Corruption threatens clean energy transition — Report

A new report by the Natural Resource Governance Institute (NRGI) warns that corruption in the licensing and contracting of transition mineral projects is threatening efforts for a just energy transition.

The report titled “Ten Red Flags for Corruption Risk in Transition Minerals Licensing and Contracting,” highlights how some government officials and mining executives are exploiting these processes to deny citizens and communities their rightful share of mining benefits.

“Some government officials and mining company executives were already using corruption around licenses and contracts to deny citizens and communities a fair share of the benefits of mining transition minerals.

“Through corruption that starts in the licensing and contracting phase, companies are neglecting and harming vulnerable populations and ecosystems with impunity. And corruption is delaying mineral production, sometimes for years,” it said.
 

Rising demand

As the world shifts away from fossil fuels, demand for the minerals and metals essential for renewable energy technologies is increasing rapidly.

The International Energy Agency predicts that by 2040, the world will require six times more mineral inputs than in 2021 to meet net-zero goals by 2050. In some cases, demand for specific minerals could increase by 30 times current levels.

Despite price volatility, demand for these materials remained strong in 2023. While new technologies and policies aimed at reducing consumption and promoting recycling could help ease demand, the coming decades will likely see a surge in mining activity.

The report stressed that with rising demand, the risk of corruption also increases, posing significant threats to communities, ecosystems, state revenues, and global efforts toward a fair energy transition.

“As demand for these essential materials booms, there is risk of a corresponding increase in corruption, with harmful impacts on communities and nature, the state budgets of mining countries, and humanity’s collective ability to realise a just energy transition.

In past commodity booms, fast-paced deal making and the promise of windfall profits encouraged graft and self-dealing. At the same time, the scale and pace of activity 
hampered the ability of oversight actors to keep pace with developments in the sector, making it harder to spot corrupt behavior,” the report said.

These problems, it said, could easily repeat themselves in transition mineral projects, not least given the added pressure of tackling the climate crisis.

Findings

The report disclosed that companies across the supply chain, especially in cobalt production, were assuming new and unfamiliar roles, negotiating deals that came with exceptional risks. 

It explained that as off takers and consumer product companies manage unfamiliar risks and dominate multiple stages of the supply chain, their anticorruption processes may be poorly equipped, perhaps even intentionally, to address the challenges posed in the extraction and processing of transition minerals. 

Second, the report emphasized that reserves of key transition minerals were concentrated in countries that have struggled to control corruption. 

“Transparency International Australia identified that as much as 94 percent of rare earth reserves and 70% of cobalt reserves are found in countries that score poorly on Transparency International’s Corruption Perceptions Index.

Some minerals, such as rare earth elements, are found in countries with contested governments or ongoing violent conflict,” it said.

It added that corruption in mineral supply chains threatens a just energy transition both by increasing the risk of harms associated with mining, and delaying and disrupting the supply of minerals needed to deliver the necessary scale-up in renewable technologies required to fight climate change. 

Recommendation 

According to the report, as the global push for a just energy transition continues, addressing corruption will be a key challenge for both governments and companies involved in mining and producing these essential minerals. 

It said without stronger oversight and governance, the promise of a fair and sustainable future may be undermined by unethical practices in the very industries designed to support it.

“Taking steps now to identify, prevent and redress corruption can help avoid the mistakes and harmful outcomes of the past, as well as new harms, lost opportunities and the reproduction of inequities,” it said.