Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.5, No.8, 2014 72 Energy poverty and climate change mitigation in Ghana: An economic assessment Jonathan Dagadu Quartey Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. E-mail: jdquartey@yahoo.com Abstract Ghana’s economy, though energy-poor, consistently grew over the past two decades, reaching 14.4% in 2011. This growth far exceeded the global average during 2011 of about 4%, from about 5.1% in 2010, making Ghana one of the fastest-growing economies in the world at that time. The Ghana Shared Growth and Development Agenda (2010–2013) projects further growth to a per capita income of USD 3000 by 2020, which is more than double the current per capita income. Since traditional biomass accounts for over 60% of total energy consumption in Ghana, attaining this target through a business-as-usual household energy approach assumes insensitivity of economic growth to energy poverty, a deceptively harmless development issue. Diversification of energy supply and demand should, however, be inevitable in the wake of climate change shocks and low-carbon development requirements. This paper assesses climate change-induced energy behaviour of households in Ghana, who contribute 32% of total energy sector emissions of greenhouse gases. It also assesses climate change-induced welfare change for households in a low carbon-development scenario as against business as usual. The net welfare effect for the scenario to switch from fuelwood to mitigate climate change was negative. The results indicate that Ghana is in an energy poverty trap, providing mixed effects for climate change mitigation. To effectively mitigate climate change under energy poverty, Ghana should promote the cultivation of energy forest plantations, introduce and use improved charcoal stoves and improved charcoal production kilns. These could lead to greater efficiency in the energy sector and create jobs for rural communities involved in the plantations for sustained growth, while at the same time delivering benefits from mitigation funding. Keywords: Climate change mitigation, economic welfare, energy poverty, fuelwood, Ghana 1. Introduction Wood-based biomass is the dominant source of energy for sub-Saharan Africa, and fuelwood consumption per capita in Africa is higher than any other continent. In Ghana, the bulk of energy consumption is based on fuelwood, and 90% is obtained directly from natural forests. The demand for fuelwood is thus a major driver of forest degradation and the release of greenhouse gas (GHG) emissions (UNEP Risoe 2013). Reducing the demand for fuelwood as a low carbon development (LCD) measure is, therefore, an important strategy to reduce drivers of deforestation and forest degradation to mitigate climate change, while generating financial flows from forest carbon activities under the Clean Development Mechanism, REDD+ (Reducing Emissions from Deforestation and Forest Degradation), and Nationally Appropriate Mitigation Activities (NAMAs). Ghana’s energy sector shows signs of high susceptibility to climate change (World Bank 2009), an indication that achieving its targeted middle-income status of US$3000 per capita income by 2020 (NDPC 2010) would require a reorganization of generation, processing and use of energy resources due to climate change shocks. In line with projections for attaining and sustaining middle income status by 2020, total energy requirements have been growing from about seven million tonnes of oil equivalent in 2004 and are expected to reach 22 million tonnes of oil equivalent by 2020 (Ghana Energy Commission 2006). Current trends in energy use show that this energy requirement is to a large extent met through traditional biomass sources, accounting for about 63% of total energy consumption (NDPC 2010). Ghana has one of the strongest economies of sub-Saharan Africa, due to its wealth in natural resources, coupled with political stability. However, the exploitation of resources through subsistence agriculture and cutting fuelwood has resulted in significant deforestation and degradation of the country’s forests (UNEP Risoe, 2013). Gillis (1988) also found that one of the two principal sources of deforestation in Ghana was fuelwood harvesting, driven by rural and urban poverty. Energy poverty can be defined as ‘the absence of sufficient choice that allo ws access to adequate energy services, affordable, reliable, effective and sustainable in environmental terms to support the economic and human development’ (Reddy 2000). It concerns people that have low income, low energy consumption and no access, or limited access, to modern energy fuel (petroleum products and electricity). Approximately 1.6 billion people do not have access to modern energy fuels globally (Chevalter & Ouedraogo 2009). The high dependence on fuelwood therefore shows the prevalence of energy poverty in Ghana, since such a trend appears highly unsustainable for continued economic growth, particularly in the wake of recent and projected climate change shocks and persistently high levels of deforestation. Also, the threat to climate change mitigation is expected to be high under such circumstances. Ghana’s greenhouse gas (GHG) emissions represent about 0.05%