Corporate Capture of the State: Energy Transition

Multi-stakeholder groups / partnerships / cooperation mechanisms

CSOs and other stakeholders have caught on and increasingly call out half-measures and similar hypocrisy. As a result, the legitimacy of EITI, U.N. COP meetings, the G20, and similar spaces has come into doubt. To address this, one strategy holds particular promise: to protect these spaces and related policy-making from corporate capture by deliberately excluding “vested interests.”

Extractive Industries Transparency Initiative (EITI)

Founded in 2003, EITI is a multi-stakeholder initiative that seeks “to promote understanding of natural resource management, strengthen public and corporate governance and accountability, and provide the data to inform policymaking and multi-stakeholder dialogue in the extractive sector. (…) [Currently,] more than 50 countries have agreed to a common set of rules governing what has to be disclosed and when – the EITI Standard.”

Insofar as corporate capture of the energy transition is concerned, EITI employs threestrategiesthat providekey opportunitiesfor improved transparency and accountability of the extractives sector — and arguably its adaptability and scalability to other sectors as well:

EITI Standard:“The EITI Standard can play a role in building awareness of how the transition will affect extractive sector activities and revenues and in supporting the responsible and transparent production of minerals that are critical for a sustainable future. The EITI provides data that can help identify and close channels for corruption – not only in mining, oil and gas but increasingly in the renewables sector.”

Project-level reporting:“For [CSOs], project-level reporting will assist them and communities in their ability to hold companies to account, comparing payments to governments with actual activities and production at specific sites as well as fiscal, legal and contractual terms. Access to more granular data could also help in managing communities’ expectations, as less areas of company activities are opaque and therefore subject to speculation. Lastly, communities and CSOs have a real interest in understanding how companies operate in a specific location, and in comparing their activities to other similar projects in other parts of the country.”

Beneficial ownership transparency:“The EITI has been able to deliver practical results through the inclusion of beneficial ownership information in licensing and company registration processes as well as through EITI reporting. Publishing details of company ownership can help close channels for corruption, enable effective taxation, build fairer markets, encourage responsible investment and manage business risk. Addressing these issues will remain critical as the energy transition gathers pace.”

Regarding EITI transparency in the energy transition, recommendations for how to accomplish this include:

“Make a high-level policy commitment to mainstreaming transparency on energy transition and climate risk through the next EITI Standard;
Identify practical next steps towards the use of EITI data and disclosures;
Enhance dialogue and coordination at national and international level;
Act fast.”

A specific case that underscores the opportunity to apply EITI to the energy transition involves the case of Congo’s cobalt supply chains, as follows:

End-user companies can work to address inaccurate reporting and associated risks such as child labor by increasing visibility into their supply chain origins and also urging the Extractive Industries Transparency Initiative (EITI) multistakeholder group and the Congolese Ministry of Mines to integrate [artisanal or small-scale mining, ASM] reporting in Congo. Under the current EITI framework in Congo, exporting companies are not required to report on ASM material. Changing this requirement would help build documentation practices that could be refined to better identify and adjust for ASM minerals that are being incorrectly exported as [industrial or large-scale mining].

Public reporting on contracts between governments and industrial mining companies provides critical information for comparing budgets with actual expenditures, especially in relation to the provision of services to the population. It also helps illuminate when a country does not get a fair price for its minerals — something that can signal corrupt deals are occurring. While this transparency on its own does not guarantee responsible practices, it does provide critical information to local and international media, whistleblowers, and anticorruption organizations in Congo, and to the international community that can pressure companies and government officials to improve their practices.

End-user companies can use their supply chain leverage to encourage the publication of these mining contracts by requiring the mining companies they source from to publish all the cobalt production contracts they have entered into in Congo, including joint cobalt/copper contracts where applicable. The publication of contracts should also include beneficial ownership information in order to provide a complete picture of who is truly profiting. Part of the reforms should also go through EITI implementation in Congo. The EITI multistakeholder group, which includes government, business, and civil society representatives, should require extractive industry companies in Congo to publish their contracts as part of EITI disclosure.

