Excerpt from a speech by Rt Hon. Helen Clark, EITI Board Chair, to the Indonesian G20 presidency’s high-level policy webinar on just energy transition.
The EITI is the global standard for transparency in the oil, gas and mining sector. The EITI Standard provides for data reporting on extractive sector revenues, beneficial ownership of companies, contracts, environmental reporting and the monitoring of licenses, production and exports. The exploration of new mineral deposits, which is expected during the energy transition process, comes with both benefits and risks. The EITI could support in maximising the benefits and mitigating these risks in three ways.
First, countries can use the EITI disclosure requirements to design robust and evidence-based policies for a sustainable and just energy transition. The EITI Standard is being implemented by 56 countries, many of which are well positioned to contribute to the world supply of minerals that will be critical to build the low-carbon infrastructure required for a green economy. EITI reporting can ensure a transparent mineral supply chain from the point of exploration and production. Data could be used to analyse the economic contribution of critical minerals, provide evidence for policy makers for forecasting revenues, and support plans for a fair distribution of revenues, especially for affected communities.
Second, the EITI could help mitigate governance risks in the energy transition. Drawing from the EITI’s experience in extractive sector management, we have seen how beneficial ownership transparency and contract disclosure could help in ensuring transparency and accountability in minerals supply chains to avoid corruption risks that can undermine socio-economic national interests. Knowing the owners of companies behind lucrative energy projects helps ensure that governments are dealing with legitimate investors. Having access to and understanding the terms of contracts executed by governments with companies help citizens assess whether these deals provide adequate returns especially for communities affected by the transition.
Third, the EITI’s multi-stakeholder approach to governance is a valuable tool to ensure proper consultations with key stakeholders as governments formulate and implement energy transition policies. We have seen from our experience in the extractive sector that transparency – coupled with a multi-stakeholder approach to policymaking through community consultations – are key components of good governance. Multi-stakeholder engagement is indispensable to a fair process that leaves no one behind in the energy transition. Government, civil society, and business must come together in open dialogue about the tradeoffs in the shift to a green economy. I hope that this would be the norm for the renewable energy industry at the outset – but there is a need to act fast to entrench good practices in a nascent industry.
Transparency for a just transition: Four key elements
The energy transition will increase the demand for critical minerals and therefore have a profound impact on communities that are heavily dependent on the mining sector. There are four areas where transparency can play a role to deliver a just transition: subnational revenues, environmental management policies, digital solutions for data use, and investment in education and skills, especially for women.
First, the increased global demand for certain minerals such as copper, cobalt, and lithium, among others that are critical to building low-carbon infrastructure, could give rise to higher revenues and job opportunities for communities that produce these commodities. Almost all subnational governments in resource-rich countries in Asia are dependent on subnational payments and transfers from extractive companies which are often used for local development projects. The spending on these projects has to be evaluated to ensure they respond to the needs of the communities affected by the transition. At the same time, ramping up production of these minerals might mean that countries need to revisit environmental plans at the subnational level to mitigate risks.
Environmental management policies
Second, it is important to ensure that there is transparency in the information used by governments for policies on revenue and environmental management in the energy transition. This would empower citizens to scrutinise assumptions about future revenues and participate in policy dialogue on the environmental impact caused by the increased demand for critical minerals.
EITI implementing countries are encouraged to disclose information on the management and monitoring of the environmental impact of the extractive industries. This includes information on environmental impact assessments, certification schemes, monitoring procedures and environmental liabilities. Contracts stipulating environmental obligations are required to be disclosed. Countries undergoing transition should look closely into these types of information so that the public could hold companies to account and ensure that they are implementing enough controls to protect the environment in the extraction of critical minerals.
Third, the energy transition is also expected to give rise to innovative technologies and digital solutions. Policies to accelerate digital reforms to enable governments to systematically disclose data on revenue, production, licenses, contracts, and beneficial owners of companies has relevance for the renewables sector. Digitisation of data would improve access to information -- a key component of inclusive decision-making and a just transition. These digital solutions could go a long way in timely monitoring compliance with obligations and detecting red flags in transactions.
Education, skills and gender equality
Finally, the shift to green energy requires new policy frameworks, business models, technologies, and skills. Job demand is expected to be 1 per cent higher throughout the transition until 2050, creating around 51 million jobs globally by 2030 according to the UNDP. This presents an opportunity to build new skills in affected communities and to diversify local economies. Governments should focus on educating and capacitating local actors to respond to this demand through training and reskilling. Students and young professionals should be exposed to possible careers in the renewable energy value chain to take advantage of the expected increase in employment opportunities.
The creation of new green jobs should make space for more gender inclusivity, not just in employment but in policymaking. It is no secret that the extractive sector disproportionately employs men. We hope to see substantial shifts in employment patterns and there are early indications of positive trends. The International Renewable Energy Agency reports that the rise of renewables has improved the gender balance in the energy sector, with women accounting for 32 per cent of jobs in renewables, compared with 22 per cent in the oil and gas in 2021. The EITI is now requiring extractive companies to disclose employment data disaggregated by gender. The same disclosure could be asked for from renewable energy companies.