By AFP
Published December 15, 2023
'Undue influence': McKinsey & Company helped set the agenda for the UN Africa Climate Summit
- Copyright AFP Thomas COEX
– Carbon markets hype –
McKinsey denied any wrongdoing, with Kenya’s environment minister Soipan Tuya insisting it is “extremely far from the truth” to say that the firm held too much sway at the summit.
McKinsey told AFP it was a “technical partner” to the summit, one of many that contributed to preparations, and that all documents were “approved by the Africa Climate Summit and the Government of Kenya.”
Archived web pages indicate that a mention of the company as a partner was removed from the event’s website. McKinsey said it had been included in error.
Two members of the advisory group formed at the request of Ruto, who asked not to be named, said they were unaware of McKinsey’s role.
“Given their client list, McKinsey had an undeniable conflict of interest,” Adow told AFP.
In one confidential document promoting its expertise in carbon markets, the firm listed companies it had advised, including Chevron, BP and Tata Steel.
It also flagged McKinsey’s work on solar, wind and gas power and electrification, as well as “performance transformation” work for firms operating coal- and oil-fired power plants.
Critics of carbon markets say they do not live up to their hype and allow polluters to offset the damaging greenhouse gas they produce too cheaply.
A study earlier this year found only a tiny fraction seemed to deliver, and last year a major UN report concluded that “too many non-state actors are engaging in a voluntary market” marked by “low prices and a lack of clear guidelines”.
– McKinsey drafted climate summit plans –
The two experts in Ruto’s advisory group said the paper diverged from long-standing positions of the 54-nation African Group and disregarded top African priorities such as money to help the continent’s economies cope with climate impacts.
McKinsey said the documents “were for use by the president of Kenya and they reflect his ambitions, not McKinsey’s.”
In the end, the summit drew hundreds of millions of dollars in pledges for carbon projects, including $450 million from COP28’s oil-rich hosts the UAE, which is seeking to secure vast tracts of land in Africa — reportedly the size of Britain — to develop carbon-offsetting projects.
With their worth increasingly questioned, the price of carbon credits for nature conservation projects nosedived from $16 per tonne in January 2022 to about $1 last month.
In October, South Pole, the biggest seller of carbon offsets, pulled out of a huge scandal-hit forest protection programme in Zimbabwe. McKinsey was among companies that had purchased credits from the scheme.
That and other damaging reports have thrown the entire sector into turmoil.
“Carbon offsets rarely achieve the climate benefits they claim,” researchers led by Danny Cullenward of the Institute for Carbon Removal Law and Policy in Washington reported last month.
Roland LLOYD PARRY, Marlowe HOOD
Consulting giant McKinsey & Company sought to place controversial carbon market schemes favoured by its fossil fuel clients at the heart of the Africa Climate Summit, according to internal documents and sources who talked to AFP.
The documents reveal that the firm worked behind the scenes to shape the agenda of September’s Nairobi gathering, a key event in the run-up to the UN’s COP28 talks in Dubai.
McKinsey’s clients include some of the world’s biggest oil and gas companies, from ExxonMobil to Saudi Arabia’s state-run Aramco.
A nine-page confidential “position paper” seen by AFP also touted the Africa Carbon Markets Initiative (ACMI), which McKinsey has publicly said it helped develop, and called for the building of a $6 billion market for carbon offsets on the continent.
Carbon offsets are billed as a way for big polluters like oil companies to make up for their CO2 emissions by supporting green projects like those that claim to safeguard forests. But experts dispute their worth and have warned of greenwashing.
More than 500 civil society groups signed a protest letter to Kenyan President William Ruto in the run up to the meeting saying McKinsey “unduly influenced” the summit through key documents it drafted on behalf of the host country.
“When McKinsey got involved in the planning of the summit, they sought to benefit from commercial deals that would emerge,” said Mohamed Adow, head of research group Power Shift Africa.
Adow was among three dozen African and global advisors from research groups, foundations and international organisations asked by the organisers to review the “position paper” to set the agenda for the talks.
He said McKinsey played a leading role in drafting the document, which was sharply criticised by several advisors as overplaying the role of carbon markets, according to comments they shared seen by AFP.
Consulting giant McKinsey & Company sought to place controversial carbon market schemes favoured by its fossil fuel clients at the heart of the Africa Climate Summit, according to internal documents and sources who talked to AFP.