Recommend the EITI multistakeholder group and the Congolese mining ministry integrate ASM reporting into EITI reporting in Congo.

U.N. Climate Change Conferences (UNFCCC)

The198 members of the UNFCCCgather annually to assess progress and discuss international climate change measures at theConference of the Parties(COP), which consists of delegates from each of the nations that have ratified the UNFCCC. The UNFCCC’s overarching objective is evaluated by COP in relation to the consequences of climate change mitigation measures.

To date, the COP meetings have been characterized by the greenwashing practices of their hosts, participants, and sponsors, as well as their lukewarm climate targets and the financialization measures of their climate finance proposals. Notwithstanding, the COP meetings are an opportunity for multilateral, mostly voluntary cooperation and a large public forum where the corporate capture of the State could be addressed.

Thefollowing skepticalyet cautiously optimistic critique illustrates the COP process well:

“For instance, big polluters and the fossil fuel industry are making use of carbon trading schemes to conceal the contradiction between climate pledges and business as usual practices. Carbon trading is based on turning carbon emissions into units that can be tracked and traded, which opens the door for greenwashing, particularly when corporations and governments can continue emitting CO2 as long as they have the cash to buy carbon permits from those with excess carbon credits. (...)

The fossil fuel multinationals have been relying on public relations and advertising campaigns to promote the claim that climate change is about individuals’ lifestyle decisions and not the fault of the oil giants. For example, [British Petroleum] — the second-largest non state-owned oil company in the world, with 18,700 gas and service stations worldwide — popularized the concept of the 'carbon footprint' when it launched, in 2004, 'the carbon footprint calculator' on its website as a way to help individuals understand how their normal daily activities cause global warming, obfuscating the fact that individual actions are fueled and powered by the fossil fuel industry. (...)

Industry players and governments have introduced 'green' hydrogen to help decarbonization efforts and accelerate the green transition. Hydrogen can be a clean energy source when produced by electrolysis using renewable energy. The North Africa region has plans to produce and export hydrogen to neighboring EU countries. However, the oil-producing states of Egypt and Algeria are manufacturing hydrogen from fossil fuel, using controversial CCS to trap emissions, known as 'blue' hydrogen. Blue hydrogen results in a huge carbon footprint and risks undermining the benefits of using hydrogen in the first place. Calculations suggest that the carbon footprint of blue hydrogen is 20% greater than that of burning natural gas or coal for heat, and 60% greater than burning diesel oil. (...)

Implementing the decisions taken at COP27 and reaffirming corporations and governments’ commitment to limiting the global temperature rise to 1.5°C above pre-industrial levels will be a decisive milestone in navigating the path to fulfilling climate pledges in a way that moves us beyond years of inauthenticity and broken promises by big polluters.”

Group of Twenty (G20)

The G20, established in 1999, comprises the finance ministers and central bank chiefs of the major industrialized and emerging economies, where they deliberate on global economic and financial matters. It plays a significant role in molding and reinforcing global architecture and governance on all major international economic issues.

Within the G20, an opportunity to advance the anti-capture agenda is through the Anti-Corruption Working Group, which endeavors to prevent corruption related to energy sustainability. “As the current G20 presidency draws to a close, it is likely that the usual anti-corruption commitments will emerge, including addressing the vulnerabilities associated with investment in the sustainable energy transition.”

Recommendations for tackling corruption in the energy transition within the G20 include:

Data:“There is little empirical evidence to date as to the nature and scale of corruption in the renewable energy sector. There is a real need for the G20 to invest in better understanding the drivers of corruption in the sector, develop evidence-based measures for mitigating these drivers, and generate case studies illustrating successes in combating bribery and corruption in this field.”

Transparency:“The renewable energy sector is also closely intertwined with other sectors that have a high risk of corruption, such as the extractives industry and the mining of critical minerals. Here, there have been some important and welcome moves towards good governance and increased transparency. The [EITI] has developed international standards for transparency and accountability in the oil, gas and mining sectors. (…) While not all G20 countries are members of EITI, there are examples of how the Standards are being used by G20 countries in relation to the energy transition.”

