Trends of CO2 emissions and economic growth

Figure 1 shows the trends of CO2 emissions in Ghana from 1990 to 2018. From Fig. 1, CO2 emissions showed a steady rise from 1990 to 1997 but exhibited some fluctuations from 1998 to 2008, although the overall trend was positive. Beyond 2008, CO2 emissions further showed an upward trend until 2013, after which it began to fluctuate again, but resumed the upward trend after 2016. The fluctuations in the growth of CO2 emissions may be attributed to the efforts made by the Government of Ghana to mitigate the emission of CO2. Twerefou et al. [47] showed an increase in CO2 emissions in Ghana from 12.2 to 23.9 Mt between 2000 and 2010, respectively. This, however, confirms the result that CO2 is rising and remains a major concern in Ghana.

Fig. 1
figure 1

Trend of CO2 emissions in Ghana. Source: Authors’ construct

Figure 2, which displays the trends in economic growth in Ghana, also depicts an upward trend, suggesting that generally, GDP rises with CO2 emissions in Ghana. For the period from 1990 to 2005, economic growth was positive, although the rate was negligible. A steady rise in economic growth was witnessed from 2006 to 2012, and a steeper rise afterwards. As with all economies, Ghana’s economic growth is determined by three sectors: agriculture, industrial, and the service or tertiary sector. It can be observed that economic growth in Ghana from 1990 to 2005 was largely contributed to by the agricultural sector. The industrial sector’s contribution to economic growth increased after 1992 but dropped in the 2006 to 2010 period. Meanwhile, the service sector has been the most important sector in terms of its contribution to GDP since 2006. The sharp rise in economic growth recorded from 2012 onwards can be attributed to the industrial sector’s output growth. This result is supported by GSS (2018) findings which postulate that the industrial sector, including the manufacturing sector, in Ghana accounts for 23.68% of the growth of the Ghanaian economy. According to Fig. 2, the services sector accounted mainly for the recent economic growth. This confirms the findings of O’Neil [48] that posited that the contributions of the industrial sector, agricultural sector, and the service sector are 29.74%, 19.25%, and 45.01%, respectively, to economic growth. The service sector, based on the Perez-Lopez [49] classification, includes transport, repair of vehicles, household goods, storage, wholesale and retail trade, communications, finance, insurance, real estate, restaurants and hotels, and business services. These activities are the core economic activities that contribute most to Ghana’s economic prosperity. Notably, a report published by GSS [50] ascertained that the economic growth rate in Ghana for 2021 was 5.4%, with the service sector, agricultural sector, industry sector, and manufacturing sector contributing 9.4%, 8.4%, 0.8%, and 7.8%, respectively, to economic growth, thus clearly confirming that economic growth in Ghana has recently been driven by the service sector, as the trend shows in Fig. 2.

Fig. 2
figure 2

Trends of economic growth in Ghana. Source: Authors’ construct

Both CO2 emissions and economic growth over the years have been increasing. However, the recent rise in CO2 emissions in Ghana can be associated with the tertiary or service sector as the leading sector contributing more to CO2 emissions in Ghana, although the industrial sector (comprising manufacturing, lumbering, mining, food processing, aluminium smelting, cement, small commercial shipbuilding, and petroleum industries), has played a significant role in the last decade. From a contextual point of view, transport services, energy-related services, waste accruing from human activities, and open burning of waste increased the contribution of CO2 emissions by 45.8%, 22.1%, 14.4%, and 92.5% between 2016 and 2019, respectively (Ghana’s Third Biennial Climate Update report, [51]. This, however, is an indication of recent CO2 emissions being driven by the service sector activities in Ghana. This result supports the empirical findings of Appiah [15], which posits that economic growth and CO2 emissions are positively correlated in Ghana.

Analysis of decoupling status of CO2 emissions from economic growth

The analysis of the decoupling status of CO2 emissions from economic growth is presented in Table 4. Over the period 1990 to 2018, there was weak decoupling of CO2 emissions from economic growth. The cumulative average decoupling index for the period was 0.2548, with CO2 growth and economic growth rates of 7.01% and 30.89%, respectively. This means during the period, Ghana experienced growth in CO2 emissions with economic growth. The low emissions of CO2 can be ascribed to implementation of the carbon mitigation policies [13] and low levels of emission factors reported in Ghana compared to advanced countries. From Fig. 2, the economy of Ghana has been mainly driven by the service and the agriculture sectors in terms of contributions to GDP, until the last decade where the industrial sector growth experienced tremendous growth from 2005 to 2018. The overall weak decupling is not surprising, given the primary nature of production and exports of goods in Ghana, which has low CO2 emissions content. According to the CAIT Climate Watch [52], between 1990 and 2018, CO2 emissions have been largely influenced by growth in emissions from electricity and heat generation to the tune of 7250%, followed by manufacturing and construction with a growth rate of 670%. Transportation and industry sectors follow with 397% and 267% growth rates, in relative terms. These are sectors that have been important to Ghana’s growth path. Specifically, the fast growth of the services sector, especially trading in finished goods, has very low emission factors and contributes to slow growth in CO2 emissions while economic growth is rising. In the energy sector, Ghana until the last decade had historically depended on hydropower with low emissions in its energy-mix to drive its economic growth. Currently, there is high resort to thermal energy sources with relatively high emissions factors and coupled with the industrialisation drive that depends heavily on fossil fuels and gas, decoupling CO2 emissions from economic growth might be a challenge in Ghana. This finding is supported by existing studies that found that most developing countries have not been successful in decoupling CO2 emissions from economic growth [53].

