Ghana’s Emission Levy Sparks Debate Over Knock-On Tariff Hikes

The implementation of the Emissions Levy Act 2023 in Ghana has ignited a passionate debate, with the Independent Power Generators, Ghana (IPGG), warning that it could lead to an increase in electricity generation tariffs. The Chamber emphasised that the levy would result in higher operational costs for electricity generation, which, in turn, would necessitate an upward adjustment in tariffs to cover these additional expenses.

Dr. Elikplim Kwabla Apetorgbor, the Chief Executive Officer of IPGG, expressed this concern in a statement shared with the Ghana News Agency. He argued that the tariff adjustment would be crucial for ensuring the operational sustainability of power producers.

The Emissions Levy Act, which came into effect on February 1, 2024, imposes a levy on carbon dioxide equivalent emissions from internal combustion engine vehicles. This includes a levy of GHS100 per tonne on emissions from electricity producers. The government has stated that this move aligns with its commitment to reducing greenhouse gas emissions, promoting eco-friendly technology, supporting green energy, and enhancing environmental management.

However, IPGG highlighted that, due to the nature of power purchasing agreements, the economic burden of the levy would ultimately fall on end-users. They explained that power plant management and operation are cost-sensitive, and the levy would be factored into the operational costs of power plants.

The Chamber stressed that this statutory incidence on power producers necessitates a corresponding review of electricity generation tariffs to ensure the predictability of cash flow obligations.

While the government’s goal of combatting emissions and promoting eco-friendly technology is commendable, the introduction of the emissions levy has sparked mixed reactions among Ghanaians. Some citizens view it as an added financial burden, particularly during an ongoing economic crisis, and there are concerns that it may have a ripple effect on the cost of living.

Environmental groups and government leaders, on the other hand, support the levy as a means to reduce emissions and generate additional revenue for the state. Ghana now joins South Africa and Mauritius as the third African country to introduce a form of carbon tax.

Critics argue that the levy may not significantly reduce emissions since people have no choice but to pay it, and the carbon emissions from transportation are likely to continue. Additionally, concerns have been raised about the impact on the transportation sector, with plans to increase transport charges by as much as 60% to account for the added costs of the levy.

As the debate continues, the government faces the challenge of striking a balance between environmental goals, economic considerations, and the welfare of its citizens.