Greater transparency is needed in flows of money as demand for land to grow biofuels and for minerals used in electric car batteries increases
LONDON (AlertNet) - The global push to curb climate change must not lead to a "green resource curse", as land and minerals valuable for low-carbon development are exploited in poorer nations that fail to reap the benefits, a new report from Transparency International (TI) warns.
In a 400-page analysis of corruption risks associated with climate change measures, released at the weekend, the Berlin-based watchdog said land in demand for growing biofuel crops and for extraction of minerals like lithium, used in batteries for electric cars, "are often found in countries that lack strong governance and integrity systems”.
Steps must be taken to ensure transparency in the flows of money governments get for allowing companies and others to access these increasingly sought-after assets, TI argues.
"The drive to prevent climate change should not result in a new resource curse, a green resource curse, condemning poorer countries to miss the opportunity for economic development while others profit from their wealth in the growth of the green economy," the report says.
The "resource curse" – also known as the paradox of plenty – is a phenomenon in which countries that are rich in natural resources such as oil, gas or minerals, end up poorer and more unequal than countries without such resources, according to investigative group Global Witness. This can occur because of corruption, a decline in the competitiveness of other economic sectors, or volatility on commodity markets. In the worst cases it can stoke conflict.
In an article in the TI report, Stefan Bringezu and Raimund Bleischwitz of Germany's Wuppertal Institute recommend mapping geographical hot spots where resources important for green economic development intersect with weak governance zones. Those places should be the focus of a push for transparency and public participation aimed at properly using the resources and creating responsible handling of the revenues they generate.
The authors point to some countries that are already seeing competition for their "green" resources hotting up. As a growing number of governments, including the European Union and India, set quotas for increasing their use of biofuels, land is being converted around the world to grow crops that produce the fuel.
In 2009, Brazil was the most attractive market for biofuel investment, with Thailand, Cambodia and Indonesia also popular, the TI report says. Sugar cane production in African countries, including Egypt, Sudan and Kenya, could also become interesting to investors. But many of these nations do poorly in governance assessments, it notes.
That suggests "there is a risk that the influx of substantial revenues from biofuel production or land concessions may not necessarily benefit most citizens of these countries", warns the report.
It says biofuel production in countries including Tanzania, Mozambique, India and Colombia has already generated reports of land acquisition through illegitimate titles, water being denied to local farmers, inadequate compensation agreements and the forcible displacement of local communities.
BOLIVIA'S LITHIUM
Another sector that carries a high "resource curse" risk is mining, increasingly undertaken to extract minerals for renewable energy supply and distribution facilities, as well as telecoms and information technologies that cut the need for global travel.
Among these, the TI report focuses on lithium ion batteries, which are used in electronic devices and are expected to be produced in greater quantities for electric cars. With demand for lithium forecast to increase by 10 percent or more per year in coming years, extraction activities are set to increase at the world's limited number of salt lakes, many of them in Latin America.
A case study on Bolivia included in the report notes that the country possesses an estimated 5 million tonnes of lithium in its Uyuni salt lake, which may represent up to half of the world's known reserves. Rising demand brings the "promise of financial prosperity and socio-economic challenges", it says.
The government is working on plans to deploy the revenues it earns from lithium to support poverty reduction and development. But Bolivia does not have a good historical record of spreading the benefits of its resources, including tin, rubber, silver and oil, the case study says.
Talks have taken place with foreign companies and governments on extracting lithium, but little information has emerged and some community groups complain that consultation efforts have been limited.
On the other hand, in mid-2010 the government reversed a decision to set up a lithium extraction company at Uyuni after opposition from a local civic group, according to the case study.
It outlines the steps needed to prevent environmental and social damage from lithium exploitation, and ensure local communities receive some of the profit. For instance, the Bolivian government should clarify and enforce mining and environmental regulations, and provide more public information on public-private partnerships, financing and contracting. Civil society should also be encouraged to help set up a transparent and sustainable process for lithium mining, it says.
Other minerals expected to be in demand for green economic growth include the aluminium by-product gallium, which is used in photovoltaic cells and comes from bauxite mining in countries including Guinea, China, Russia and Kazakhstan. And platinum group metals (PGMs) are important chemical catalysts used for pollution control, such as in exhaust systems in cars and fuel cells. South Africa is a major producer.
SOLUTIONS
The TI report warns mining companies based in emerging economies may increasingly seek to meet domestic demand for raw materials by investing overseas, particularly in Africa, but could operate without adequate anti-corruption rules.
While emphasising the risk of a "green resource curse", the TI report also highlights various ways to prevent it.
A range of voluntary standards to improve accountability in the mining sector already exist, for example, such as the Extractive Industries Transparency Initiative (EITI), which promotes the public disclosure of industry payments and government earnings.
Codes of conduct for the private sector and international anti-corruption conventions can also be used to promote honest and open behaviour.
National governments, meanwhile, are tightening relevant legislation. Brazil, for example, has limited the amount of land foreign firms can acquire. And U.S. law now requires energy and mining companies to publish tax and revenue payments to governments in the countries where they operate.
"Enforcing legal requirements, stepping up civil society oversight and demanding business commitments to high governance standards and transparency should help prevent a resource curse in a low-fossil-carbon future," Bringezu and Bleischwitz conclude.
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