Table 4 Decoupling of CO2 emissions from economic development (1990–2018)

From Table 4, Ghana’s weak decoupling state was interspersed with strong and expansive negative decoupling states during the period. Strong decoupling states occurred in 1990–1991, 1999–2000, 2002–2004, 2007–2008, 2013–2014, and 2015–2016. Expansive negative decoupling occurred in 1990–1991 and 1997–1998. The strong decoupling status is viewed as the best status for CO2 reduction, suggesting that the speed of economic growth has been faster than the rate of increase in CO2 emissions. This could also be attributed to the temporary environmental and CO2 mitigation strategies such as fuel diversification for thermal electricity, installation of power factor correction devices, solar lantern replacement programmes, sustainable land water management projects, and forest investment programmes [13].

Decomposition of decoupling indicators

Figure 3 shows the result of the decomposition analysis of the decoupling indicators in Ghana from 1990 to 2018. The result indicates that changes in economic activities (DEA) and economic structure (DES) contributed significantly to the growth in CO2 emissions in Ghana in the periods of weak decoupling. On the other hand, growth in energy intensities (DI) and emissions factors (Df) reinforced economic activities (DEA) and economic structure (DES) to realise the strong and negative expansive decoupling status. This implies that improvement in production efficiency and the deployment of green energy technologies in Ghana will help in the absolute decoupling of economic growth from CO2 emissions in the long term. Environmental degradation is expected to decrease as a result of improved technology, increased environmental awareness, and the effective application of environmental regulations brought on by economic development. The result of this study supports the findings of [54, 55] that the main factor limiting CO2 emissions growth is energy consumption intensity in the strong decoupling periods. Also, in line with [54, 55], Ghana’s economic structure and economic activities promote CO2 emissions, especially in the weak decoupling periods.

Fig. 3
figure 3

Decomposition of decoupling indicators. Source: Authors’ construct

Decomposition of annual changes in CO2 emissions in Ghana

From Table 5 (and Table 6 in Appendix), the analysis shows that changes in economic activities ((Delta {varvec{C}}_{{{varvec{EA}}}})) are the main driver of growth in CO2 emissions in Ghana, with 51,343.98 tCO2, corresponding to 15.31%. Economic activities are a key source of funds for a country’s development, and thus the government pays attention to these activities in funding its short and long-term projects. From Fig. 2, growth in the service and industrial sectors, dominant economic activities, contributed mostly to the growth of the economy, at least since 2010. This result is consistent with the findings of Appiah et al. [15], which found a positive relationship between economic growth rate and CO2 emissions in Ghana. The strength of this finding is backed up by the analysis in Fig. 3, which showed that the growth in CO2 emissions was driven by economic growth in the different economic sectors.

Table 5 Decomposition of changes in CO2 emissions (in percentages)

Moving away from economic activity, the next significant driver of growth in CO2 emissions in Ghana is the emission factor, which emitted an average of 12,430.33 tCO2 over the period, constituting 3.71%. In line with expectations, the IPCC (2019) asserted that a higher emission factor is associated with increased CO2 emissions. Emission factors can be used in the conversion of land use (clearing of forest and grassland for crop production) to be significant in releasing more CO2 into the atmosphere. Due to population growth, estate developers clear more forests for infrastructural purposes and other human activities such as waste disposals, mining activities, and transportation services, which pollute the environment.

Also, demographic factors, which are changes in the population size and lifestyle, emitted an average CO2 of 5309.75, representing 1.58%. This result could be explained by the growth in population size in Ghana, which corresponds to a surge in demand for energy, occasioning a high build-up in CO2 emissions. For instance, the electrification rate in Ghana increased over the past decades by 85% (GLSS 2017). Because of this, more energy is being used, which is partly to blame for the rise in CO2 emissions.

In contrast to the above findings, structural variations in energy intensity and economic activity reduced CO2 emissions in Ghana by 43,172.95 tCO2 and 13,933.04 tCO2, constituting 4.15% and 12.87% between 1990 and 2018, respectively. This confirms previous studies by Liu et al. [56] which suggested changes in the structure of an economy have a significant impact on CO2 emissions. For instance, industrial restructuring and modernisation of energy infrastructure reduce CO2 emissions (Wang and Watson 2010). This result can be attributed to structural changes in energy consumption brought about by Ghana’s carbon reduction plan.

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