Anti-Corruption and Integrity Outlook 2024

8. Green transition

Introduction

Addressing climate change and other environmental goals is a priority for governments across the OECD and beyond. Faced with this long-term, complex, and systemic challenge, public policymaking is under unprecedented pressure, as governments try to manage difficult trade-offs and competing interests, and respond to rapidly changing and unknown circumstances. This creates a myriad of integrity risks. Complicating matters further, governments cannot deliver climate targets by themselves, and the response to climate change and the green transition requires the expertise, experience and innovation of a range of actors, notably the private sector, raising the integrity risks even higher. The stakes are high and there is still no widespread awareness of the risks and opportunities presented by anti-corruption and integrity concerns.

This chapter aims at raising such awareness and explores how the speed and scale of the green transition is putting an increased strain on public integrity systems within OECD countries. It also examines how this impact on public integrity may in turn be leading to less effective green policy development. It finds that:

• Misleading lobbying and conflict of interest may be obstructing the delivery of the green transition.

• Robust law enforcement against transnational corruption can also contribute to the green transition.

Misleading lobbying and conflict of interest may be obstructing the delivery of the green transition

The green transition opens new vulnerabilities to integrity risks

Governments across the OECD are committed to deliver their climate and sustainability targets through co-operation with a broad range of external actors. This increased engagement brings a wider range of interests, knowledge and expertise to bear on the policymaking process. For the business sectors and industries which have, often significant stakes in ongoing debates, negotiations and policy development around climate change, lobbying is crucial. Public officials and politicians are trusted with charting a course forward on the green transition, taking decisions in the public interest for current and future generations, not for private gain.

Evidence of lobbying and other influence practices aimed at blocking progress on climate change policies demonstrates the risks this increased engagement can bring. Oil and gas companies spend significant sums on influence activities, far exceeding equivalent expenditure from environmental advocacy groups and clean energy firms (Resimić, 2022[34]; McCarthy, 2019[45]; Slowiczek, 2022[46]). For example, an analysis of a major oil and gas company’s internal documents and communications between 1977 and 2014 found that, while its own research had established that climate change was caused by human activity, the company engaged in several practices to raise doubt, influence public opinion and reduce regulatory pressure to curb CO2 emissions (Conway and Oreskes, 2010[47]; Supran and Oreskes, 2017[48]). Oil and gas companies have also been leading contributors to think-tanks and front groups questioning established climate science and have funded misleading branding campaigns or social media advertisements (Influence Map, 2022[49]; Graham, Daub and Carroll, 2017[35]). And during debates around the introduction of a carbon tax during the COP26 summit, a number of powerful interests sought favourable treatment, such as a tailor-made carbon tax, bypassing legislation or making sure they were exempt from the tax (Conway and Hermann, 2021[50]). While these instances are not representative of all lobbying on climate targets, these illegitimate or misleading lobbying practices affect public integrity as they diminish public office holders’ ability to act in the public interest. In the worst cases, where lobbying activity is designed to influence policy development away from established science, it also increases the risk that policy is made which is less suited to meeting governments’ climate goals and delivering the green transition.

The green transition is susceptible to manipulation by foreign entities

Instances of prolonged operations across OECD countries reveal how foreign powers exploit weaknesses in the integrity frameworks of target states. These exploits allow them to establish structures of influence, gain access to energy markets, and sway countries striving to secure renewable and dependable energy sources. For instance, foreign state-affiliated energy firms have taken advantage of loopholes in lobbying regulations and revolving door policies to enlist current and former government officials at national and local levels, aiming to sway decision-making processes in target states (Correctiv, 2022[51]). Additionally, foreign states have employed misinformation campaigns to portray their natural resource supply as an overly viable solution for meeting climate objectives (Influence Map, 2022[52]). They have also mobilised diasporas and infiltrated think tanks, academic institutions, and segments of the private sector to garner support in target states for purchasing from their markets (Correctiv, 2022[51]). While most engagements with foreign suppliers are legitimate and can bolster countries' capacities to facilitate the green transition and achieve climate goals, numerous instances across OECD countries have demonstrated the adverse effects of foreign undue influence. These effects include excessive reliance on foreign energy imports or diminished confidence and investment in certain green transition solutions, such as nuclear energy. Consequently, in instances where countries' safeguards regarding lobbying, misinformation, and revolving door practices are inadequate, they remain vulnerable to foreign interference in their endeavours to advance the green transition and fulfil climate targets.

