Transparency International warns on low-carbon fraud

In a wide-ranging report Transparency International (TI) has identified a number of green investment areas at risk of exploitation by corrupt organizations, and sets out recommendations to help decision makers tackle rising levels of fraud.

Under the United Nations Framework Convention on Climate Change (UNFCCC) governments are preparing to establish the Green Climate Fund with the aim of spending up to USD100 billion annually by 2020 to limit climate change and prepare for its impact. TI is warning of the corruption risks of climate finance flowing through new, untested channels and recommends strengthening governance systems to tackle them.

Some developing countries have already been lobbying for a loose governance rules for the Green Climate Fund. Among the demands being made are the exclusion of the World Bank from the management of the fund, the use of grants rather than loans as the main funding mechanism and accountability to the entire UNFCCC instead of a special committee tasked to assess the effectiveness of fund use.

"The urgent need to respond to climate change needs to be enhanced by transparency and accountability. Oversight must be built into all climate-related initiatives from the start," said Huguette Labelle, chair of Transparency International. "Good governance now will help ensure the success of the impact of climate change policy and funding."

The new TI report, Global Corruption Report: Climate Change, warns that developing countries most vulnerable to the impacts of climate change, and in line to benefit from international climate change funds, are faced with serious corruption risks. None of the 20 countries expected to be most affected by climate change - where much of this money will be spent - scores higher than 3.6 on the TI's Corruption Perceptions Index, in which 0 indicates perception of extremely corrupt and 10 is very clean.

The report draws on analysis by more than 50 leading climate change experts from 20 countries tackling a wide range of issues including:

• the politics of climate change and accountability of funding institutions;

• the role of the private sector;

• the integrity of carbon markets;

• the response to climate change impacts in developing countries (climate-proofing infrastructure, preparing for climate migration and improving disaster management); and

• Forestry governance.

To limit the potential for conflicts of interest in decision-making and the negative effects that lobbying and special interests TI recommends greater public participation, access to information and accountability to make climate governance more effective.

The report also warns of the risk of a "green resource curse" similar to the "oil curse". It reasons that the new technologies needed to replace fossil fuels require different natural resources and so it is, therefore, important that these be exploited in a transparent manner with public disclosure of payments to governments.

A particular cause for TI concern is the USD28 billion of climate financing expected to flow annually to countries with large tropical forests to discourage deforestation and preserve this form of natural carbon storage. Illegal logging, worth more than USD10 billion a year, is already fuelled by corruption of customs and land management authorities. The report highlights that some governments have already claimed credits for fictitious forest plantation projects.

"Corruption holds nothing sacred, not even our planet's future. Failure to properly govern climate change measures now will not only lead to misallocated resources and fraudulent projects today, but also hurts future generations," said Labelle.