Power Producers Warn of Higher Electricity Bills Due to New Emissions Levy

The chamber of private power producers says the levy will add to their operational costs and require a corresponding adjustment in the generation tariff.

by Motoni Olodun

The introduction of a new emissions levy on carbon dioxide equivalent emissions from electricity producers will lead to an increase in electricity tariffs, according to the Independent Power Generators, Ghana (IPGG).

The IPGG, a chamber of private power producers in the country, said in a statement that the levy would add to the operational costs of the power plants and require a corresponding adjustment in the generation tariff to ensure their sustainability.

The Emissions Levy Act, 2023 (Act 1112), which came into effect on February 1, 2024, imposes a levy of GHS100 per tonne on carbon dioxide equivalent emissions from electricity producers, as well as internal combustion engine vehicles.

The Act is part of the government’s efforts to combat greenhouse gas emissions, promote eco-friendly technology and green energy, and enhance environmental management.

However, the IPGG argued that the levy was a “political risk” that should be borne by the end user, as stipulated in the Power Purchase Agreements (PPAs) signed between the power producers and the Electricity Company of Ghana (ECG).

“As a direct consequence of this statutory incidence on the power producers, there will be an upward adjustment in the cost build-up of the electricity generation,” the statement said.

The IPGG also expressed concern about the lack of consultation and stakeholder engagement before the enactment and implementation of the Act, saying it violated the principles of good governance and transparency.

The chamber called on the government to engage with the power producers and other relevant stakeholders to address the implications of the Act and ensure a smooth and fair implementation.

The Emissions Levy Act has also been met with mixed reactions from other stakeholders, such as the Association of Ghana Industries (AGI), the Ghana Chamber of Commerce and Industry (GCCI), and the Consumer Protection Agency (CPA).

While some have welcomed the Act as a positive step towards reducing the country’s carbon footprint and mitigating the effects of climate change, others have raised concerns about the potential impact on the cost of living and doing business, especially amid the economic challenges posed by the global pandemic.

According to the Ghana Statistical Service (GSS), the average electricity tariff in Ghana as of December 2023 was GHS0.83 per kilowatt-hour, which was higher than the average tariff in the West African sub-region.

The GSS also reported that the annual inflation rate for electricity in Ghana was 9.8% in December 2023, compared to 5.6% in December 2022.

The Ministry of Energy has not yet issued any official statement on the expected effect of the Emissions Levy Act on electricity tariffs but has assured the public that the government is committed to ensuring reliable and affordable power supply for all.

Source: GhanaWeb

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