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Financial transparency in extractive industries leads to reduced carbon emissions

February 2021: The Extractive Industries Transparency Initiative aims to increase publicly available data about environmental payments and to highlight needs for environmental policies that promote better natural resource and environmental management practices. Increased financial transparency in the extractive industries can be linked to significant reductions in carbon emissions.

Information

Countries that have committed to improving financial transparency over oil, gas, and mining revenues have benefitted from reductions in their carbon emissions. Members of the Extractive Industries Transparency Initiative (EITI) have decreased their carbon emissions from 2000-2014 by 13%. During the same period, the global average carbon footprint per capita grew by 23%. The initiative focused on improving financial transparency to reduce levels of corruption and encouraged the use of recovered funds to invest in more sustainable forms of energy and improved environmental performance. Members who committed to the initiative saw an improved performance in relation to regulatory quality, rule of law, control of corruption, foreign direct investment, and interest rates. By challenging information about property rights and publishing data on revenues, the initiative has generated positive media attention, fostered dialogue with local communities, and provided investors and regulators with access to measure relative environmental performance in the extractive industry.

Implications and opportunities

Increased transparency in the extracting industry through initiatives such as the EITI could increase visibility for environmental payments, highlight the need for environmental policies and promote better natural resource and environmental management. The initiative has introduced agreed upon tools and approaches such as increased public data availability, carbon permits, and infrastructure investments. This has led to increased media attention and improved dialogue with local communities which can represent opportunities for poverty reduction and further increased investments in energy infrastructure in natural resource-dependent countries.

Limitations

Despite the initiative’s positive environmental impacts and increased transparency in reporting practices, the EITI does not have a direct focus on political stability of democratic processes which often pose major challenges in the extractive industry.

Sources

Sovacool, B. K. (2020). Is sunshine the best disinfectant? Evaluating the global effectiveness of the Extractive Industries Transparency Initiative (EITI). The Extractive Industries and Society. doi:10.1016/j.exis.2020.09.001 

Ruiz Leotaud, V., (2020). Countries being more transparent over resources reduce carbon emissions – study. Retrieved from https://www.mining.com/countries-being-more-transparent-over-resources-reduce-carbon-emissions-study/

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The views expressed in these external research papers are those of the authors and do not represent an official position of CISL, the University of Cambridge, or any of its individual business partners or clients.