Leveraging climate finance for green growth: Time for Ghana to go for green budgeting
Perhaps, for the first time, climate change received a significant attention in the 2024 budget. This is particularly interesting especially when national budgets have focused on economic growth without adequate attention to social equity and environmental sustainability as the other pillars of sustainable development.
Yet, today climate change is an existential threat to humanity and there cannot be any serious budget without attention to investments to the implementation of climate action.
Even though Ghana’s greenhouse gas emission is generally low as per capita is 24 per cent of global average, the impact of climate change is significant. Climate-related disaster in many developing countries is costing between 5-15 per cent GDP.
The World Bank country report (2023) reveals that the cost of climate action is estimated at approximately USD two billion per year until 2050. In Ghana, flooding affects almost 45,000 people and almost half of the entire coastline of Ghana is vulnerable to flooding due to high sea rise.
The World Bank report further indicates that at least one million more people could fall into poverty and that incomes could reduce by up to 40 per cent for poor households by 2050.
There is therefore the need to implement climate action, particularly the programmes under the Country’s NDCs. The WB’s study concludes that some USD26 billion in economic benefits will be delivered by 2040 if we take a low-carbon pathway.
However, in general, global financing of climate action has come short of the needed investments. It is estimated that some 2.5 trillion dollars is requested from 2020 to 2030 to close the financing gap for climate action.
The famous 100 billion climate pledge is short by $17 billion as of 2020, yet the 2022 adaptation gap report indicates that adaption finance flows to developing countries are five to 10 times below estimated needs. Developing countries need over $300 billion per year by 2030 for climate adaptation.
In spite of this, climate finance flows and investment to Africa remain woefully inadequate. The Africa Development Bank estimates that only three per cent of climate finance flow to Africa yet Africa will have a USD 3 trillion climate investment opportunity by 2030.
Notwithstanding, the opportunities for climate finance and investment in African continue to grow. Africa countries can mobilise $52 billion/year by participating in well-functioning carbon markets. The ADB’s African Adaptation Acceleration Programme has earmarked $25 billion to catalyse other financing for adaptation projects
The challenges of accessing some of these funds like from GCF have been understanding the process, the proposal is asses on impact potential, rational, sustainable development potential and country ownership in terms of defining targets of the ambitions. Projects also need to be aligned to country legal system.
From the foregoing, African countries like Ghana need to position themselves to tap into the overgrowing climate finance and investment opportunities. Climate finance will become a significant source for green investments and the earlier we have a paradigm shift the better.
In this regard, national budgets remain perhaps the most tangible avenue to showcase a nation’s policy commitments to investing in climate action and exploring the financing and investment opportunities.
There is the need for countries to shift to green budgeting and for Parliaments to demand that to aid it to provide effective oversight. This calls for how national budgets affect or is affected by the environment.
Overall understanding of how a country’s budget affects the environment is often missing, increasingly, there is a call for green budgeting and in fact the European Union has institutionalised green budgeting (Bova 2021).
The Green budgeting is a budgetary practice whereby the climate and environmental contributions of a budgetary items are identified and assessed with respect to specific environmental performance indicators with the objective of better aligning budgetary policies with environmental goals”.
Green budgeting is being promoted in contemporary public green making, especially as climate change is becoming an existential threat to humanity and national commitments to financing adaptation and mitigation and building resilience to climate-induced vulnerabilities and risks continue to gain importance.
What is green vary from fully-fledged tagging approaches to lighter forms of tagging. For example, Bova (2021) reports that Ireland tracks climate related appropriations through a detailed examination of content. Italy assigns percentages based on a green content of a budgetary programme by environmental objectives.
The EU uses climate markers methodology that assigns 100%, 40% and 0% to full, partial and null contribution to the climate and biodiversity at the lowest possible level of expenditure.
France goes further to include ‘unfavourable’ (brown) spending. It conducts brown tagging of its budget.
It is important for Ghana to pursue green budgeting and demonstrate leadership in the Continent, particularly as the President chairs the Climate Vulnerable Forum and the Finance Minister chairs the V20 of the CVF.
More importantly, it needs to demonstrate greater accountability to its climate commitments, especially when it has policy objectives of leveraging hugely on climate finance to support its budget.
The 2024 budget Statement and Economic Policy of the Government of Ghana has a plethora of policy underpinnings for climate finance and therefore makes Ghana a suitable candidate for green budgeting.
This is especially important if Ghana wants to take advantage of the huge climate finance and carbon trading opportunities
A number of issues in the 2024 Budget beg for deeper interrogation that could best be elaborated by a green budget. For example, in paragraph 676, it is claimed that a total of 24 million tons of Carbon dioxide equivalent in Ghana’s Nationally Determined Contributions (NDCs) will be used in carbon trading and is expected to generate about $800 million by 2030.
How does the Budget explain the corresponding investments needed to implement the NDCs to generate the 24 million tons of CO2 to be traded?
A green budget would have shown the expenditure side to reflect investment. This is critical as the voluntary carbon offset market is expected to grow from $2 billion in 2020 to $250 billion in 2050. In fact, if the structures of markets improve, BloombergNEF suggests that it could reach $1trillion by 2037
In paragraph 481 of the 2023 Budget, green revenue of $ 4.8 million through a million tons of CO2 emission reduction through forest conservation and degradation prevention with an expectation of earning up to 445 million by end of 2024 is given.
BY DR EMMANUEL MARFO
The writer is Member of Parliament of Oforikrom Constituency
To be cotinued
