Considerations for COP29: Where Does Corruption Fit Into Broader Conversations Surrounding Climate Change?

As the world strives to limit global warming to a maximum of 1.5 degrees Celsius and increasingly focuses its attention on funding for carbon emission offset schemes and renewable energy projects, it is an ideal time to hold conversations about corruption. 

Carbon markets offer a mechanism to contribute to the goal of net zero carbon emissions by 2050 through the purchase and sale of carbon credits or allowances with the potential to support decarbonization efforts globally. The agreement reached last week at COP29 regarding a United Nations-backed global carbon market, if implemented responsibly, and with greater transparency, could improve the quality of credits and unlock capital for real, lasting, and independently-verified emissions reductions and removals. 

Similarly, changes in the broader renewable energy landscape present new opportunities for growth in renewable technologies, which require sourcing critical ‘green minerals’ such as cobalt, lithium, copper, and rare earth elements. To meet the growing demand and shared climate goals in this area, the World Bank estimates that the annual production of these minerals will need to increase by 500 percent before 2050. 

These markets provide an opportunity to promote a myriad of co-benefits for local and indigenous communities through leadership and engagement in inclusive economic development, sustainable livelihoods, and land, water, and biodiversity conservation. Driven by private sector demand, they can play an integral and essential role in supporting an industry-wide push for greater adherence to environmental, social, and governance (ESG) standards, addressing the climate crisis with the right incentives and guardrails in place. 

However, as COP29 negotiations conclude in Azerbaijan, it is important to consider the potential corruption risks we face when talking about the “G” in ESG priorities. In 2022, average financial flows to support climate finance reached $1.3 trillion.¹ Similarly, in 2023, global carbon pricing revenues exceeded $100 billion, with 75 carbon pricing instruments in operation worldwide. Only half of the collected revenue was used to fund climate and nature-related programs. In fact, according to the U4 Anti-Corruption Resource Centre, an estimated 7–15 percent of climate finance is lost to corruption.² Discussions about the New Collective Quantified Goal at COP29 are viewed as critical for financing efforts to limit global temperatures, and highlight the need for good governance, yet solidarity and progress on this target and the financing it unlocks have stalled in negotiations. Even the hosting of the event itself has come into question, with Transparency International underscoring concerns about undue influence in multilateral negotiations with the potential to undermine the 2016 Paris Agreement, an international treaty on climate change.

What are the Corruption Risks in Climate Finance? 

A recent paper published by the Basel Institute on Governance, which focused on Good Governance in the Just Energy Transition, provides a number of lessons for renewable energy that aptly apply to the climate space more broadly. Most importantly, it emphasizes how a lack of transparency with regard to beneficial ownership, industry and government interests, and licensing and contracting processes often results in issues surrounding land rights, concessions, fraud, and general embezzlement of benefit funds. The risk and importance of proper allocation of climate capital are further highlighted by the estimate that developing and vulnerable countries urgently need over $1 trillion in climate financing, as well as better allocation and deployment of those climate funds.

These relatively new, highly fragmented, and poorly regulated markets are prone to risks due to the increased demand and high growth potential. There is significant pressure to disburse funds quickly, working across multiple industry supply chains—including timber, land use, technology, mining, transportation, construction, and others. 

Many of the industries are newer areas with unclear, evolving, and even contradictory laws and regulations. Challenges may involve embezzlement or theft of funds from carbon and renewable energy projects, rent-seeking that results in the award of contract approvals to insiders offering kickbacks, or land grabbing or the appropriation of other resources from local communities. This is complicated by limited governance, monitoring, and oversight, combined with a lack of technical expertise for managing a highly technical suite of diverse actors. 

Why Talk About Corruption Now? 

Talking about corruption does not have to be a bad thing. 

In fact, by ensuring proper governance and putting policy mechanisms in place to support greater transparency and accountability in financing, we could potentially save billions of dollars for future climate funds. This would generate greater trust in the markets, enhancing sustainable development goals and ultimately shoring up our returns on climate finance. 

What Can We Do About All This? 

Innovation is an essential tool in the fight against corruption. 

The United States Agency for International Development (USAID)’s 2022 State of Innovation Analysis analyzed where innovation is happening and considered future opportunities to reduce corruption opportunities, raise the costs of corruption, and incentivize integrity in the public and private sectors. Since its publication, USAID’s Countering Transnational Corruption Grand Challenge (CTC Grand Challenge) continues to advance the innovation agenda through cutting-edge work to address the intersection of climate and corruption (among other areas), mobilizing and leveraging the private sector to support lasting change. It promotes local, regional, and global solutions that build transparent and accountable supply chains, do business with integrity, and advance public sector integrity. 

Under this effort, CTC Grand Challenge activities, including the Powering a Just Energy Transition Green Minerals Challenge (JET Minerals Challenge) and the Safeguarding Carbon Markets Challenge, leverage innovation and collaboration to prevent corruption actors from siphoning off critical resources that should be used for the public good. 

Examples of current work supported by the CTC Grand Challenge in this space include: 

1. Promoting data platforms that enhance transparency and disclosure for rigorous analysis and decision-making to support compliance and due diligence processes, such as JET Minerals Challenge innovator Talisman International’s engagement in lithium supply chains. For private companies, this can close gaps across supply chain actors, reducing leakages and helping to maintain brand integrity. 
2. Working collectively with industry leaders to identify corruption risks and strengthen integrity policies and practices, such as through JET Minerals Challenge innovator Transparency International Australia’s Responsible Mining Business Integrity Tool. This involves collaborating with companies to enhance shared standards, improve transparency, and address reputational risk.  
3. Using digital technology to promote local, indigenous community, civil society, or journalistic monitoring of carbon projects, such as in Indonesia and other Southeast Asian countries under the Data for Integrity Hackathon Series’ “Carbonitor” initiative. This provides a potential platform for citizen engagement in strategy and decision-making around resource use and benefits. 

A man oversees the copper extraction process in Zambia.

Credit: Transparency International

USAID continues to look for new opportunities to partner with organizations on these and other upcoming activities. Currently, we are exploring a new activity focused on grand corruption in the just energy minerals transition. It would launch in Spring 2025 with a call for applications from innovators seeking financial and technical assistance to support their unique solutions. 

To learn more about this effort or our other work in this space, please visit our project website or contact Shanna Tova O’Reilly, Senior Advisor on the CTC Grand Challenge.

[1] Corruption and Climate Finance, Anticorruption Resource Center  

[2] Global Landscape of Climate Finance, Climate Policy Initiative