Climate advisory and expert groups present high risks

Many OECD governments are also benefitting from external input on climate initiatives through advisory bodies and expert groups. Strong conflict-of-interest regimes, political finance regulations, lobbying regulations and open government agendas will provide a framework for such inputs to happen in a way that upholds democratic principles of integrity and accountability. These groups can bring much needed knowledge and skills to policy development. Depending on their status and mandate, these bodies may provide analysis to parliaments or governments on climate-related risks, monitor progress on international climate commitments, or carry out modelling and scenario planning. They may consist solely of researchers or academics, or can also include, for instance, engineers, economists, think tank directors, officials from the wider public sector, and members of the private sector and civil society organisations with expertise in climate policy (OECD, 2022[53]). These groups can, however, increase risks around conflict of interest and revolving door, particularly where they do not have adequate transparency and integrity standards to ensure the legitimacy of their advice. Private sector representatives participating in these groups often have direct access to policymaking processes without being considered external lobbyists or subject to rules and conventions on engagement with outside organisations. Several studies have explored how, whether consciously or not, members of these groups may favour the interests of their company or industry, increasing the risk that policy is not made in the public interest or as effective as it could otherwise have been (Conway and Hermann, 2021[50]; OECD, 2022[53]).

A stronger performance of lobbying and conflict-of-interest frameworks is key for the green transition

These potential risks around lobbying and conflicts of interest can extend across the public sector. Many aspects of the response to climate change, such as renewables or decarbonisation, are characterised by close working between public and private sector actors. In many cases, this close collaboration and movement between sectors is an important source of knowledge and expertise, and governments should expect to continue benefitting from the insights which it can bring. However, examples across OECD countries have demonstrated that illegitimate or misleading lobbying and conflicts of interest can also increase the risk of collusion between sectors and state capture (Resimić, 2022[34]; Pons-Hernández, 2022[54]; Huter et al., 2018[55]). In some instances, these cases have deterred the transition to green initiatives, impeded the realisation of climate targets, or led to less efficient use of funds for climate projects (Resimić, 2022[34]).

Countries must ensure their public integrity frameworks remain resilient in the face of the added challenges which the green transition is presenting to policymaking. This is not only so public office holders continue to act in the public interest under the weight of other competing interests. It is also because doing so can ensure more effective climate policy, rather than policy which represents the preferences of sectors and industries which, evidence suggests, may sometimes have different agendas. OECD countries should consider how to improve the performance of their lobbying frameworks, as explored in Chapter 4 above, by expanding lobbying disclosure requirements to include information on the objective of lobbying activities, its beneficiaries, the targeted decisions and the types of practices used, including the use of social media as a lobbying tool. They could also improve their transparency requirements, by publishing details about the meetings of key public officials involved in climate and environmental decision making, and introducing precise and clear criteria for the award of licences and contracts. Countries should also ensure their conflicts of interest and revolving door policies are robust enough to cope with the added pressure of the green transition, and that the frameworks they have are being implemented. And they should strengthen their rules around political financing, to allow public comparison between the agendas which corporations are financially supporting, and the public statements they may be making in support of climate agendas.

Risks in transition minerals

The race to secure transition minerals is an important part of the green transition, and is particularly vulnerable to corruption risk. The world’s energy and digital transitions are dependent on the vast expansion of renewable energy and the electrification of the global economy. The development of this infrastructure and production capacity is dependent on large amounts of minerals and other critical raw materials (Box ‎8.1). Developing supply to meet anticipated mineral demand requires substantial increases in the mining and production of key transition minerals (IEA, 2021[56]; OECD, 2023[57]). There are ample identified supplies of these minerals, but there remain gaps between the current anticipated investments to extract them and global net zero goals, particularly relating to lithium (IEA, 2023[58]). To meet the net zero scenario, the International Energy Agency projects a required additional investment need in transition mineral mining capacity of between USD 360-450 billion by 2030 (IEA, 2023[58]). OECD countries are seeking to overcome these challenges through substantial new investments and a wave of new policies and regulations (IEA, 2023[58]; IEA, 2021[56]). As they do so, countries are encountering corruption risk throughout the supply chain, endangering public integrity and making it harder to secure mineral supplies and meet climate and development targets (EITI, 2023[59]).

