Now that world leaders have signed the climate change agreement they announced in Paris last December, it is time to recognize an 800 pound gorilla that has been lurking around the edges of the agreement without drawing much attention: the threat that corruption will make it impossible to achieve carbon reduction goals.
The agreement has been heralded as a historical turning point in the global effort to restrict carbon emissions. Its ambitious objectives cannot be met, however, unless developing countries curb their use of fossil fuels – the same fuels that have enabled rapid industrialization in China, India and elsewhere. Demand for energy in these countries will continue to increase. Despite gains in recent decades, more than a billion people still do not have reliable access to electricity. Currently, the only practical way to allow most of these people to share the electricity-based infrastructure which prosperous societies take for granted is to use coal and other fossil fuels. Are political leaders in places like India prepared to tell energy-starved constituents that, rather than use available coal supplies, they will have to wait another generation or more for adequate electricity? Will they force those who currently have access to fossil fuel-generated electricity to cut back in order to meet carbon reduction goals?
It would be unrealistic to expect these countries to curtail economic growth and their political leaders have made it clear that they have no intention of doing so. Instead, representatives of developing countries contended in Paris that their ability to comply with the agreement’s carbon reduction goals was dependent on receiving massive aid to help implement alternative energy systems. How much aid? The agreement’s stated goal is to provide $100 billion per year beginning in 2020, an amount that is expected to rise in later years. The environment minister for India dismissed even that amount as inadequate, claiming that industrialized countries would have to provide trillions, not billions of dollars to ensure that the less developed world meets the agreement’s goals.
Whatever it costs, unless developing countries satisfy their large and growing demand for energy through alternative sources the agreement’s overall carbon reduction goals will not be met. Even if North America, Europe, Japan and other developed areas of the world meet all their emission reduction goals – an outcome that will be difficult enough to achieve – global emissions will far exceed the agreement’s targets unless China, India, Brazil and other countries that have relied heavily on fossil fuels for growth and modernization no longer do so. Thus, the United States and other more industrialized nations will be asked to fund the transformation of energy production in the developing world.
Raising the necessary funds, however, and using them to build efficient alternative energy systems will be impossible if resources intended for the design and construction of such systems are diverted to enrich corrupt officials. Thus, in a very direct way the success of the climate change agreement depends upon there being effective anti-corruption measures in the planning, procurement and implementation stages of each project. This will not be easy. The presumed beneficiaries of the $100 billion per year that is supposed to start flowing in 2020 include countries with very poor scores on international corruption indices.
On the positive side, the four years between now and 2020 can be used to develop the anti-corruption measures that will be needed to give the climate change agreement a chance to succeed. Among the steps to be considered are the following:
Enforceable Anti-Corruption Agreements
Agreements to fund the implementation of green technologies in developing countries should anticipate allegations of fraud and corruption and provide strong, enforceable standards, together with mechanisms for investigating and sanctioning violations of them, to ensure that resources are applied to the intended purpose.
Anti-Fraud Filters in Procurement Systems
Because most fraud and corruption occurs at the procurement stage of development projects, procurement standards, systems and procedures need to be designed with fraud detection in mind. Technological aids, such as fraud and corruption filters built into e-procurement systems, can make it much easier to detect irregularities at early stages of a project.
Preventing Fraud and Corruption at the Implementation Stage
The implementation stages of projects are also vulnerable to fraud and corruption schemes. In addition, irregularities that surface during implementation – such as substandard materials delivered to a construction site – may be evidence of a corrupt procurement scheme. Anti-corruption and fraud filters, as well as oversight personnel with the expertise to use them properly, should be part of the controls planned for these stages.
Strong, enforceable agreements, appropriate standards and fraud filters will be ineffective unless project managers, procurement officers, oversight personnel and auditors/investigators are trained in what to look for and how to gather and present useable evidence.
Monitoring and Other Sanctions
Effective anti-corruption measures must include credible sanctions for noncompliance. These may include civil, administrative and criminal charges directed against culpable individuals as well as financial penalties and debarment of businesses found to have engaged in corrupt practices. Debarments, however, can be problematical if they result in the delay or cancellation of projects – an especially serious concern if the project is critical to meeting a carbon reduction schedule. An alternative and relatively underused sanction for businesses that violate anti-corruption standards is to require that they accept an outside monitor designated by the donor or sponsor of the project. This sanction allows essential work to go forward without ignoring or tolerating fraud and corruption.
Meeting the climate change agreement’s strict standards for carbon reduction will be an enormous challenge even if every dollar allocated toward the development of alternative energy systems is spent for that purpose without fraud, waste or abuse. With little margin for error, the kind of corruption that often plagues international development projects simply cannot be tolerated. Both donors and recipients of climate change aid have a strong interest in using the next few years to build strong anti-corruption measures into their alternative energy projects.
Howard T. Anderson, IACRC Secretary-Treasurer
IACRC: Fighting Corruption through Training, Consultancy and Advocacy to Achieve a Level Playing Field