Basic guide to corruption and anti-corruption efforts in renewable resource sectors

Renewable resources are any natural resource that can replenish itself naturally over human timescales. Corruption is a major concern for renewable resources like forests, and in climate and green energy projects. Corruption can lead to environmental degradation and destruction. Such outcomes undermine the livelihoods of people directly dependent on forest products, charcoal production, and herding. Corruption also undermines the global goods particular ecosystems represent. The poor and other vulnerable groups, including some Indigenous Peoples, suffer the worst consequences.

Corruption is common in renewable resource extraction

Various actors use methods outside the law to access natural resources. This is the rule rather than the exception in large parts of the world according to influential academic Paul Robbins. In 2000, he wrote that corruption is“quite often the predominant organised system governing the use of nature.” It affects anything from hardwood felling in the Philippines, land use permits in Ghana, or offshore fishing licences in Senegal.

Criteria to define corruption

Robbins defines corruption in renewable resource management as “the use or overuse of community (state, village, city, etc.) natural resources with the consent of a state agent by those not legally entitled.” This leads to inequality in resource distribution.

The UN Food and Agriculture Organization uses five criteria to distinguish corrupt acts in the forest sector from other illegal forest practices:

1. Involve public officials
   Public officials are almost always implicated although it may involve private sector or civil society actors. It is a crime – but not necessarily corruption – if a private person steals wood from a public forest.
   
2. Involve public property and power
   Public property may be either tangible (eg timber) or intangible (eg selling knowledge about government negotiating positions on timber concessions).
   
3. Are perpetrated for private gain
   An official who misuses public forest resources without delivering a private benefit may qualify as negligent and incompetent, but not as corrupt.
   
4. Are intentional acts
   An official who unknowingly uses public forest resources illegally is negligent and incompetent, but not corrupt.
   
5. Are surreptitious (secret or unauthorised)
   ...and, therefore, difficult – though not impossible – to measure and trace.

Defining illegal practices

Illegal logging is an important term for our understanding of corruption in the forest sector. In fisheries, we often refer to illegal, unreported and unregulated (IUU) fishing:

1. Illegal fishing
   Fishing vessels or harvesters violate the laws of a particular fishery.
   
2. Unreported fishing
   Fishing is unreported or misreported to the relevant authorities.
   
3. Unregulated fishing
   Fishing vessels operate without or with unclear nationality or harvest in unregulated areas.

As with illegal logging, IUU fishing need not involve corruption. However, evidence shows that corruption commonly facilitates these acts.

Forestry

Billions of people use forest resources for their livelihoods, for shelter, building materials, spiritual meaning, recreation, and economic rents. In 1997, researchers estimated that all forest ecosystem goods and services and natural capital is worth USD 4.7 trillion per year. This included timber and other forest products such as nuts and berries, and the ecosystems’ contribution to climate and water catchment regulation.

Forests as a resource, livelihood and protected value

Economic activities and corruption risks vary in forestry sectors. European notions of scientific forest management spread across the globe in the colonial era. This led to authorities and large-scale actors viewing tropical forests as primarily an economic resource. As a result, we see forest concession systems that promote economic development via industrial timber and plantation activities. At the same time, large populations depend on artisanal forestry – non-timber forest products, charcoal production, etc. Forest regions where this is typical include the Amazon, Congo Basins, and Indo-Malayan tropical forests. In addition there are conservation areas, national parks and reforestation zones. In these territories the official policy is to protect and even extend forest cover, but enforcing this in practice is hard work and overlapping claims often exist.

Corruption can steer decisions

For the industrial timber and plantation sub-sectors, people seeking profits and private gains through corrupt means will target decision-makers. What type of industrial regulation should apply? How to implement forest or plantation management plans? What details to set in concession contracts? All of these decisions are vulnerable to corruption. For example, logging actors may influence authorities to apply inappropriate regulations for a specific forest.

Authorities establish forest policies that cover human intervention and protection of non-commercial values. How effective these plans are depends on willingness and capacity to enforce them. Corruption can influence how officials enforce and prioritise forest policy concerns. To appreciate corruption risks, we have to understand concession contracts details. Because these contracts influence incentives for forest use, some actors engage in corruption to shape contract details such as size, length, and how authorities collect the fees.

Market structures that lead to corruption

In artisanal forestry – gathering non-timber forest products, and producing charcoal – petty corruption is most common. This means that transactions are frequent and seldom involve higher-level officials.

One example is illicit charcoal trade over the Tanzania-Kenya border. Researchers have found that local forest users and producer groups bribe officials to avoid the set regulations (CIFOR; Cerutti et al 2013; TNRF 2009).

Such activity falls within Robbins’ definition of corruption discussed above. However, CIFOR’s research points to the need for caution when appraising small-scale illicit economic activities. We have seen a trend in developing countries to prioritise both industrial timber production and large-scale forest conservation. This means local populations can lose access to ancestral forestland that they depend on for a living. Their traditional activities in these areas have even been criminalised in many places. Small-scale Cameroonian forest users who supply domestic and regional timber markets want to pay genuine taxes instead of bribing officials who encourage corruption. This shows that the structure of the market itself may be the main driver of corruption.