OECD countries must ensure that public office holders working in licensing and regulation are subject to adequate conflicts of interest processes and that, where appropriate, licensing decisions are subject to strong transparency requirements and open government policies. Corruption risks in transition minerals are transnational by nature and all OECD governments are facing greater pressure from sectors and industries nationally and internationally trying to shape and come to terms with green and sustainability targets and the policies needed to meet them. This increase in engagement between the public and private sectors is in part a product of governments’ reliance on the private sector to help effect the green transition. But where this lobbying activity is greater, OECD countries should make sure their lobbying rules are comprehensive and being implemented to ensure policymakers continue to act in the public interest.

Box ‎8.1. Renewable energy and electrification growth and associated mineral demand

Wind and solar should account for 40% of power generation by 2050 to meet the world’s net zero goals (IEA, 2023[60]; OECD, 2023[57]). Global production of electric cars is forecast to increase sixfold by 2030, with the European Union and several countries already moving to ban the sales of non-electric cars (IEA, 2023[60]). Mineral demand for clean energy technologies is set to grow 3.5 times by 2050 to meet the globe’s green transition goals (IEA, 2021[56]). The use of these minerals solely for these technologies has already increased by around 20% between 2016 and 2021 (IEA, 2023[60]). Heightened demand and rising prices have meant that the market size for key transition minerals has doubled in the past five years to USD 320 billion (IEA, 2023[58]).

Figure ‎8.1. Forecast global transition mineral demand by end use in the IEA’s Net Zero Scenario

Source: (IEA, 2023[58]).

The granting of licences and approvals for mining projects is particularly vulnerable to corruption, irrespective of the country’s stage of economic development, political context, geographic region, or the size and maturity of their mining sectors (TI, 2017[61]; OECD, 2021[62]; EITI, 2023[59]). Public office holders working in licensing processes are at risk of undue influence as some companies are responding to increased demand by seeking preferential treatment or access to speed up licensing processes or to conceal or compensate for misleading or inadequate applications (TI, 2022[63]). These risks in the licensing process are especially acute when there is greater discretionary decision making, unclear assessment criteria, or limited opportunities for public scrutiny and participation. Likewise, regulators and policymakers are coming under pressure to relax regulatory standards to improve investment opportunities. Examples of public office holders with close links to the mining industry are common, and in some cases appear to have led to regulatory or legislative changes to favour particular mining projects (Resimić, 2022[34]). Governments are also increasingly pushing local content requirements, in which foreign mining companies must partner with local suppliers or domestic processors and refineries (OECD, 2021[62]). There have been examples of public office holders putting pressure on mining companies to partner with favoured local companies or those with close political connections or family ties (Resimić, 2022[34]; TI, 2022[63]). And there have been instances of bribery relating to the acquisition of energy infrastructure contracts, e.g. for dam or rig construction, commodity trading deals, and corruption in export operations. Many investigations of these cases involved state-owned enterprises holding rights to extracting or trading hydrogens and minerals. Corruption cases in these sectors are often highly complex and transnational, involving several jurisdictions.

OECD countries throughout the supply chain, including those downstream, are experiencing a lobbying boom in relation to transition minerals. Estimates suggest that mining companies and companies relying on transition minerals spent more than EUR 21 million a year lobbying the EU Commission since 2014 (Friends of the Earth, 2023[64]). In the United States, over 30 mineral and battery companies have retained lobbying firms for the first time under the current administration (Politico, 2023[65]). This lobbying is aimed at a range of issues. One is governments’ announced and expected climate ambitions themselves, as companies seek to shape targets and reduce uncertainties around possible futures which could hamper their investment decisions and cause supply-demand imbalances (IEA, 2021[56]). Lobbying efforts have also aimed to shape and improve access to the billions of dollars earmarked by OECD governments’ initiatives to stimulate the green transition, such as loan guarantees or tax incentives for green industries (Friends of the Earth, 2023[64]; Politico, 2023[65]). In other instances, companies and individuals in the minerals supply chain have lobbied OECD governments to lift sanctions applied to them for wrongdoing. This lobbying has targeted connections in both producer countries and OECD countries (CBS News, 2022[66]). And there is increased pressure on governments in relation to the negotiation of strategic partnerships with producer countries, designation of new transition minerals (particularly copper), investment in refining and recycling capabilities, or improvements in common domestic infrastructure and access to industrial land (Australian Financial Review, 2023[67]; The Africa Report, 2023[68]; Bloomberg, 2023[69]; Friends of the Earth, 2023[64]).

