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The energy transition needs a transparent and accountable extractive sector

Statement from Rt Hon. Helen Clark, EITI Board Chair

The transition to a sustainable, decarbonised economy is reshaping the extractive industries. In view of the profound implications of transition for the kinds of data, disclosures, and dialogues required to support accountability and good governance in implementing countries, the EITI Board discussed the role of the EITI in the energy transition at its meeting earlier this week.

The transition has profound implications for the extractive sector, and it will not be easy. The EITI can be supportive of the transition, as the robust data gathered to meet its requirements, when published and used responsibly, can advance understanding of transition pathways. It can, for example, inform the choices and trade-offs which will need to be made so that decisions are balanced, the transition is well managed, and vulnerable groups are not left behind. Sustained engagement by government, industry, and civil society will be necessary to find solutions.

The authors of the EITI Principles stated in 2003 that a public understanding of government revenues and expenditure over time could help inform the choice of appropriate and realistic options for sustainable development. In the context of the energy transition, this has proved to be far sighted.

The EITI sets a global standard for best practice governance in the extractives sector which is now implemented in 55 countries. Each of those countries has choices to make about the energy transition, and there is data disclosed through the EITI in each country which can inform their choices. Countries implementing the EITI draw on revenues from oil, gas, and/or minerals to meet the energy and development needs of citizens.

While the production of oil and gas will remain a significant source of revenue for many for some time, there is a role for the EITI in building awareness of the transition to come, and in working with other governance partners towards sustainable outcomes.  An orderly transition is also a key concern of extractive companies. Their role in providing sustainable employment and their contribution to domestic revenue through taxation can be very significant.

The EITI does not see engagement with the energy transition as a new and distinct area of activity, but rather as a contribution it can make, through the data which its processes gather, to support resource rich countries to find a way forward.

At its meeting earlier this week, the EITI Board agreed on four ways in which it will work with implementing countries, supporting companies, civil society organisations, financial institutions, and others to build awareness of how existing EITI data can support debate.

  • First, by collaborating with a group of countries – based on stakeholder demand and interest – to pilot analysis demonstrating how disclosures can inform debates on the energy transition. These kinds of pilot disclosures are encouraged in guidelines on flexible reporting applicable in 2020 and 2021.

  • Second, by integrating plans for supporting multi-stakeholder groups in engaging on issues related to the energy transition as part of the EITI’s broader capacity building activities.

  • Third, considering how to integrate transparency on energy transition through the EITI Standard and guidance. This could include highlighting the opportunities for using EITI data to inform discussions related to energy transition in guidance, or sharing examples of data analysis as they emerge.  Recognising the existing work by expert and partner organisations in this area, this would be complemented by coordination with partners and standards working on this issue.

  • Finally, by continuing to engage industry and institutional investors in inclusive discussions on industry trends. This will improve the EITI’s understanding of how the energy transition may affect extractive sector transparency and how the EITI can contribute.

We may conclude, as a result of this work and further analysis, that there are opportunities to reflect the lessons learned through changes to the EITI Standard, to ensure that it remains relevant to the changes facing the sector. That option should remain on the table in the lead up to the planned 2022 EITI Global Conference. Close consultation with implementing countries which champion the EITI process will be key.

I look forward to working with the EITI Board, the International Secretariat, implementing countries, supporting companies, and civil society organisations on the four areas of work identified. In doing so, I believe that we contribute to transparent and accountable extractive sector governance which helps ensure a sustainable future for all.