The documents reveal that the firm worked behind the scenes to shape the agenda of September’s Nairobi gathering, a key event in the run-up to the UN’s COP28 talks in Dubai.
McKinsey’s clients include some of the world’s biggest oil and gas companies, from ExxonMobil to Saudi Arabia’s state-run Aramco.
A nine-page confidential “position paper” seen by AFP also touted the Africa Carbon Markets Initiative (ACMI), which McKinsey has publicly said it helped develop, and called for the building of a $6 billion market for carbon offsets on the continent.
Carbon offsets are billed as a way for big polluters like oil companies to make up for their CO2 emissions by supporting green projects like those that claim to safeguard forests. But experts dispute their worth and have warned of greenwashing.
More than 500 civil society groups signed a protest letter to Kenyan President William Ruto in the run up to the meeting saying McKinsey “unduly influenced” the summit through key documents it drafted on behalf of the host country.
“When McKinsey got involved in the planning of the summit, they sought to benefit from commercial deals that would emerge,” said Mohamed Adow, head of research group Power Shift Africa.
Adow was among three dozen African and global advisors from research groups, foundations and international organisations asked by the organisers to review the “position paper” to set the agenda for the talks.
He said McKinsey played a leading role in drafting the document, which was sharply criticised by several advisors as overplaying the role of carbon markets, according to comments they shared seen by AFP.
– Carbon markets hype –
McKinsey denied any wrongdoing, with Kenya’s environment minister Soipan Tuya insisting it is “extremely far from the truth” to say that the firm held too much sway at the summit.
McKinsey told AFP it was a “technical partner” to the summit, one of many that contributed to preparations, and that all documents were “approved by the Africa Climate Summit and the Government of Kenya.”
Archived web pages indicate that a mention of the company as a partner was removed from the event’s website. McKinsey said it had been included in error.
Two members of the advisory group formed at the request of Ruto, who asked not to be named, said they were unaware of McKinsey’s role.
“Given their client list, McKinsey had an undeniable conflict of interest,” Adow told AFP.
In one confidential document promoting its expertise in carbon markets, the firm listed companies it had advised, including Chevron, BP and Tata Steel.
It also flagged McKinsey’s work on solar, wind and gas power and electrification, as well as “performance transformation” work for firms operating coal- and oil-fired power plants.
Critics of carbon markets say they do not live up to their hype and allow polluters to offset the damaging greenhouse gas they produce too cheaply.
A study earlier this year found only a tiny fraction seemed to deliver, and last year a major UN report concluded that “too many non-state actors are engaging in a voluntary market” marked by “low prices and a lack of clear guidelines”.
– McKinsey drafted climate summit plans –
The two experts in Ruto’s advisory group said the paper diverged from long-standing positions of the 54-nation African Group and disregarded top African priorities such as money to help the continent’s economies cope with climate impacts.
McKinsey said the documents “were for use by the president of Kenya and they reflect his ambitions, not McKinsey’s.”
In the end, the summit drew hundreds of millions of dollars in pledges for carbon projects, including $450 million from COP28’s oil-rich hosts the UAE, which is seeking to secure vast tracts of land in Africa — reportedly the size of Britain — to develop carbon-offsetting projects.
With their worth increasingly questioned, the price of carbon credits for nature conservation projects nosedived from $16 per tonne in January 2022 to about $1 last month.
In October, South Pole, the biggest seller of carbon offsets, pulled out of a huge scandal-hit forest protection programme in Zimbabwe. McKinsey was among companies that had purchased credits from the scheme.
That and other damaging reports have thrown the entire sector into turmoil.
“Carbon offsets rarely achieve the climate benefits they claim,” researchers led by Danny Cullenward of the Institute for Carbon Removal Law and Policy in Washington reported last month.
Countries risk ‘paying polluters’ billions to regulate for climate: UN expert
By AFP
Published December 15, 2023
Countries are under growing pressure to regulate to protect the environment - Copyright AFP JUSTIN TALLIS
By AFP
Published December 15, 2023
Countries are under growing pressure to regulate to protect the environment - Copyright AFP JUSTIN TALLIS
Kelly MACNAMARA
An “explosion” of multibillion-dollar claims by fossil fuel and extractive firms through shadowy investment tribunals is blocking action on climate and nature, the UN Special Rapporteur for Human Rights and Environment has warned, with developing nations increasingly targeted.
