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Helen Clark on the role of the EITI in supporting the energy transition

Excerpt from a speech by Rt Hon. Helen Clark, EITI Board Chair, on 4 November 2021 to an EITI and Chatham House COP26 online event on the role of transparency and multi-stakeholder dialogue in supporting a transition to net zero.

At the EITI, we welcome the focus at this COP on producer countries, and on what the transition to net zero will mean for their economies and societies. Those implications are what the EITI seeks to shine a light on in its contribution to addressing the energy transition. Let me set out how we can do that.

The EITI has set the global standard for open and accountable management of oil, gas, and mineral resources. The Standard is implemented by 56 resource-rich countries with populations which often have high expectations of what their natural resources can deliver for sustainable development, revenues, and employment.

All the member countries of the EITI are affected in one way or another by the energy transition. The need for the EITI to understand better what its role could be in this space is what has led to its collaboration with Chatham House and its research and dialogue capacity.

After consultations with government, industry, and civil society stakeholders, a research paper was developed for EITI by Chatham House. Key recommendations for the EITI were formulated, and last year its Board decided to take those forward and reflect the transition in the EITI’s work.

We have also collaborated closely with key partners, in particular the Natural Resource Governance Institute (NRGI), in identifying opportunities to support resource-dependent countries in preparing for the transition.

So, how can the EITI contribute in this space?

First, through the data and disclosures which EITI processes generate.  These should enable decision makers and key stakeholders to have informed debates on the implications of the transition on their economies. Issues to be addressed include the following:

  • How will future revenues and investment related to the extractives sector be affected by the transition? Let’s note here that the impacts will differ between the producers of fossil fuels on the one hand, and those of the strategic minerals needed for sustainable energy on the other. Understanding the assumptions made in revenue forecasts – both from fossil fuels and from critical minerals – will be important in assessing how future revenue flows may be impacted.

  • Then there is the question of the scale of national public finance invested in fossil fuels which is potentially at risk under more rapid or disruptive transition scenarios. This is of great relevance to the macroeconomic stability of producer countries, and it is an issue that EITI data and disclosures can help shed light on. It will be necessary for disclosures to provide a complete picture of a state’s investment in extractives, including through its state-owned enterprises.

  • Understanding the scale of fossil fuel subsidies in a country will also be needed to assess their impact on clean energy investment. The EITI Standard enables disclosures and analysis that can inform debate around revenue resilience.

  • The energy transition will also require adapting legal frameworks and contracts to the new realities, and making sure risks of future commodity price fluctuations are shared by all parties to a contract. Using publicly accessible contracts, civil society actors such as NRGI are analysing contracts and identifying clauses that can pose risks to governments as the transition to net zero speeds up.

  • As well there is the important question of how local communities, subnational revenues, and local employment will be affected by the energy transition. Reporting and analysis of current and future subnational transfers and payments from the extractive sector can help communities and local governments anticipate revenue fluctuations.

Overall, EITI is in a position to help ensure that there is reliable and timely information available to governments and citizens so that they can respond to these and other questions which will arise.

These are some of the ways in which data and disclosures provided by the EITI can contribute to a planned transition to net zero.

Second, our processes provide inclusive platforms for dialogue between governments, industry, and civil society, and these can be applied to dialogue on the energy transition.

To identify smart and sustainable solutions to the climate crisis, a diversity of views and experiences will need to be channelled in policy debates.

The quest for climate justice in all its forms is rising on the agenda of the COP this year. It is crucial that the voices of younger generations are heard on the extractives sectors and what constitutes responsible governance of them.

EITI’s multi-stakeholder platform can also help facilitate inter-agency coordination – across ministries of finance, energy, petroleum, mines, climate, and environment, most of which are already represented in EITI multi-stakeholder groups. These need to be co-ordinated to ensure alignment in developing energy transition policies.

A multi-stakeholder approach is also important for ensuring that citizens are included through open dialogue and consultation and not locked out of decision-making.

The research paper prepared for EITI by Chatham House documented how some countries are already effectively using EITI data and dialogue to explore issues relating to the energy transition. For example, there is Germany’s engagement on the coal phase-out, Indonesia’s engagement on energy transition planning, and Trinidad & Tobago’s efforts to build emissions reporting into their EITI process.

As these activities develop, the EITI may help contribute to the inclusion of the extractives sector within Nationally Determined Contributions or ‘NDCs’ under the Paris Agreement.

The EITI stands ready to support its implementing countries to advance country-level analysis on the economic implications of the transition, and to build the capacity of stakeholders to engage in informed debate on the associated risks and opportunities. We will also consider how the efforts made by implementers should be reflected in future iterations of the EITI Standard.