, buses, and coaches up to 3000 and above, cargo trucks, and articulator trucks are taxed with a tax rate of GH¢ 75, 150, and 300 per annum.
Kwaku Asamoah also a panellist, took the opportunity to educate the public on how information on the emission of motor vehicles would be attained. He stated that in motor vehicles there is a document known as the V5C which contains details of the vehicle and possibly information on the carbon emissions of the vehicle. He also attempted to refute the misconception people have that, only vehicles with smoke coming out of their exhaust pipes are emitting carbon. He stated that as long as the vehicles run on fuel, they are going to emit carbon and other gases into the atmosphere.
YAFO Institute called for intensive stakeholder engagement before policy implementation, educating the population on policies, seeking alternative methods rather than relying on taxation, and finally after levies have been collected, showing proof of research and solutions.
Participants had the opportunity to engage the panel with their questions.
This policy dialogue was hosted by Nathaniel Dwamena president of YAFO Institute and held on Zoom. Click here to watch the full session on YouTube.
Article by
Narkie M. Larnyoh
She is a policy scholar at YAFO Institute and contributes to research and commentary on trendy issues in Ghana. She has a Bachelor of Arts in Linguistics and French. She is Bilingual having proficiency in both English and French.