Corruption risks in forest conservation initiatives / REDD+

Large-scale tropical forest conservation initiatives, such as schemes for Reducing Emissions from Deforestation and Forest Degradation (REDD+) are widely considered to be at considerable risk from corruption. Corruption is likely to affect REDD+ in two main ways. First, existing broad patterns of corruption in implementing countries are likely to shape individual behaviour within REDD+ programs. Second, REDD+ will involve sizable fiscal transfers under relatively under-tested aid modalities to countries scoring poorly on formal quantitative indicators of corruption. REDD+ will also enhance the value of forestland. The combination of large amounts of money, weak institutions for channelling financing and a broader context of poor governance have been viewed as likely to enhance both incentives and motivations for corrupt behaviour.

Consequences in forestry

Where corruption is relatively common in a forest sector, its consequences can take many forms:

• Deforestation and forest degradation, and the accompanying loss of carbon sinks.
• Land degradation and soil erosion.
• Damage to protected wood species.
• Damage to water catchment systems.
• Damage to natural habitats for flora and fauna, and loss of biodiversity.
• Loose controls for the protection of non-timber values, such as the protection of livelihoods for forest dependent communities.
• Reduced state revenues from forestry, illegal sale of protected wood species.

Marine fisheries

We see increasing industrial marine fishing off the coast of Africa. Part of the reason is that global demand for fish products is rising. Another reason is that industrial actors find fewer fish in the waters near industrialised, richer regions like Europe. See: Making transparency work in Africa's marine fisheries.

We also see an increase in small-scale fisheries in Africa. Official statistics from African governments give an estimate of at least 10 million people working in this sector. Many more get their income from related activities. Official statistics do not, however, capture illicit or informal activities in fisheries sectors. The real scale of these sectors is therefore likely to be higher than the estimates.

In 2000, the FAO Committee on Fisheries adopted an international plan of action to prevent, deter, and eliminate IUU fishing. Fisheries economics researchers from the University of British Columbia estimated that IUU catches in 2002 amounted to 16 million tonnes. In economic terms this is worth between US$ 2.4 and 9.5 billion (Sumaila and Jacquet 2008).

Corruption is a major challenge for the governance of global marine fisheries. Opportunities are ample, and sanctions limited. Enforcing regulations in the vast oceans is costly, and corruption can occur throughout the value chain. The risk includes institutions that govern marine fisheries.

Marine fisheries is a global industry with vessels from one jurisdiction operating in foreign jurisdictions. It is common that countries have bilateral access agreements to regulate such fishing. The negotiations that lead to these agreements are often non-transparent. Therefore, corruption sometimes leads to unfair resource distributions through such agreements.

National fisheries legislation often aims to balance poverty relief with the country’s economic development goals. It may protect small-scale fishing and promote commercial initiatives at the same time. While national fisheries laws are often of good quality, their enforcement can be less than effective. For example, an official raid of a vessel suspected of illegal shark fishing in Ecuador’s Galapagos Marine Reserve, interrupted the captain’s lawyer at lunch with an admiral of the Ecuadorian Merchant Marines (Sumaila and Jacquet 2008).

At sea, corruption in fisheries can let captains exceed quotas, dump tons of catches worth less money, transfer catches between vessels while at sea, and smuggle goods. Representatives of fisheries interests use corruption to influence observers who monitor unlawful practices at sea. These suppliers of corruption may be vessel crew or owners and official protectors on shore.

Consequences in marine fisheries

Consequences of corruption in marine fisheries manifests itself in different ways:

• Inequity in bilateral fisheries access agreements.
• Overfishing, sometimes of already depleted fish stocks.
• Undermining of marine fisheries surveillance and monitoring systems.
• Enabling the use of banned fishing equipment and practices.
• Undermining of artisanal marine fisheries sector, including jobs and associated livelihoods.
• Undermining of marginal subsistence fishers and associated livelihoods.

Land

Land administration is one of the most corrupt of government activities. According to a 2011 Transparency International survey, one in five people report having paid a bribe when dealing with land services. Corruption in land administration reduces peoples’ access to land, and harms the livelihoods of small-scale producers, agricultural labourers, indigenous communities, landless rural inhabitants, and urban poor. Women, young people and ethnic minorities suffer most.

Large international land deals are affected by grand corruption. Cases where foreign investors take over land are more frequent in places with poor land governance. Corruption may affect:

• Decisions on land use and control
• Enforcement of regulations
• Management of competing interests

Corruption can severely influence land tenure – the relationship between people, land, and the resources it contains. Land tenure, ownership, and access rights vary from country to country. You'll often find historical or traditional rights and obligations mixed with more recent land reforms. The way land governance is publicly administered can involve various institutional levels as well as traditional authorities such as chiefs.

