A Climate of Corruption? Transparency Challenges for Cancun and Beyond

An update from the International Anti-Corruption Conference.

At the start of the international climate conference in Cancun, the international anti-corruption movement is weighing into the debate on how to shape a new global treaty and deliver effective climate financing to developing countries.

Issues of transparency and accountability have long been a source of contention, and a barrier to progress, in the UN-led climate negotiations. Disagreement between developed and developing countries over how to make actions and policies taken by countries robust and comparable has undermined the trust essential for effective global cooperation to halt rising temperatures. More recently, the issue of climate financing has become a bone of contention, with developing countries questioning whether the money pledged by industrialized countries is new, or simply diverted development aid.

Last month in Bangkok, Transparency International organized the 14th International Anti-Corruption Conference (IACC), which focused in part on the the transparency and corruption challenges associated with climate policy, climate finance for mitigation and adaptation, and carbon markets. WRI prepared the IACC background document on climate change and corruption and has been advising Transparency International on the 2010 Global Corruption Report, which also take climate change and corruption as its theme.

In a plenary presentation, WRI’s executive vice-president, Manish Bapna, focused on transparency in adaptation. He highlighted the “significant corruption and governance risks at each stage of funding for climate adaptation – how it is generated, how it is managed, and how it is spent.” Bapna highlighted the following specific questions and issues for policymakers to grapple with:

Transparency and accountability in the generation of adaptation finance.

• With $30 billion pledged for climate finance for 2010-2012 and about $100 billion annually by 2020 (a figure comparable to total Official Development Assistance (ODA) today), making sure that these flows are corruption-free will be a massive challenge. Greater transparency on whether these funds are “new and additional” and a “balanced” amount is being allocated to adaptation will be crucial to creating trust between rich and poor countries.

Corruption and governance risks related to who should manage adaptation finance

• Should adaptation financing be entrusted to multilateral and bilateral aid agencies such as the World Bank (what rich countries want) or should national institutions in developing countries have direct access to these funds? Rich countries argue that many of the new institutions created in developing countries lack the fiduciary controls and safeguards that, however flawed, have been tried and tested in the multilateral banks. Poor countries argue that adaptation finance is fundamentally different from development aid and should not be channeled in the same way.

New corruption risks related to how adaptation funding is spent

• Sectors that will receive significant adaptation money include water, infrastructure and disaster relief. Yet all these have typically been characterized by high levels of corruption.

• Corruption pressures are likely to pull funding to projects that are large and concrete-heavy (such as new infrastructure). This is the opposite of the small, local and flexible solutions often needed to deal with climate impacts.

Bapna concluded by calling for collaboration between the anti-corruption and environmental communities to help make emerging adaptation funds in developing countries more robust and corruption-proof. Efforts should include working with adaptation institutions in developing countries to make their governance and operations more transparent and inclusive as well as with civil society organizations to build their capacity to hold these institutions to account.

In a related IACC conference workshop, WRI’s electricity governance (EGI) team focused on how to address pervasive corruption in the capital-intensive electricity sector. Kickbacks to government officials to secure contracts for building new power plants or providing fuel or equipment are common, and clean energy technology markets are also not immune to fraud or corruption. These conflicts of interests can affect power development plans that shape a country’s energy choices. The workshop showcased innovative strategies to fight corruption in a sector that has historically received little attention from civil society, yet is at the center of sustainable development and climate change efforts. Speakers from EGI civil society partner organizations shared experiences from four different countries: Thailand, India, Indonesia, and South Africa.

EGI will soon compile a compendium of these examples and other emerging strategies and challenges that will be available on its website: https://electricitygovernance.wri.org