Report: Corruption could undermine global climate change efforts
Transparency International urges businesses and governments to strengthen anti-fraud efforts and address green policy loopholes
Governments and businesses have been urged to step up efforts to prevent fraudulent practices undermining confidence in fast-expanding low carbon industries, after a new report warned that corruption poses a growing threat to green construction projects, the integrity of the carbon market, and wider environmental messaging.
The wide-ranging report, released by Transparency International (TI) on Saturday, identified a number of green investment areas at risk of exploitation by corrupt organisations, and sets out recommendations to help decision makers tackle rising levels of fraud.
The watchdog warned that many of the developing countries most vulnerable to the impacts of climate change, and in line to benefit from international climate change funds, often face serious corruption risks.
None of the 20 countries most affected by climate change scored higher than 3.6 on TI’s Corruption Perceptions Index, in which 0 represents an extremely corrupt country and 10 is very clean.
“Under adaptation projects, large amounts of public funds will flow into large-scale construction, a sector rife with corruption risk and issues of sustainability, particularly in countries with weak governance,” TI said.
The report also called for a mapping of countries that boast abundant green assets, such as rare earth metals, alongside weak governance practices, as part of efforts to avoid the so-called “green resource curse”, whereby governments sidestep public accountability by avoiding having to collect taxes because most of their revenue is earned from the sale of natural resources.
“In the absence of accountable governance, funds generated from natural resources may be mismanaged, poorly invested or siphoned off to an elite minority that seeks to concentrate power,” the report said.
“Despite significant additional revenue, social inequity and poverty may rise while long-term economic growth falters. In the worst instances, these conditions can contribute to public unrest or civil war.”
In addition to wide-ranging geopolitical risks, the report also highlighted how green businesses could be affected by fraudulent practices as they seek to develop or invest in low carbon projects and initiatives.
Most notably, the report highlighted the corruption risks attached to emerging forest protection projects, such as the United Nations’ Reducing Emissions from Deforestation and Forest Degradation scheme through which $28bn of climate financing is expected to flow annually to countries with large tropical forests.
The report said that some governments have already claimed credits for fictitious forest plantation projects, and calls for tighter monitoring to prevent the award of unearned credits or the double-counting of existing credits.
TI also looked at the risk of corruption in carbon markets such as the European Emissions Trading Scheme where the resale of used carbon offsets, hacking, theft and VAT fraud have dented investor confidence.
“Weak governance of these critical markets can create a lose-lose scenario, in which over-allocation of permits and the resulting low carbon prices provide a disincentive for business to find new low-carbon means of production, and potentially can bring about market collapse,” the report warned.
The group also argued that the “greenwashing” pursued by those utilities and large companies that overstate their green credentials can constitute a kind of fraud that undermines wider confidence in low carbon markets.
In particular, the report said that planned new coal fired power stations should not be advertised as “carbon capture ready” because the plants are likely to be nearing the end of their lives before the technology becomes available.
Such advertising, the report argues, will confuse customers and can hoodwink governments by encouraging them to make the wrong policy decisions in the belief that they are being green.
It urges governments to strengthen product and technology standards, and require manufacturers to advertise what green standards their products meet in order to avoid this confusion and boost public confidence in purchasing greener goods and services.
Governments and businesses have been urged to step up efforts to prevent fraudulent practices undermining confidence in fast-expanding low carbon industries, after a new report warned that corruption poses a growing threat to green construction projects, the integrity of the carbon market, and wider environmental messaging.
The wide-ranging report, released by Transparency International (TI) on Saturday, identified a number of green investment areas at risk of exploitation by corrupt organisations, and sets out recommendations to help decision makers tackle rising levels of fraud.
The watchdog warned that many of the developing countries most vulnerable to the impacts of climate change, and in line to benefit from international climate change funds, often face serious corruption risks.
None of the 20 countries most affected by climate change scored higher than 3.6 on TI’s Corruption Perceptions Index, in which 0 represents an extremely corrupt country and 10 is very clean.
“Under adaptation projects, large amounts of public funds will flow into large-scale construction, a sector rife with corruption risk and issues of sustainability, particularly in countries with weak governance,” TI said.
The report also called for a mapping of countries that boast abundant green assets, such as rare earth metals, alongside weak governance practices, as part of efforts to avoid the so-called “green resource curse”, whereby governments sidestep public accountability by avoiding having to collect taxes because most of their revenue is earned from the sale of natural resources.
“In the absence of accountable governance, funds generated from natural resources may be mismanaged, poorly invested or siphoned off to an elite minority that seeks to concentrate power,” the report said.
“Despite significant additional revenue, social inequity and poverty may rise while long-term economic growth falters. In the worst instances, these conditions can contribute to public unrest or civil war.”
In addition to wide-ranging geopolitical risks, the report also highlighted how green businesses could be affected by fraudulent practices as they seek to develop or invest in low carbon projects and initiatives.
Most notably, the report highlighted the corruption risks attached to emerging forest protection projects, such as the United Nations’ Reducing Emissions from Deforestation and Forest Degradation scheme through which $28bn of climate financing is expected to flow annually to countries with large tropical forests.
The report said that some governments have already claimed credits for fictitious forest plantation projects, and calls for tighter monitoring to prevent the award of unearned credits or the double-counting of existing credits.
TI also looked at the risk of corruption in carbon markets such as the European Emissions Trading Scheme where the resale of used carbon offsets, hacking, theft and VAT fraud have dented investor confidence.
“Weak governance of these critical markets can create a lose-lose scenario, in which over-allocation of permits and the resulting low carbon prices provide a disincentive for business to find new low-carbon means of production, and potentially can bring about market collapse,” the report warned.
The group also argued that the “greenwashing” pursued by those utilities and large companies that overstate their green credentials can constitute a kind of fraud that undermines wider confidence in low carbon markets.
In particular, the report said that planned new coal fired power stations should not be advertised as “carbon capture ready” because the plants are likely to be nearing the end of their lives before the technology becomes available.
Such advertising, the report argues, will confuse customers and can hoodwink governments by encouraging them to make the wrong policy decisions in the belief that they are being green.
It urges governments to strengthen product and technology standards, and require manufacturers to advertise what green standards their products meet in order to avoid this confusion and boost public confidence in purchasing greener goods and services.
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