Corruption and climate finance: The risks facing energy transition initiatives at COP29

Right now, the international climate community is gathered in Baku, Azerbaijan, for COP29, where critical decisions for our planet's future are on the line.

Dubbed the ‘Finance COP’, all eyes will be on the negotiations around the New Collective Quantified Goal (NCQG), and whether a new target for international climate finance - one that can support developing countries in their climate change efforts – can be set.

Equally important for the NCQG’s funding targets is the way climate finance is delivered. Just Energy Transition Partnerships (JETPs) offer a new and evolving approach to climate finance in which a group of predominantly Western donor countries and financial institutions work together to support coal-dependent emerging economies in transitioning to green energy. A key element of JETPs is ensuring an inclusive transition, so that vulnerable groups, such as low-income households or communities dependent on coal mining, are not left behind.

With US$46.5 billion already committed by the International Partners Group (IPG) and the international financial institutions, JETPs are gaining traction– but there’s also a growing risk that these energy transition initiatives could be captured, and the justice aspect deprioritised.

This is the focus of Transparency International’s Climate Governance Integrity Programme’s latest report, which examines JETP governance processes in South Africa, Indonesia and Vietnam - the beneficiaries of the aforementioned US$46.5 billion. Alarmingly, we found that corruption is a very real threat, thanks to weak governance, insufficient public participation, underdeveloped oversight mechanisms, and a general lack of transparency in decision making, as well as in the management of JETP-related funds.

South Africa is a prime example, where according to allegations made in 2023 by Andre De Ruyter, the former CEO of Eskom - the state-owned enterprise which provides approximately 90% of the country’s electricity - around a billion rand (more than US$56 million) is stolen from the entity each month, including via corruption and infrastructure theft at power stations.

The South African government has also been criticised for its lack of meaningful engagement with civil society and communities - only 4% of people in affected areas like Mpumalanga, Limpopo and KwaZulu-Natal had heard anything about the energy transition from councillors or other government officials.

In Vietnam, five environmental, land rights and civil rights activists, along with a prominent energy expert, have been arrested since 2021 on alleged tax offences and document appropriation, highlighting a climate of repression that excludes meaningful civil society participation.

A further issue that surfaced throughout our research is a lack of transparency in JETP financing. For example, the allocation of JETP grants—which account for only about 4% of total JETP funding in South Africa, about 2% in Vietnam, and about 1.4% in Indonesia—raises significant concerns about their transparency and effectiveness. It remains unclear whether these grants represent ‘new and additional’ climate finance or are simply a rebranding of pre-existing funds, which is a general problem within climate finance. As the grants are distributed by traditional donor organisations, there are also doubts about how much of the allocated funding will benefit national or local actors once administrative costs are deducted by the donors.

These case studies illustrate just how abundant the corruption risks are, but they also underline the critical role JETPs can and should play in tackling the climate crisis. Their emphasis on social justice and the substantial financial commitments they’ve already received make them critical tools that must be strengthened, not abandoned.

Among our recommendations for achieving this is that JETP governing bodies undertake corruption risk assessments with national anti-corruption and oversight bodies, civil society organisations and experts. They should also adopt and implement best practice anti-corruption policies and procedures, introducing institutional accountability measures to address the systemic gaps that allow corruption to infiltrate the energy sector.

Inclusive participation is equally essential. JETP governing bodies must facilitate early and meaningful multi-stakeholder engagement on the just transition, involving civil society groups and communities from the regions most affected by coal phase-out.

Establishing clear, robust and inclusive governance structures in which responsibilities and processes for decision-making, oversight and coordination are transparent to all stakeholders is also crucial. JETP governing bodies and those responsible for implementing projects should similarly establish grievance mechanisms to ensure environmental whistleblowers are protected.

For JETPs to reach their true potential and support international climate action, they must be protected from corruption and administered with integrity. National and international institutions now have a fantastic opportunity to build proactively on the work already started in South Africa, Indonesia and Vietnam and ensure they become models for all future climate finance initiatives.