Robust law enforcement against transnational corruption can also contribute to the green transition

International bribery, particularly where it is not met with a strong law enforcement response, is an important way in which governments’ responses to climate change can be undermined. A key challenge in, for instance, the forestry, fisheries or conservation sectors is regulatory capture – a phenomenon where regulatory agencies tasked with safeguarding the public interest become influenced or controlled by the industries they are meant to oversee. Regulatory capture often involves transnational criminal networks, which use bribery to exploit opportunities for high profits, legal discrepancies among countries, low risk of detection, and marginal penalties (Europol, 2022[70]). Corrupt relationships between private industry and regulatory authorities, often with the involvement of criminal entrepreneurs, may lead to lax enforcement of regulations, allowing companies to engage in illegal and unsustainable practices without fear of repercussions. This weakening of the regulatory framework undermines sustainability goals, perpetuates a cycle of environmental exploitation, and can have enormous financial impacts for the governments and corporations involved.

To address the particular challenges which the green transition presents for bribery investigations, law enforcement authorities need to adopt a proactive approach to tackling corruption in sectors critical to the green transition and which present complicated corruption risks. Drawing from the lessons learnt from the fossil fuel or forestry industry, for instance relating to licencing or the award of contracts, law enforcement agencies should strengthen their capacities to identify and investigate similar criminal patterns in a growing number of projects related to the green transition.

Given the transnational nature of the green transition and of corruption schemes, robust international co-operation between law enforcement authorities is paramount. Collaborative efforts to establish and enforce international anti-corruption standards, share best practices, and provide oversight can help mitigate the risks associated with corruption in the global green agenda. Facilitating the exchange of intelligence and information across borders to identify and track corrupt actors involved in green initiatives, collaborative efforts to investigate and prosecute transnational bribery cases are key to strengthening international co-operation between authorities. In addition, building robust co-operation of law enforcement with the private sector and the expert community can contribute to developing a much-needed level of knowledge and expertise with respect to corruption risks linked to the green transition. This, in combination with effective whistleblower protection mechanisms and partnerships with investigative media, can help law enforcement agencies recognise corruption and take appropriate measures to combat it in these sectors. The role of the private sector in investing in integrity in the context of the green transition, supporting the efforts of public actors and civil society, is of paramount importance (Box ‎8.2).

Box ‎8.2. Corporate anti-corruption engagement in support of the green transition

By adopting ethical practices and actively engaging in initiatives that promote transparency and accountability, companies can become a valuable ally in the fight against regulatory capture in the forestry sector. This collaborative approach, involving both public and private stakeholders, is essential for achieving the goals of the green transition and fostering sustainable environmental practices.

Specific corporate risks in the green transition:

• Supply chain risks: corruption risks are high in sustainable material sourcing and through the supply chain.

• Carbon credit schemes: corruption risks in carbon credit trading necessitate transparent transactions.

• Public-private partnerships: collaboration risks with governments require stringent controls and transparency.

• Greenwashing and false claims: companies may be at risk of exaggerating environmental efforts for favourable treatment.

Companies engaged in environmentally sensitive industries can take proactive steps to promote transparency, accountability, and sustainable practices:

• Strong anti-corruption compliance: establishing and implementing stringent anti-corruption compliance measures is essential for companies involved in the green transition. Compliance ensures that business operations align with ethical standards, mitigating legal, financial, and reputational risks. Adhering to international anti-corruption standards such as the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance, and staying compliant with national and international regulations is crucial to navigating the complex landscape of anti-corruption laws.

• Ethical business practices: private entities can commit to ethical business practices and adhere to environmental standards beyond what is required by regulations. This includes implementing responsible sourcing policies, avoiding engagement in illegal activities, and fostering a culture of environmental stewardship. The OECD Guidelines for Multinational Enterprises addressed by governments to companies, aim to encourage positive contributions enterprises can make to environmental progress in particular.

• Collaboration with civil society: by supporting and participating in independent monitoring initiatives together with civil society organisations, companies contribute to the transparency of their operations and help expose instances of regulatory capture.

• Advocacy for stronger regulations: rather than resisting regulations, responsible private sector entities can advocate for robust and comprehensive regulatory frameworks. Engaging in constructive dialogue with regulatory authorities, environmental organisations, and local communities, leading to the development of regulations that truly prioritise sustainable practices.

Source: OECD elaboration.