The world economy is embarking on one of the biggest structural shifts since the industrial revolution. The transition from high greenhouse gas (GHG)-emitting energy production and consumption to low or zero GHG-emitting energy systems is a major component of global climate change mitigation efforts.25cd825fb5a5 The United States (US), China and European Union (EU) states have committed to carbon neutrality by the middle of this century, with other countries following suit. The green or renewable energy transition affects many aspects of our lives, promising a more sustainable and equitable future.3f379c567158 However, the many technical, social, economic, political and geo-strategic issues confronting the green transition mean that change is occurring slowly. The International Energy Agency notes that in 2020, coal and gas still represented close to 60% of the global electricity supply.

Corruption, defined for the purposes of this brief as the abuse of entrusted power for private gain, is expected to pose major obstacles for the green energy transition. This is because decarbonisation of energy systems requires investments from the tens to hundreds of trillions of dollars.4729edc387dd It is widely acknowledged that corruption is used to artificially extend the life of carbon-intensive industries, yet green energy itself is far from immune from corrupt practices. The effects of corruption on green transition outcomes are likely contingent on local political economies and the reactions of power holders to new constraints and opportunities. Targeted-to-context and politically savvy responses that address underlying causes and enablers of corruption are therefore essential.

This U4 Brief offers an anti-corruption primer on the green energy transition. Based on a short, systematic review of 55 published studies (see Text Box 1), it provides a snapshot of existing evidence on the corruption challenges and anti-corruption dilemmas posed by the green energy transition. It also captures examples of attempts to resolve these issues. Finally, it identifies some emerging areas of anti-corruption support.

1. Corruption and the green energy transition: What do we know?

Economies that reduce dependence on fossil fuels and diversify their energy mix should, in theory, be less beholden to the autocrats who tend to emerge in extractive resource-rich countries and who typically adopt strategies of patronage and rent-seeking to shore up support. According to this view, green energy transitions might provide unique opportunities for anti-corruption reformers.aa962436b687 Renewable energy is not immune from corruption, however, and the sheer size of needed investments poses many dilemmas for project implementors, regulators, watchdogs and judiciaries.92f37d51f79e Research on corruption in green energy transitions is still sparse, but forms of corruption already observed include institutional capture, rent-seeking, nepotism, bribery, tender-rigging or ‘tenderprenuership’, as well as collusion.0d861d62daa6 For example, politicians and businesses might collude to syphon off money or steal funds meant for relocations linked to a green energy project. Text Box 2 offers further examples.

It is worth noting that the green energy transition is unlikely to guarantee the decline of all corruption-prone petrostates.0c66bd90d5a3 This is because the green energy shift will not occur simultaneously around the world, with backtracking expected due to, among others, political contestations, social conflicts and wars. Western economic sanctions imposed following the Russian invasion of Ukraine have recently led, for example, to renewed demand for fossil fuels from non-Russian sources. It has even been hypothesised that uneven energy transition speeds could lead to a carbon polluters’ ‘race to the bottom’, where jurisdictions in which corruption is prevalent market lax regulations to attract unscrupulous investors.b13184b233cb

Reducing corruption is vital for the speed and quality of countries’ green energy transitions,3e231ccb8d97 with studies showing measures of corruption correlated with increased carbon emissions.e4adcb34e39d Corruption is known to be used to extend the life of carbon-intensive industries, though various ideological and political biases play a similar role. Evidence from China, for example, shows that monopoly enterprises in the energy sector depend on rent-seeking, which exerts a significantly inhibitory effect on green technological progress.14bd79b42cd7 Acceptance of green energy projects among communities is also known to be undermined simply by perceptions of bribery and unfairness slowing project uptake.142c2778925b Corruption is understood too to reduce green energy efficiency.b5e9af5c73e2 For example, some of those who seek to benefit from new green energy regulations have used rent-seeking techniques to do so.bf801e2533e3 Two particular areas of concern are feed-in-tariffs and renewable portfolio standards (see Text Box 3). Moreover, injustices in Kenya and Ghana’s energy systems (including renewables) are noted to be at the root of ‘corruption-as-problem-solving’ strategies on the part of both providers and consumers.640f68d77388 Finally, corruption can be a significant feature in national-subnational energy transition dynamics.0c26cf39bc83 Whether support to green energy transitions should be decentralised therefore depends on the national and subnational political economies of specific countries.

2. Initiatives aimed at improving governance of the green energy transition

Donors are investing large funding streams in supporting countries through their energy transitions, often in contexts of high corruption risk. A range of initiatives are aimed at improving governance of the green energy transition in one way or another. The extent to which these initiatives target and tackle specific corruption challenges is an empirical question that requires further research. Pending such findings, this section highlights a non-exhaustive selection of initiatives practitioners can potentially learn from, following Sovacool’s2da23f6d37a8 classification of intervention types.

