The global effort to combat climate change demands increased transparency and oversight, given the complex interplay of various stakeholders, rapidly evolving regulations, and substantial financial flows. And these, writes Steven-Hristo Evestus, inherently heighten the risk of corruption
Climate-related shifts will impact living standards and established norms, exerting immense pressure on social and political fabrics worldwide. We are already witnessing adverse consequences, ranging from health issues and misallocation of funds to delays in sustainability initiatives and human rights violations. Consequently, achieving fair and transparent governance poses a significant challenge.
The issue lies in the fact that conflict, crises, and transformations inherently carry the risk of corruption, which, without preventative measures, could undermine collective endeavors. In the context of climate change, corruption can manifest through subsidy misuse, bribery, nepotism, or manipulation of scientific data. Consequently, swift remedies, regulatory changes, and substantial financial flows may inadvertently enable corruption rather than thwart it.
Scale of financial flows amplifies the risk of corruption
A 2022 Transparency International report examined the link between corruption and climate change policies, including climate subsidies. It revealed that corruption risks arise when funds are misappropriated or diverted to companies with connections to public officials, bending public procurement rules arbitrarily. This phenomenon can also be observed concerning the complex nature of climate adaptation and mitigation work, potentially facilitating state capture. Instances of such capture were found in the forest climate finance and mineral funds in Ghana, where political elites took advantage of weak accountability mechanisms to prioritise their interests over local communities.
Institutionalised grand corruption often involves diverting climate subsidies to politically connected companies by manipulating public procurement rules. This practice has been observed in climate adaptation infrastructure projects in Bangladesh and forest climate finance in the Democratic Republic of Congo.
The climate debate involves diverse actors, making lobbying a crucial focus. For instance, fossil fuel lobby groups may attempt to influence the design of climate finance programmes. Ironically, the Transparency International report suggests that the UN Climate Change Conference was heavily influenced by fossil fuel lobby groups, despite its emphasis on addressing climate finance approaches. Corruption can also assume a transnational dimension, including unequal access to lobbying or advocacy and the misuse of foreign funds for climate action. Transparency International’s report on multilateral trust funds highlights the misuse of fund financing for a project in Russia aimed at adapting energy efficiency standards.
Funding studies show disappointing results
In the first half of 2023, the EU’s Open Access Coalition, in collaboration with ten organisations from central and eastern Europe, including Transparency International Estonia, conducted a pilot study on the transparency of revolving funds. The study revealed that the utilisation of the EU’s €672.5bn (US$709.8bn) Recovery and Resilience Fund (RRF) remains at significant risk of corruption and misuse. Member states disclosed just under 60% of information regarding fund usage, falling short of the EU’s recommended transparency standards. Without more comprehensive and higher-quality information disclosure, the remaining 40% of data’s exact risk level cannot be assessed. Bulgaria, Estonia and Lithuania stand out for their efforts towards openness, publishing around 80% of investment spending data in a user-friendly manner.
User-friendliness is crucial because it is not only essential to consider what data is published but also how it is published. Information and data on aid allocation and usage must be easily accessible, complete, timely, and preferably centralised to enable machine-readable analysis. Without this, citizens, businesses, researchers, and investigative journalists cannot assess fund utilisation or identify risks warranting further investigation.
Climate subsidies need transparency
The findings from the aforementioned study are directly applicable to the utilisation of climate subsidies. To safeguard against undue influence, conflicts of interest, and fund mismanagement, policymakers must establish clear rules and guidelines. Additionally, it is crucial to ensure complete and high-quality data disclosure, closely monitor the data to prevent conflicts of interest, promptly report any inconsistencies or irregularities, and respond swiftly to address such issues.
Transparency must permeate every stage of the subsidy process, from initial planning to implementation. It is vital to maintain a comprehensive monitoring system that tracks the conditions under which grants are allocated, the recipients of these allocations, and the effective oversight of contract performance. A centralised and user-friendly database would serve as the most effective means to achieve these goals and ensure accessibility and scrutiny by all stakeholders.
Lobbying shouldn’t happen behind closed doors
In Estonia, there has been a positive step forward as lobbyists’ meetings with ministries and government departments have been made public for the past three years. However, transparency has not extended to the level of the parliament. Despite this progress, it remains crucial to fulfil the duty of informing the public about who meets with whom, when, and with what interests. This transparency adds weight to the objectivity and openness of policy decisions as they take shape. Lobbying is a recognised aspect of democratic governance, but it must be conducted openly and involve the participation and consultation of all interested parties.
Consequently, in the realm of granting and utilising funds, further crucial measures must be taken to prevent corruption risks, improve data quality, and ensure unburdening access to and processing of data. Although progress is underway, much work lies ahead, and the motivation for change exists, at least in theory. Corruption in climate finance undermines the commendable efforts of countries to reduce emissions and impairs the quality of mitigation and adaptation infrastructure. In both cases, donors and funders suffer losses or encounter fund misuse. For ordinary citizens, this translates to a decline in the quality of life and heightened distrust in decision-makers.
About the author
Steven-Hristo Evestus spent 17 years in Estonia’s Office of the Prosecutor General, latterly as chief state prosecutor, and later joined the NGO Transparency International Estonia as chairman of the board and executive director. He left in August 2023 to take up a role at law firm Sirel & Partners. He is an expert in anti-corruption and anti-money laundering.
Evestus spoke at the Open Government Partnership (OGP) Global Summit, hosted by Estonia in early September 2023, which brought together heads of state and government, civil society organisations, and policy-makers from around the world. Corruption prevention was one of the key themes of the event, including how to reduce the risk of corruption in the context of the fight against climate change.
