LONDON, Oct 11 (TrustLaw) - The pressure to deliver large amounts of funding quickly to help poor countries cope with climate change is raising concerns the money could be misallocated or fuel corruption, an expert with anti-graft watchdog Transparency International has warned.
Lisa Elges, climate governance programme manager at the Berlin-based organisation, said agreement has yet to be reached on how countries should track and account for the climate change assistance they are starting to receive through a range of channels.
There is particular unease over governance risks surrounding the $30 billion in "fast start" finance donors have promised to provide between 2010 and 2012 to vulnerable nations under the non-binding Copenhagen Accord, hastily stitched together at the U.N. climate conference late last year, Elges told TrustLaw.
A handful of countries, including Bangladesh and Indonesia, have set up national-level trust funds to manage aid flows for climate change projects. But 70 participants at a workshop on climate governance organised this summer by Transparency International (TI) noted there is often little public disclosure and public input into how such funds are run.
"Most climate financing is now in the planning stages, and the architecture is still being designed," said Elges. "Corruption cases have been few, so far, but there are concerns about whether things are being done the right way. There are perceptions that some people are benefiting more than others."
For example, some analysts suggest companies involved in carbon trading schemes may have undue influence over officials drawing up the rules, Elges said. If that is the case, transparency could be improved by monitoring corporate donations, board membership and relationships with policy makers.
Participants in the TI workshop also raised questions about the management and operations of the U.N. Clean Development Mechanism (CDM), under which companies and governments in rich nations invest in projects that reduce greenhouse gas emissions in the developing world in return for carbon offsets that can be sold for profit or used to meet mandatory targets to cut emissions.
Some members of the CDM executive board also serve on national-level boards that approve projects in their own countries, which could result in a conflict of interest. There are also concerns regarding the governance structure of the CDM, as executive board members are nominated, rather than elected, for unlimited terms.
In addition, more research is needed on the levels of accountability and transparency surrounding the bodies that process eligible projects and those that audit the emissions reductions they produce, according to Elges.
"With an increasing magnitude and increasing number of CDM projects, capacities are limited to ensure that emissions reductions are measured correctly, for example," said Elges, adding that review mechanisms for people to challenge those decisions are wanting. But she welcomed efforts underway to set up an appeals process within the CDM.
"CARBON COWBOYS"
The report from the TI workshop notes that limited technical abilities, capacity constraints and inadequate governance infrastructure for absorbing large funds can lead to "honest mistakes" in the allocation of money.
Problems can also arise when local communities are not consulted about green energy and forest preservation schemes, or are forced to give up their land to developers.
Some workshop participants discussed cases where people known as "carbon cowboys" have exploited vulnerable villagers by getting them to sign over the rights to their forests and other assets for less than the commercial value, sometimes even at gunpoint.
Elges said increasing trust and legitimacy around projects and policies to tackle climate change will require building local knowledge and capacities to better engage and monitor them - an area where there is currently a "serious deficit".
This is a particularly tough challenge because of the complex and fragmented nature of climate financing, in addition to the technicalities of climate science and carbon markets.
TI is developing a pilot project in six countries - Mexico, Dominican Republic, Peru, Kenya, Maldives and Bangladesh - to build a network that raises public awareness and understanding of the importance of good governance in climate finance.
"Governance deficits that may happen in developing countries will impact on what's happening at the global level. So for (climate change) mitigation projects, for example, you need to work with local stakeholders," said Elges.
BUILDING LOCAL CAPACITY
Civil society organisations could be trained to monitor the organisations that approve and verify CDM projects or the impact of schemes like dams and wind farms on indigenous people and their land rights.
TI hopes to join up with other organisations that specialise in governance, environmental issues and financial reform to create a framework for assessing the transparency, accountability and integrity of national-level institutions working on climate change and to track financial flows.
The network would aim to share tools and information through an online platform, besides doing advocacy work to draw attention to problems and successes in climate governance at an international level.
Participants at the TI workshop cited a few examples of local groups already engaging with policy makers on relevant issues. In Thailand the government's commitment to low-carbon development has opened up space for constructive input from communities, while in India activists have highlighted the inequity of corporate profit-making from an expanding renewable energy sector in a country where 40 percent of the population lack access to electricity.
"We don't want to give the message that donors should not give money because of corruption," explained Elges. Both they and recipient countries need to be aware of the governance challenges that can arise at all stages in the process of delivering on promises of funding to cope with the impacts of global warming and pursue cleaner development.
"We think developing countries will be very open to safeguarding what are essentially investments in their future, and if that is the case, then building civil society oversight and local participation shouldn't be a problem," Elges said.
A similar approach is also required in industrialised countries, she added, because as public and private spending on climate change adaptation and mitigation in these nations is increasing, so are the related governance risks.
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