Corruption risk mapping and analysis

Practitioners can already access generic corruption risk maps for green energy, covering activities from the selection of project options, through planning, contracting, construction, operation and maintenance, to decommissioning.cdf29f81a932 Such generic risk maps are a helpful starting point for thinking through potential risks and developing mitigation measures. At the same time, given the context-specific character of most corruption challenges, some donors are beginning to invest in country-specific studies to enhance their anti-corruption approaches to renewable energy development. The Swedish International Development Cooperation Agency (Sida), for example, has supported a legal and political economy analysis of Zambia’s anti-corruption regime in the renewable energy sector, covering the period 2001–2021. Another example is the Norwegian Agency for Development Cooperation’s (Norad) support to Global Witness in producing a visual essay on Myanmar’s illegal rare earth-mining industry, which provides China with minerals for building electric vehicles and wind turbines.

Registers and clauses

Good practice in the governance of financing for green energy does exist, with studies showing that both data and analysis should be transparent, complete and calculations relatively easy to replicate.228bd69460bd Public registers focused on applicable laws and regulations can help keep investors and others informed, while beneficial ownership registries notify the public of the real actors behind projects. As recommended by the Organisation for Economic Co-operation and Development (OECD), publishing contracts and their clauses raise public awareness and enable ownership structures to be revealed. Integrating ‘sunset clauses’ in regulations can also possibly mitigate against the misuse of subsidies by specifying their end date.

Transparency initiatives

Various initiatives exist intending to strengthen formal reporting standards and the public’s right to information about green energy projects. In addition to the Open Government Partnership and Open Contracting Partnership, the Inter-American Development Bank has, for example, created the Green Bond Transparency Platform. The Extractive Industries Transparency Initiative (EITI), a long-standing transparency initiative in the minerals sector, has also begun to address how its experience and data can help inform decision-making in the green energy transition.

Laws and prosecutions

Although most countries already have anti-corruption laws on their books, addressing corruption in the green energy transition is likely to require legislative reforms as well as a step-change in prosecutions around the world. Two of the strongest pieces of domestic legislation countries can learn from are the US Foreign Corrupt Practices Act and the UK Bribery Act. Both laws feature aspects of extra-territoriality, meaning that they can, under certain circumstances, be used to prosecute foreign actors. Other legislative points-of-reference are the provisions contained in the United Nations Convention against Corruption and the OECD Anti-Bribery Convention.

Ownership models

Devolving, decentralising or expanding ownership of green energy projects can help spread their benefits and create a safety net against corruption.bfbad0412611 Employee-ownership models and cooperatives, such as the Mondragon Corporation in Spain, divide up revenues so that a certain proportion goes to employee-owners. Community interest companies (CICs) and low-profit limited liability companies (L3Cs) are also models that can potentially help mitigate some corruption risks. CICs are hybrid organisations that mix the characteristics of firms and non-profits, whose social justice orientation can help improve transparency conditions in projects. L3Cs are a similar legal form established in the United States, which create fewer profits for elites or corrupt actors to secure, thus potentially mitigating rent-seeking. whose social justice orientation can help improve transparency conditions in projects. L3Cs are a similar legal form established in the United States, which create fewer profits for elites or corrupt actors to secure, thus potentially mitigating rent-seeking.

3. Identifiable areas of further support

Green energy sectors around the world are only now beginning to emerge and, although expanding, their novelty means we lack a strong empirical evidence base about how corruption and secrecy play out in the green energy transition, and which countermeasures will work in specific circumstances. Energy transition studies often lack consideration of power dynamics and political factors at play in those transitions, although these are crucial aspects for understanding and countering corruption.4059dafc556a More research is needed to arrive at firmer policy and practice approaches, but we already know enough to identify several areas of further support. Of overarching importance will be for donors not only to support greater production of data and analysis, to push for transparency and new reforms, but also to facilitate recourse to sanctions that close accountability loops for victims of green energy corruption.

Support more context-specific corruption analyses of green energy

Practitioners should not have to rely on generic corruption risk assessments to guide their anti-corruption approaches for green energy transitions in specific regions, countries and places. Tailored, in-depth analyses are required that directly address the often-hidden power dynamics, networks of actors and financial flows involved. Such analyses are likely to provide a strong evidence base and ideas for future programming and interventions. Of particular relevance are analyses that address the national-subnational governance dynamics of transitions and the spillover effects of (mismanaged) green energy industries across national borders.

Support investigative reporting specifically on green energy corruption

In addition to state-to-state support and collaboration with the private sector on improving governance of the green energy transition, funding investigative non-governmental organisations (NGOs) and journalists to uncover and report on green energy corruption around the world is vital. Existing transnational networks and organisations (e.g., the Gecko Project and the Organized Crime and Corruption Reporting Project), focused on addressing illegal resource governance, environmental crimes and corruption, many of whom are already supported by donors, could be encouraged to extend their attention to green energy.

Support indigenous environmental defenders on green energy corruption

Indigenous environmental defenders are often at the forefront of attempts to block corrupt and/or illegal acquisitions of land and natural resources, including those needed for green energy transitions. Recent examples (e.g., from Peru) show indigenous peoples face great risks doing so, frequently paying with their lives. Yet despite evidence that securing tenure rights for indigenous peoples plays a vital role in biodiversity protection, and that this role is at risk from corruption, indigenous peoples’ organisations receive only a fraction of available funding for this work. Donors can therefore do more to directly support indigenous peoples’ organisations in highlighting environmental corruption linked to the green energy transition, protecting those who do so.