Accountability:“[Increased] data and transparency on corruption in the sector also serve an important purpose in allowing the public and civil society to hold governments to account. As already noted, there are significant challenges in ensuring that G20 countries deliver on the raft of anti-corruption commitments made to date. Making more information available publicly can only help drive the kind of changes needed. There are some notable examples in the G20 already, such as the launch by Argentina of an open information system (SIACAM), which provides public access to data on mining activity in the country, including the environmental and socio-economic impact.”

Lead by example:“Finally, and maybe most importantly, G20 countries need to lead by example by building on the good practices already seen in some countries. They have a hugely important role to play, both domestically and internationally. G20 countries must demonstrate that they are pushing for higher international standards and that they themselves are meeting those standards – for example, in relation to beneficial ownership transparency, an essential element in the fight against corruption. G20 countries must also ensure that they vigorously investigate and prosecute cases of bribery and corruption, and that they have the necessary law enforcement resources to do so. In addition, the G20 should commit to building capacity in developing countries, particularly relating to the investigation of corruption and any subsequent asset recovery.”

Community of Latin American and Caribbean States (CELAC)

CELAC, which comprises 46 member States, was established to contribute to the economic advancement of Latin America, organizing activities towards this end and building up economic ties among nations and with other parts of the world. In July 2023, at the CELAC-EU summit, both regions relaunched a partnership toward a just energy transition, including new agreements on climate finance, transition minerals, and hydrogen.

“Among [the solutions of various global problems], the challenges of the energy transition within the wider framework of the European Green Deal and energy diversification efforts are two essential elements for a renewed EU-LAC partnership. Such a partnership should evolve – from the traditional flow of European investment in the Latin American extractive export-oriented sector towards a much more complex relation that integrates investment in renewables, green industrial value chains and climate cooperation. (…) The EU-LAC partnership finds in energy cooperation a space for updating and strengthening relations that transcends the traditional dynamics of the fossil system. The success of European investment in renewables provides grounds for optimism regarding a future of increased bi-regional energy cooperation, which, besides consolidating traditional cooperation on renewables, could be extended to hydrogen, industrial decarbonisation and mining. (…) Latin America and Europe are two broadly compatible regions that must deepen their relations on the road to a just energy transition in the wider context of the European Green Deal.”¹

The former foreign minister of Chile,Heraldo Muñoz,told Empower that: “An agreement was recently signed within the framework of the European Union with CELAC countries creating a global investment fund of 25 billion euros for the green transition and non-renewable energies. This can help a lot to strengthen the idea and acceptance of SOEs (51% or more participation) to boost lithium production and point towards much-needed industrialization. It is important that the State participates in the economy because it will be concerned about having better conditions, jobs, and leaving more resources and dividends in the countries that produce raw materials. Companies are primarily interested in maximizing profits. Today there is more debate than before in this regard.”

EU Just Energy Transition Partnerships

In the area of climate finance, just energy transition partnerships (JETPs) — launched at COP26 in Glasgow — are intended to channel money from wealthier to poorer countries in order to wean them from coal and other fossil fuels. They are “multilateral funding agreements — supported by the International Partners Group (IPG) composed of the European Union, the UK, the U.S., Japan, Germany, France, Italy, Canada, Denmark and Norway — to help emerging economies secure a just transition towards low carbon energy sources, with equity considerations at their core.”

The JETPs come on the heels of much olderstrategic resource partnerships,which Germany and South Africa have maintained for decades. Both are opportunities for collaboration and conditionality, for example between trade unions in both countries; however, greenwashing threatens their legitimacy.

Legislation such as Germany’s supply chain due diligence law, which excludes projects that do not comply with regulatory conditions — such as critical minerals for batteries whose mining uses forced labor —, are likely to slow the implementation of JETPs and strategic partnerships going forward.