In extreme cases, people engage in corruption to capture entire institutions or state functions to administer land. Officials in these institutions then allocate land to particular individuals, families, clans, social groups, or commercial firms in exchange for monetary considerations or political favours. In such settings land reform is extremely difficult. This is because the actors in position to strengthen governance tend to benefit from a non-transparent status quo.

Rapid urbanisation and rising food prices have brought land issues high up policy-makers’ agendas. The first priority for donors to address corruption in land administration is to support domestic governments in improving land administration and anti-corruption processes in general. In addition, donors should analyse the political economy of land and reduce their own projects' impact on land administration corruption.

Including local communities in decision-making processes and strong legislation can help tackle corruption in land administration. International donors can help mitigate corruption risks by supporting the legal recognition of ownership and user rights. Donors can play a role in setting up conflict resolution mechanisms to support land administration processes.

Consequences in the land sector

The consequences of corruption in the land sector can be severe, and include:

• Non-consensual land transfer, potentially leading to the loss of livelihoods for dispossessed families.
• Resentments stemming from corrupt land transfers leading to conflict and violence.
• Reduction of confidence in the enforcement of existing land rights, which may reduce investment and engagement with formal land registration systems.
• Inefficient land ownership, with land owned by those most able to undertake corrupt acts rather than those with the best potential to use it.
• Reduced desire among elites for land reform and the implementation of a well-functioning system of land governance.

Wildlife

Trafficking in wildlife is a leading threat to the survival of many species. The Convention on International Trade in Endangered Species of Wild Fauna and Flora is a multilateral treaty to protect endangered plants and animals. However, people trade live animals and plants, their products and derivatives, despite this convention and national laws. Illicit trade spans from caviar to coral, from walrus tusks to whale meat.

Wildlife traffickers make between US$ 10 and 20 billion in criminal profits per year according to the authors of a U4 Issue. Corruption can play a major part in facilitating these profits. It compromises the role of law enforcement, customs, the criminal justice system, corporations, and individuals in protecting endangered wildlife. Although wildlife trafficking mostly begins in developing countries, the illicit financial flows and related money laundering take place in both developing and OECD countries.

Wildlife trafficking is a multi-stage crime often connected to other organised crimes. People who poach or capture animals must smuggle these to sales spot. This involves multiple actors, modes of transportation, and ways of hiding the animal. Other people, again, may process the animal into a product to be sold.

Researchers criticise criminal justice systems for failing to deal effectively with wildlife trafficking. Some forms of wildlife trafficking do not receive the serious attention that scholars say it deserves. Governments typically allocate few enforcement resources to combat wildlife trafficking, and penalties tend to be low. Corruption may not be the driver of wildlife trafficking, but together with poor governance, it facilitates these crimes.

Forms of corruption linked to wildlife trafficking can vary depending on the context and the type of resource at stake. Political, state, or institutional corruption can allow armed non-state actors to engage in poaching, for instance. The resulting profits can in turn fuel conflicts. Criminal syndicates can take advantage of collusion between the private sector and government institutions. This can allow them to undermine law enforcement efforts, and continue poaching and wildlife trafficking.

Consequences in wildlife

Corruption relating to the illicit wildlife trade can have a number of serious consequences:  

• Increases species loss and the reduction of biodiversity.
• Lost revenues to the state in the form of fees and taxes on legal wildlife products traded illicitly – reducing potential spending on social services.
• Undermining the authorities' natural resource management efforts including disrupted surveillance and monitoring regimes.

Green energy

Donor countries have pledged US$ 10 billion via the UN’s Green Climate Fund to facilitate green energy transitions in developing countries. The Clean Development Mechanism (aims to help countries decarbonse their economies. Renewable energy from wind, solar, wave, and biomass sources now represent the largest share of CDM projects.

The energy sector has a great potential to generate rents. It is therefore both a target and a source of corruption (Ruth 2002). Institutions that finance energy infrastructure in developing countries recognise the need to address corruption in energy projects – including green energy.

We have largely only anecdotal evidence linking corruption to renewable energy. A few detailed studies attempt to analyse specific risks and mechanisms. Researchers from the Grantham Institute on Climate Change and the Environment and Princeton Environment Institute analysed the links between public wind energy subsidies and corruption, using Southern Italy as a case study. They claim a new resource curse may exist in the green energy sector. The study showed criminal activity including corruption increasing at higher rates in windy provinces following a new policy supporting wind power generation.

Research on perceptions of risk connected with investments in renewable energy in North Africa found that the complexity of bureaucratic procedures and corruption were viewed as significant investment barriers. While more research is needed to define corruption in green energy, case information suggests that this sector is not immune from corruption risks.

Consequences in green energy

Although more research is required to better appreciate the consequences of corruption in green energy, known consequences include:

• Diversion of public spending intended for renewable energy subsidies.
• Inflating the cost of developing renewable energy infrastructure.
• Inefficient allocation of public contracts for renewable energy to those willing to bribe rather than those best able to deliver the required service.