How Accountability Actors Can Use the 2023 EITI Standard to Support a Just Energy Transition: A Practical Guide
The world is undergoing an energy transition in which fossil fuels are being replaced by renewables as sources of energy. As the transition progresses, countries will need much less oil, gas and coal, but significantly greater amounts of the transition metals and minerals needed to build clean technology.
The new Extractive Industries Transparency Initiative (EITI) Standard reflects the profound effects this shift will have on oil and mineral producer countries. Approved in June 2023, the Standard includes new requirements for civil society, implementing countries and companies to consider the energy transition in EITI processes, report on energy transition policies that affect the extractive sector, and make a number of new disclosures that will help stakeholders understand the many risks and opportunities presented by these changes. With effective implementation, these improvements can contribute to a transition that is just and equitable, by supporting public debate among a range of stakeholders from the extractive sector and beyond, including those engaging in climate change policy.
Impacts of the transition will not be the same for all countries. For fossil fuel producers, declining demand brings uncertainty, with significant consequences for national government revenues and exports, but also for the local communities, businesses and subnational governments that depend on specific projects.
High-cost projects, or those with high environmental and social costs, are increasingly the subject of asset sales, with a growing body of research showing that these sales are moving assets from transparent public companies with high environmental, social, and governance standards to more opaque private companies.
In the longer term, there is also a risk that some projects become stranded assets, meaning they will no longer be commercially viable. These trends have important implications for government revenues and environmental and social protection, including around closure and decommissioning. With state-owned enterprises (SOEs) becoming ever more important players in oil and gas production, significant amounts of public finance are also being put at risk.
A different story is playing out for mineral producers. With market demand and government policy accelerating worldwide investment in clean energy, countries are scrambling to take advantage of a boom in demand for transition minerals. Facing enormous pressure to bring scarce resources to market, many countries are moving at breakneck speed to develop policies to attract investment, including the fast-tracking of award and regulatory approval processes.
While the potential for benefit is high, new investments also bring many environmental, social, and governance risks. Public oversight and accountability will be essential to avoid the mismanagement and corruption that have thwarted development in previous resource booms.
Global efforts to fight climate change are adding further dynamics to sectoral decision-making. In one set of developments, greenhouse gas (GHG) emissions are set to play an increasingly important role in determining the competitiveness of oil, gas, and mining projects, as investors, consumers, and governments move to meet their emissions reduction targets.
Meanwhile, a public debate on what a fair, global phaseout of fossil fuels will look like is developing at a fast pace. Though currently in an early stage, as more and more governments, civil society, and company actors engage in the debate, these discussions have the potential to influence important questions, including which countries should wind down production first, and which may be offered financial support to forgo development of reserves.
In this tool, NRGI provides an analysis of the main changes to the 2023 EITI Standard that stakeholders can harness to engage with energy transition policy debates. We also provide practical suggestions for how they can use data that will soon be disclosed. By doing so, we aim to show EITI Multi-Stakeholder Groups (MSGs) and civil society actors engaged in the EITI why discussions on the energy transition are relevant to their work. We also seek to demonstrate to climate change actors not traditionally engaged in the resource governance world how EITI disclosures can add value to their existing efforts.
Authors
Robert Pitman
Portfolio Coordination Lead