After countries agreed this week at UN climate talks on a “transitioning away from fossil fuels”, governments are likely to come under heightened pressure to boost regulation and reject further expansion of oil, gas and coal projects.
But that could leave them open to litigation under a secretive arbitration process called investor-State dispute settlement (ISDS), according to UN rights expert David Boyd, who has called it a “major obstacle” to environmental action.
“When governments bring in these stronger laws and policies, they’re ending up paying millions — and sometimes billions — of dollars in compensation,” Boyd told AFP.
Denmark, France and New Zealand have all backed off from stronger regulation on fossil fuel exploration because of ISDS fears, he said.
In a report called “Paying Polluters”, presented to the UN General Assembly earlier this year, Boyd warned that the number of claims — and the size of the payouts — were soaring.
“The explosion of ISDS claims in recent years, and the threat of such claims, is led by fossil fuel, mining and other extractive industry corporations,” Boyd said in his report.
ISDS cases targeting actions to protect the environment rose from 12 initiated before 2000, to 37 from 2000 to 2010, and 126 between 2011 and 2021, it said, adding fossil fuel and mining industries have won over $100 billion in awards.
That could rise substantially, as “sunset clauses” mean even if a state pulls out of a treaty it could still face litigation for some two decades.
– ‘Hypocrisy’-
ISDS mechanisms built into thousands of international treaties have roots in the global reconfiguration after World War Two, as investors based often in former colonial powers sought to protect assets in newly-independent countries.
Lukas Schaugg, an international law analyst with the International Institute for Sustainable Development, said the tribunals had historically operated with a “lack of public scrutiny”.
“People are increasingly talking about the duty of states to regulate with regard to climate,” said Schaugg, who used to work at the International Chamber of Commerce’s arbitration court.
Now, “the clash with the investment treaty regime is increasingly visible”, he said.
The United Nations Conference on Trade and Development says ISDS poses a particular challenge for the energy transition.
In an August report, UNCTAD said of 1,257 publicly-known ISDS claims made by early 2023, 15 percent were initiated by fossil fuel investors.
Even renewable companies have filed substantial claims, as countries change investment incentives.
The Energy Charter Treaty is the most frequently-invoked international investment agreement in these claims.
It “can amplify existing burdens on countries that are trying to shift from traditional fossil fuel projects to renewable energies”, UNCTAD said.
Several wealthy nations have moved to pull out of the ECT, including Germany, France and the Netherlands, while the European Parliament has called for withdrawal of the entire EU.
Boyd said even as richer nations reduce their exposure, investors continue to use their territory to target poorer nations.
“It’s absolutely gross hypocrisy, it’s unjust and it’s definitely unequal,” he said, adding that “jurisdiction shopping” also allows foreign companies to open offices in treaty countries to launch claims.
According to UNCTAD, 65 percent of cases in 2022 were brought by investors in richer nations — and 65 percent of cases were against developing countries.
– ‘Dustbin of history’ –
Examples of claims include two Australian mining corporations seeking nearly $37 billion from the Republic of Congo — more than twice its 2022 gross domestic product.
“It’s obvious that there’s no way on earth the Republic of Congo could pay that kind of compensation, if they were unsuccessful in these claims,” Boyd told AFP.
Often, he said, “governments just capitulate”.
Last year, Pakistan agreed an out-of-court settlement with a foreign firm, which waived penalties that had ballooned to $11 billion in exchange for the reopening of an open-pit copper mine.
It was seen as the only solution for the debt-stricken country after a World Bank arbitration tribunal imposed a $5.8 billion penalty in 2019.
The Tethyan Copper company told the tribunal it had spent over $240 million on the mine.
Boyd said the case illustrates inconsistencies in tribunal awards.
Payouts are sometimes based on investors’ actual spending on a project, but at other times use a method estimating future earnings.
Boyd called for the investment treaty system to be reimagined to align with rights and environmental priorities — and for ISDS to be “relegated to the dustbin of history”.
“We’ve known there’s been a climate crisis for 30 years (but) we have companies operating coal fired power plants, saying: ‘We had a legitimate expectation we’d be able to continue burning coal forever’,” he said.
“Those arguments are being accepted by these arbitration tribunals.”
