Understanding Carbon Credits in Ghana
Carbon credits have become a significant tool in the global fight against climate change. These credits are essentially permits that allow the holder to emit a specific amount of carbon dioxide or other greenhouse gases (GHGs). One credit corresponds to one ton of CO₂ or its equivalent in other GHGs. They are also referred to as carbon allowances, and their primary objective is to reduce the overall emissions of GHGs into the atmosphere.
In Ghana, the concept of carbon credits is gaining traction due to the country’s rich natural ecosystems, which offer substantial opportunities for emission reduction. As part of the broader Environmental, Social, and Governance (ESG) principles, organizations are increasingly assessing their sustainability and ethical impact. This has made carbon credits an essential component of sustainable business practices.
Why Ghana Sells Carbon Credits
As a member of the United Nations, Ghana is allocated a certain number of carbon credits. The government sets limits on the amount of GHGs that companies can emit without needing to purchase additional credits from other countries. However, if Ghana has excess carbon credits, it can sell them on a carbon exchange or marketplace. This system, known as a cap-and-trade programme, allows for the efficient allocation of emissions rights.
How Carbon Credits Work
Carbon credits operate through a mechanism known as carbon offsetting. This involves compensating for GHG emissions by either avoiding emissions or enhancing removals. For example, replacing a coal power plant with solar energy prevents emissions, while using carbon capture technology actively removes CO₂ from the atmosphere.
Organizations can buy and retire carbon credits instead of reducing all their own emissions directly. Each credit represents one ton of CO₂ that was either avoided or removed elsewhere. This approach is effective because the climate impact of emission reductions is the same regardless of where they occur. Companies can either reduce their own emissions or pay for projects elsewhere to achieve the same effect.
Laws Governing Carbon Credits in Ghana
The Environmental Protection Agency Act 2025 (Act 1124) regulates carbon credits in Ghana. It introduces specific regulations and guidelines for project approval, monitoring, and verification of carbon credits to ensure transparency and alignment with international standards. Through this act, the Carbon Markets Office (CMO) was established within the Climate Change Unit of the EPA. The CMO serves as the secretariat, providing administrative and technical services to the public and supporting the implementation of Ghana’s International Carbon Market and non-market approaches framework.
The EPA Act also establishes the Ghana Carbon Registry (GCR), an online database system designed for carbon market project activities within Ghana and internationally. The GCR collects and tracks the transfer and use of Internationally Transferred Mitigation Outcomes (ITMOs), facilitating the listing and registration of mitigation activities and voluntary carbon market projects.
The Paris Agreement and Its Impact
The Paris Agreement is an international treaty focused on combating climate change. Adopted by 195 parties at the UN Climate Change Conference (COP21) in Paris, France, on December 12, 2015, it aims to limit the increase in global average temperature to well below 2°C above pre-industrial levels, with efforts to restrict the temperature rise to 1.5°C.
Under Article 6 of the Paris Agreement, Ghana and Switzerland signed a bilateral agreement in 2020 that facilitates the international transfer of carbon credits between member states. This agreement allows Ghana to sell ITMOs to Switzerland, which in turn provides investments, supports capacity building, and grants access to technologies.
Key Initiatives Under the Agreement
Some key initiatives under this agreement include:
- The Ghana Climate-Smart Rice Project: Aims to reduce methane emissions from rice farming and enhance water use efficiency.
- The Transformative Cookstove Activity in Rural Ghana: Seeks to replace traditional, inefficient stoves with improved cookstoves (ICS) to reduce greenhouse gas emissions and improve household air quality.
- Integrated waste recycling and composting for methane reduction in Ghana: Processes waste into compost, cutting greenhouse gas emissions and producing valuable fertilizer for agriculture.
Why Companies Buy Carbon Credits
Companies purchase carbon credits to legally emit more GHGs. They also acquire carbon offsets, which help them achieve a “net-zero carbon emission” status. This means that the amount of carbon a company adds to the air is the same as the amount it takes out. Public and institutional pressure has led many companies to make these net-zero commitments in response to the urgency of the climate crisis.
Scenario: The Transformative Cookstove Activity in Rural Ghana
As a party to the Paris Agreement, Ghana has a climate action plan known as its Nationally Determined Contribution (NDC), which outlines how the country intends to reduce GHG emissions and adapt to the effects of climate change. Under this project, Ghana launched a large-scale clean cookstove project. These cookstoves:
- Burn fuel more efficiently
- Reduce the need for firewood
- Cut down on indoor air pollution
- Most importantly, reduce carbon emissions
This project is funded and implemented in partnership with Switzerland.
What Article 6.2 Requires and Applies to the Scenario
Under Article 6.2 of the Paris Agreement, the following requirements apply:
- Voluntary cooperation: Ghana and Switzerland voluntarily agree to work together under a bilateral agreement.
- Promote sustainable development: The cookstoves improve health, reduce deforestation, and save fuel, benefiting Ghanaian households.
- Ensure environmental integrity: Emissions are measured accurately and verified using approved standards.
- Transparency in governance: Ghana’s EPA approves the project, monitors implementation, and shares reports publicly.
- Robust accounting & no double counting: Ghana records the 500,000 tons transferred to Switzerland in its National Carbon Registry, so it does not claim them again. Switzerland also reports the purchase in its own registry.
Why This Matters
Ghana earns revenue or support (funding, technology) for sustainable projects. Local communities in Ghana benefit from jobs, cleaner air, and safer homes. Switzerland meets part of its international climate obligations more affordably. Both countries follow strict rules to ensure the integrity of climate action.
Conclusion
Ghana is taking a bold and strategic approach to developing carbon markets. Recently, the country achieved a significant milestone under the Paris Agreement by issuing Internationally Transferred Mitigation Outcomes (ITMOs) for the ‘Transformative Cookstove Activity in Rural Ghana’. This collaboration with Switzerland represents a pioneering effort, marking the first time both countries have worked together to enhance cooperative climate action. Notably, it is also the first instance of ITMOs being issued for Nationally Determined Contribution (NDC) use from a mitigation activity implemented in Africa.
These initiatives are part of Ghana’s broader commitment to climate action, sustainable development, and environmental stewardship. The Environmental Protection Agency (EPA) has implemented regulatory reforms, including mandatory project approvals, benefit-sharing mechanisms, and environmental, social, and governance (ESG) screening. These measures ensure that the carbon credits generated in Ghana are credible, equitable, and in alignment with global standards.
Stay tuned for Part 2: What role do Carbon Credits Play in promoting ESG in Ghana? In the next article, we examine how carbon credits intersect with ESG principles and the practical steps businesses can take to integrate them into their sustainability strategies.
