Fighting Corruption in Climate Change

There is rising concern that the US$30 billion pledged to protect forests last year during the Copenhagen conference on the Kyoto Protocol on climate change is going into the pockets of corrupt officials in some of the world's developing countries.

Thus, starting tomorrow, tackling corruption in climate change policy is high on the agenda for a joint conference seeking to tweak the Kyoto document in Cancun, Mexico, over the next 12 days – partly because there may not be much else to tackle.

There is virtually no chance that the leaders will agree on a legally binding climate change framework this year, following the failure to do so in Copenhagen and given hardening attitudes against it in the US Congress. Instead, the officials, meeting under the cumbersome title the Conference of the Parties of the United Nations Framework Convention on Climate Change and the 6th Conference of the Parties to the Kyoto Protocol, are looking to make progress in key areas, including a forest conservation scheme being piloted now in a number of developing nations.

Some headway was made in Copenhagen when leaders agreed to mobilize the initial funds from the developed world to protect carbon-rich forests in the developing world through 2012. The UN-backed scheme, Reducing Emissions through Deforestation and Forest Degradation (REDD+), aims to conserve or sustainably manage forests in the name of mitigating climate change.

Developed countries that fund REDD+ projects in developing nations with these objectives can offset their carbon emissions and earn carbon credits to trade on markets that are slowly emerging. The mobilization of such large amounts of money, however, has raised concerns of corruption.

"There is a lot of money pledged right now to fund readiness activities, preparation funds to make sure countries are ready to enter a REDD+ mechanism," said Estelle Fach from the United Nations Development Program in New York. "There needs to be a focus on corruption and good governance. The risks are there because forest governance is not perfect anywhere."

The stakes are high. Tropical deforestation accounts for 20-25 percent of the earth's greenhouse gas emissions, according to the International Panel on Climate Change, more than the world's transportation emissions put together. If the forests perish, the earth loses rich carbon sinks and the ability to absorb carbon from the atmosphere, exacerbating climate change; if money is put into corrupt systems, the forests could still perish and billions of dollars could be lost.

Some of the world's poorest countries, lying on the world's tropical belt, are the richest in forest carbon stocks. Many of these nations have a deep-rooted culture of corruption. Forestry ministries in the Philippines and Indonesia, for example, are regarded as among the most corrupt institutions by their citizens.

The World Bank estimates that illegal logging in developing countries results in more than US$10 billion in annual losses, and as much as half of that is lost to governments in evaded taxes and royalties.

As REDD+ is still in its early stages, all eyes are on countries like Indonesia, which has a number of REDD+ projects up and running and more in the pipeline. In May, Indonesia and Norway entered a bilateral REDD+ agreement, in which Norway pledged US$1 billion to impose a two-year moratorium on natural forests across Indonesia.

The moratorium was welcomed by environmentalists, but many have grown sceptical. Permits to log swathes of carbon-rich primary forest such as peatland were issued before the moratorium and business-as-usual logging will continue in those areas.

There is contention over what type of forest in Indonesia should be protected under the agreement. In its report "REDD Alert: Protection Money" released last week, Greenpeace accused the government of trying to mislabel intact forest as degraded land so that it could be legally destroyed for commercial purposes. This could also mean REDD+ funds in the future will flow to land for "rehabilitation," even if forest is intact.

An Ernst & Young audit found that over a five-year period in the 1990s, US$5.2 billion was lost from the reforestation fund, designed to rehabilitate "degraded" forest lands.

"In Indonesia, there is no clear definition for degraded land," said Bustar Maitar, Southeast Asia Greenpeace campaigner. "So this situation can be used by industry to deliberately misinterpret the meaning of degraded land. A current ministerial regulation says that degraded land is appointed by the minister of forestry. In many cases, areas that have already been logged are identified as a degraded land, but in reality, a lot of that land is still in good condition."

Around 4,000 miles to the west, in Cameroon, the story is similar. A study by Paolo Cerutti of the Center for International Forestry – The challenges of redistributing forest-related monetary benefits to local governments: a decade of logging area fees in Cameroon – illustrates how forest funds are unfairly distributed and offers lessons learned ahead of REDD+ implementation.

Under Cameroonian law, companies that log land must pay an additional tax, known as an area fee, 50 percent of which is allocated to councils for village development. Cerutti says village development has been "weak to say the least," but blames a flawed system of management, rather than corruption alone.

Mayors are often made scapegoats for mismanaged money, the study shows, when in reality the public cannot keep track of the funds as baseline data is not made publicly available. Even when mayors do have their hands dirty, they are often re-elected by manipulating local councils and party power structures.

With the extra revenue to councils comes extra pressure. Expenses that were previously covered by the central government, such as health, education and infrastructure, are now the responsibility of the councils.

The amount councils receive to provide these essential services each year is at the behest of the central government. In 2008, for example, the government halved the area fee to attract investors during the global financial crisis.

"If this money, or REDD+ money, becomes a substitution for other funds that the central government should be providing, then we are back to square one. This money should be used for investments on top of other money," Cerutti says. "But if the central government doesn't own the system, there will always be a tendency to grab and maintain as much money as possible at the central level, while donors keep pushing for REDD+ money to trickle down to rural communities."

The report also found that funds were lost because local councils did not have the skills needed to manage bigger budgets, which often doubled with the introduction of the area fee. If REDD+ funds end up with councils, these budgets stand to increase by even larger amounts.

Like Cerutti, Aled Williams, Program Coordinator for the U4 Anti-Corruption Resource Centre in Norway, says corruption is complex and must be analyzed contextually to be tackled. A zero tolerance approach is not always effective.

"Provisions for assessing governance are not considered to move beyond basic concepts, such as promoting transparency, accountability and responsible decision-making," Williams says.

"How political, social and economic contexts will respond to REDD+ is as yet unknown, and corruption is an adaptable phenomenon capable of mutating in response to new policy environments and incentive systems. It is crucial to learn from the pilots projects and studies currently underway."