Understanding Carbon Credits in Ghana
Carbon credits have become a significant tool in the global fight against climate change, and their relevance is increasingly felt in countries like Ghana. As organizations worldwide adopt Environmental, Social, and Governance (ESG) principles, the need to assess sustainability and ethical impact has become more pressing. Within this framework, carbon credits play a crucial role, especially under the environmental component of ESG.
In Ghana, the natural ecosystems offer substantial opportunities for reducing greenhouse gas (GHG) emissions. This makes the concept of carbon credits particularly relevant for both the environment and the economy.
What Are Carbon Credits?
Carbon credits are essentially permits that allow the holder to emit a specific amount of carbon dioxide or other GHGs. Each credit corresponds to one ton of CO₂ or its equivalent in other gases. These credits, also referred to as carbon allowances, are part of a broader system designed to reduce overall emissions.
The primary objective of the carbon credit system is to limit the release of GHGs into the atmosphere. By setting emission caps and allowing trading of excess credits, this system encourages companies to either reduce their own emissions or invest in projects that do so elsewhere.
Why Does Ghana Sell Its Carbon Credits?
As a member of the United Nations, Ghana is allocated a certain number of carbon credits. The government is responsible for issuing, monitoring, and reporting on these credits annually. Companies operating in Ghana are limited in the amount of GHGs they can emit without purchasing additional credits from other countries.
However, if Ghana has surplus credits, it can sell them on a carbon exchange or marketplace. This mechanism, known as cap-and-trade, allows for the efficient distribution of emission rights while promoting environmental responsibility.
How Do Carbon Credits Work?
Traditionally, carbon credits are used for carbon offsetting, which involves compensating for emissions by either avoiding them or enhancing their removal. For instance, replacing coal power plants with solar energy prevents emissions, while reforestation 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 ensures that the climate impact is consistent, regardless of where the emission reduction occurs.
In recent years, some parties have started using carbon credits for climate change mitigation without making explicit offsetting claims. This shift highlights the evolving role of carbon credits in global environmental strategies.
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 the EPA and the new Environmental Protection Act, 2025, Act 1124, Ghana has established the Carbon Markets Office (CMO) 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.
Additionally, the Ghana Carbon Registry (GCR) was introduced under the new EPA Act. This online database system 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 Ghana’s Role
The Paris Agreement, an international treaty on climate change, aims to limit global temperature rise to well below 2°C above pre-industrial levels. Under Article 6 of the 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 not readily available domestically. This collaboration marks the first instance of ITMOs being issued for Nationally Determined Contribution (NDC) purposes in Africa.
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.
- Transformative Cookstove Activity in Rural Ghana: Seeks to replace traditional stoves with improved ones to reduce emissions and improve air quality.
- Integrated waste recycling and composting: Processes waste into compost, cutting emissions and producing fertilizer for agriculture.
These initiatives highlight Ghana’s proactive approach to structuring its carbon market ecosystem, aiming to become a hub for credible and high-integrity carbon credit generation.
Why Do Companies Buy Carbon Credits?
Companies purchase carbon credits to legally emit more GHGs and achieve a “net-zero carbon emission” status. This means the amount of carbon added to the air is the same as the amount taken out. While some companies can alter their practices to reduce emissions, complete elimination is often not feasible.
The Transformative Cookstove Project
As a party to the Paris Agreement, Ghana has a climate action plan known as its Nationally Determined Contribution (NDC). Through this project, Ghana launched a large-scale clean cookstove initiative, which improves fuel efficiency, reduces firewood use, cuts indoor air pollution, and lowers carbon emissions.
Funded and implemented in partnership with Switzerland, this project demonstrates how international cooperation can lead to meaningful climate action.
What Article 6.2 Requires and Applies to the Scenario
Under Article 6.2, several requirements must be met, including voluntary cooperation, promotion of sustainable development, ensuring environmental integrity, transparency in governance, and robust accounting to prevent double counting.
Ghana’s EPA approves the project, monitors its implementation, and shares reports publicly. The 500,000 tons transferred to Switzerland are recorded in the National Carbon Registry, ensuring no double counting.
Why This Matters
Ghana earns revenue or support for sustainable projects, while local communities benefit from cleaner air and safer homes. Switzerland meets part of its climate obligations affordably, and 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. By issuing ITMOs for the ‘Transformative Cookstove Activity in Rural Ghana,’ the country has achieved a significant milestone under the Paris Agreement. This collaboration with Switzerland represents a pioneering effort, marking the first time ITMOs have been issued for NDC use from a mitigation activity in Africa.
These initiatives are part of Ghana’s broader commitment to climate action, sustainable development, and environmental stewardship. The EPA has implemented regulatory reforms, including mandatory project approvals, benefit-sharing mechanisms, and ESG screening, ensuring credibility and 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.