An “explosion” of multibillion-dollar claims by fossil fuel and extractive firms through shadowy investment tribunals is blocking action on climate and nature, the UN Special Rapporteur for Human Rights and Environment has warned, with developing nations increasingly targeted.
After countries agreed this week at UN climate talks on a “transitioning away from fossil fuels”, governments are likely to come under heightened pressure to boost regulation and reject further expansion of oil, gas and coal projects.
But that could leave them open to litigation under a secretive arbitration process called investor-State dispute settlement (ISDS), according to UN rights expert David Boyd, who has called it a “major obstacle” to environmental action.
“When governments bring in these stronger laws and policies, they’re ending up paying millions — and sometimes billions — of dollars in compensation,” Boyd told AFP.
Denmark, France and New Zealand have all backed off from stronger regulation on fossil fuel exploration because of ISDS fears, he said.
In a report called “Paying Polluters”, presented to the UN General Assembly earlier this year, Boyd warned that the number of claims — and the size of the payouts — were soaring.
“The explosion of ISDS claims in recent years, and the threat of such claims, is led by fossil fuel, mining and other extractive industry corporations,” Boyd said in his report.
ISDS cases targeting actions to protect the environment rose from 12 initiated before 2000, to 37 from 2000 to 2010, and 126 between 2011 and 2021, it said, adding fossil fuel and mining industries have won over $100 billion in awards.
That could rise substantially, as “sunset clauses” mean even if a state pulls out of a treaty it could still face litigation for some two decades.
– ‘Hypocrisy’-
ISDS mechanisms built into thousands of international treaties have roots in the global reconfiguration after World War Two, as investors based often in former colonial powers sought to protect assets in newly-independent countries.
Lukas Schaugg, an international law analyst with the International Institute for Sustainable Development, said the tribunals had historically operated with a “lack of public scrutiny”.
“People are increasingly talking about the duty of states to regulate with regard to climate,” said Schaugg, who used to work at the International Chamber of Commerce’s arbitration court.
Now, “the clash with the investment treaty regime is increasingly visible”, he said.
The United Nations Conference on Trade and Development says ISDS poses a particular challenge for the energy transition.
In an August report, UNCTAD said of 1,257 publicly-known ISDS claims made by early 2023, 15 percent were initiated by fossil fuel investors.
Even renewable companies have filed substantial claims, as countries change investment incentives.
The Energy Charter Treaty is the most frequently-invoked international investment agreement in these claims.
It “can amplify existing burdens on countries that are trying to shift from traditional fossil fuel projects to renewable energies”, UNCTAD said.
Several wealthy nations have moved to pull out of the ECT, including Germany, France and the Netherlands, while the European Parliament has called for withdrawal of the entire EU.
Boyd said even as richer nations reduce their exposure, investors continue to use their territory to target poorer nations.
“It’s absolutely gross hypocrisy, it’s unjust and it’s definitely unequal,” he said, adding that “jurisdiction shopping” also allows foreign companies to open offices in treaty countries to launch claims.
According to UNCTAD, 65 percent of cases in 2022 were brought by investors in richer nations — and 65 percent of cases were against developing countries.
– ‘Dustbin of history’ –
Examples of claims include two Australian mining corporations seeking nearly $37 billion from the Republic of Congo — more than twice its 2022 gross domestic product.
“It’s obvious that there’s no way on earth the Republic of Congo could pay that kind of compensation, if they were unsuccessful in these claims,” Boyd told AFP.
Often, he said, “governments just capitulate”.
Last year, Pakistan agreed an out-of-court settlement with a foreign firm, which waived penalties that had ballooned to $11 billion in exchange for the reopening of an open-pit copper mine.
It was seen as the only solution for the debt-stricken country after a World Bank arbitration tribunal imposed a $5.8 billion penalty in 2019.
The Tethyan Copper company told the tribunal it had spent over $240 million on the mine.
Boyd said the case illustrates inconsistencies in tribunal awards.
Payouts are sometimes based on investors’ actual spending on a project, but at other times use a method estimating future earnings.
Boyd called for the investment treaty system to be reimagined to align with rights and environmental priorities — and for ISDS to be “relegated to the dustbin of history”.
“We’ve known there’s been a climate crisis for 30 years (but) we have companies operating coal fired power plants, saying: ‘We had a legitimate expectation we’d be able to continue burning coal forever’,” he said.
“Those arguments are being accepted by these arbitration tribunals.”
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