The Ghanaian Minister of Land and Natural Resources, Samuel A. Jinapor, recently said that the Ghanaian government has been working on legislation to regulate the production of carbon credits in the country to ensure that the industry is environmentally sound and that the benefits are shared fairly between the government, local communities, and project developers.
The proposed legislation is still in the early stages, but it is expected to include the following provisions: (1) the registration and verification of carbon credits, (2) the monitoring and enforcement of environmental standards, and (3) the sharing of benefits from carbon credit projects.
Carbon credit prices have been historically lower on the continent than in many other parts of the world where schemes are more strictly regulated. Africa’s market currently sees the continent earning less than $10 per ton of carbon. Other regions have been securing over $100 for the same amount. This decision trails efforts made by other African nations, including Zimbabwe and Kenya, to enact legislation aimed at ensuring that the government and local communities receive a greater share of benefits from offset production.
The Ghanaian government stated that the regulation of the carbon credits industry is important for several reasons. First, it can help to ensure that carbon credits are generated in a way that actually reduces greenhouse gas emissions. Second, it can help to prevent fraud and abuse in the carbon market. Third, it can help to ensure that the benefits of carbon credit projects are shared fairly between all stakeholders. However, regulating the carbon credit industry presents some serious limitations that could impede the market process of that industry.
First, the increased costs. Indeed, regulation can add to the cost of carbon credits, making them less attractive to buyers. This could discourage investment in carbon credit projects and make it more difficult for companies to meet their emissions reduction goals.
Second, reduced flexibility. Regulation can, surely, reduce the flexibility of the carbon market, making it more difficult for companies to buy and sell carbon credits as needed. This could make it more difficult for companies to manage their emissions and could lead to higher emissions overall.
Third, an increased bureaucracy. Clearly, regulation can add to the bureaucracy of the carbon market, making it more difficult and time-consuming to trade carbon credits. This could discourage investment in the carbon market and make it less efficient.
Fourth, the ineffective enforcement. If regulations are not effectively enforced, they can be circumvented or ignored. This could undermine the integrity of the carbon market and make it less effective in reducing emissions.
The regulation of the carbon credits industry is a complex issue, and there are a number of challenges that Ghana will need to address. However, regulating that market will not necessarily improve its access and the earnings that it seeks to generate. It might, in fact, make it more difficult to achieve the goals set. Regulations lead to inflexibility, an increased bureaucracy, and to the inefficient allocation of resources.