What does the future hold for the poor in Ghana? An assessment of the impact of climate change

Ghana is considered a ‘success story’ of development in Africa. A growth rate of more than four per cent over the last two decades has resulted in an almost doubling of GDP and a dramatic improvement in poverty and food security. As a consequence, the country is on track to achieve MDG1 – halving the proportion of poor and hungry people – before 2015 and there is a strong likelihood that Ghana will achieve its goal of becoming a middle income country by 2020. Nevertheless, the government has recently identified climate change as a major threat to economic growth and development. The exact impact of climate change depends on the size of the shock which is subject to uncertainty. This paper examines climate change as a potential threat to Ghana’s development by evaluating the impact of a range of climate change scenarios. The effect of climate change shocks on the lives of people will differ across households, depending on income, occupation, gender and location. It is expected that climate change will be particularly damaging to the agricultural sector, which, at 36 per cent of GDP, is a major contributor to economic growth. It is likely to negatively impact the cocoa sector which is an important source of export earnings. Climate change could therefore disproportionally affect the livelihoods of the rural poor and small scale (cocoa) farmers. Furthermore, through the effects of higher food prices and diminishing economic growth, climate change may also have a negative impact on income and food security of the urban population. Finally, since climate change is a global phenomenon, poverty and food conditions in Ghana will be affected by developments in other countries transmitted through international trade and foreign direct investment. This may offer opportunities, e.g. in terms of increased exports to countries whose agricultural production is negatively affected, but may also pose threats if crucial imports or investments fall away. This paper presents the likely impact on poverty and food security in Ghana of differing degrees of climactic challenge. We consider three ranges of challenge: low, medium and high, where the low challenge corresponds to the IPCC shared socio-economic pathway, SSP1 ‘Sustainability’, medium to SSP2 ‘Middle of the Road’ and high to SSP3 ‘Fragmentation’. By examining this range of possible futures, we can provide a picture of the bounds of the impact on food security and poverty and highlight possible areas for policy intervention. We conduct the analysis using the Modular Applied GeNeral Equilibrium Tool (MAGNET), a GTAP-based global economic simulation model. The model is extended to include several Ghana-specific features including cocoa as a separate crop, Ghana’s main neighbouring and trading partners and most importantly, nine household types distinguished by location. The paper presents a SAM-based method for disaggregating the single representative household into multiple households types and integrates the households into the model using the MyGTAP approach. Capturing the heterogeneous effects on household groups in this way allows for a richer understanding of the impact on the three aspects of food security: availability, access and utilisation. In addition, we compute the standard Foster-Greer-Thorbeke poverty measures to indicate the change in poverty within each household group. The result is a Ghanaian-focused global CGE model that produces a detailed picture of the economy in 2030 and the degree to which climate change will threaten and potentially undo the development of the last two decades. We expect to find that the high climate challenge lowers GDP growth compared to the reference scenario; with negative effects for poverty and food security. The results provide a vision of the future for which policy interventions can be identified as part of Ghana’s mitigation and adaptation planning for the future. Furthermore, the results are likely to be of value not only to Ghana but also to surrounding countries with similar climates and economic structures.