The Independent Power Generators, Ghana (IPGG) has cautioned that the implementation of the emission levy will cause an upward adjustment of electricity generation tariffs.
The Chamber said the levy would lead to an upward adjustment in the cost buildup of electricity generation, and thus the corresponding increment in tariffs would cover for the increased operational costs induced by the imposition of the levy.
In a statement signed by Dr Elikplim Kwabla Apetorgbor, Chief Executive Officer, IPGG, shared with the Ghana News Agency, the Chamber said the increment in generation tariff would ensure the operational sustainability of the power producers.
On February 1, 2024, the Ghana Revenue Authority (GRA) announced the commencement of the implementation of the Emissions Levy Act 2023 (Act 112) which imposes a levy on carbon dioxide equivalent emissions from internal combustion engine vehicles.
The law imposes a levy of GHS100 per tonne on carbon dioxide equivalent emissions from electricity producers as statutory incidence.
The move, according to the government, aligns with its commitment to combat greenhouse gas emissions, with the aim of promoting eco-friendly technology and green energy, as well as enhancing environmental management.
The IPGG said, per the nature of the power purchasing agreements, the levy was a “political risk” and thus the economic incidence would go to the end user.
It said power plant management and operation was cost-sensitive, adding that the levy would be added to the operational costs of the power plants.
“In accordance with the Power Purchase Agreements (PPAs), this legislation is a political risk (an Increased Cost Event) mitigated by an Increased Costs clause in the Agreements, which suggests a pass-through mechanism, where the economic incidence goes to the end user.
As a direct consequence of this statutory incident on the power producers, there will be an upward adjustment in the cost build-up of the electricity generation,” it said.
The Chamber added that the levy “necessitates an equal measure of review of the electricity generation tariff, to ensure the predictability of the cash flow obligations of the power producers.”