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Germany EITI leads by example

Germany EITI leads by example

With all requirements met, Germany is set to embrace routine disclosures and innovate further.

Germany was recognised today by the EITI Board as having made satisfactory progress across all EITI Requirements. An active advocate and supporter for the EITI internationally, Germany started implementing the EITI in 2016 to demonstrate its own commitment to responsible natural resource governance.

From the outset, Germany’s multi-stakeholder group focused on making the EITI relevant to national priorities, addressing implementation in a federated state, manage a declining mining sector, water use and environmental impacts and aligning reporting standards.

Understanding the impact of extraction on the environment

Germany’s 2016 EITI Report covered environmental aspects and subsidies. It explained how environmental impacts are compensated for and how the state can guarantee that the cost of rehabilitating sites does not fall on the taxpayer. The report also disclosed the amount of water consumed by the extractive sector in each state and described the rules and fees for water usage.

“Germany’s ambitious approach to reporting on environmental management and monitoring provides inspiration to other multi-stakeholder groups that are seeking to understand the impact of oil, gas and mining activities,” said EITI Chair Fredrik Reinfeldt.

The German EITI has also shed light on subsidies received by the extractive sector. Hard coal production in Germany is no longer competitive due to high production costs, and the sector has been subsidised. In 2007, an agreement was reached to phase out subsidies in a socially responsible manner by the end of 2018.

The EITI Report showed that in 2016 subsidies to the coal sector totalled nearly EUR1.3 billion. In the same year, total gross government revenue from the extractive sector was less than EUR500 million.

One country, many governments

Germany’s federal structure adds complexity to EITI implementation. Its experience offers some important lessons for other implementing countries.

While the Federal Mining Law sets the basic terms for extraction, each of the 16 states has its own regulations, licensing processes and royalty rates. This presents challenges for ensuring comprehensive disclosures.

For example, information about licenses is held in state registers and the 12,000 municipalities collect significant taxes. The level of data management and transparency varies across states, and production is concentrated in a handful of them.

Germany has sought to address the challenge by creating a working group for coordination between the federal government and states. Additionally, only municipal tax payments above EUR 2 million were reconciled to manage the workload.

Less reporting with better data

Germany’s Validation uncovered opportunities to further align EITI implementation with the European Union’s regime for mandatory payment disclosures. The EITI Standard requires disaggregating data by revenue stream, while the EU framework allows companies to group different revenue streams under one heading. For example, all taxes on income, production and profits are aggregated.

Refining the mandatory reporting regulations and ensuring that compliance is monitored efficiently would allow Germany to start moving from reconciling revenues and payments to relying on routine disclosures.