Energy Governance, Transnational Rules, and the Resource Curse: Exploring the Effectiveness of the Extractive Industries Transparency Initiative (EITI)

Benjamin K Sovacool,Götz Walter,Thijs Van De Graaf,Nathan Andrews

doi:10.1016/j.worlddev.2016.01.021

Abstract

Transnational standards for disclosure have become a defining feature of global governance and sound economic development, yet little is known about their effectiveness. This study statistically explores the efficacy of such standards for the important case of the Extractive Industries Transparency Initiative (EITI), an international non-governmental organization which maintains a voluntary standard for revenue transparency in the extractive industries. As of November 2015, 31 countries were ‘‘EITI Compliant” and another 49 were ‘‘EITI Candidates.” In total, 49 countries had disclosed payments and revenues worth some $1.67 trillion in more than 200 ‘‘EITI Reports”, and over 90 major companies involved in oil, gas, and mining are committed to supporting the EITI. The EITI has also received support from 84 global investment institutions that collectively manage about $16 trillion in energy infrastructural assets. Moreover, the European Union, African Union, G8 and G20, and the United Nations have all endorsed the EITI. This article provides the first broad empirical examination of the EITI’s effectiveness in improving governance and economic development outcomes in its member countries using non-parametric tests, regression analysis, and data from the World Bank. We analyze the performance of the first 16 countries to attain EITI Compliance Status over the period of 1996–2014. We find, interestingly, that in most metrics EITI countries do not perform better during EITI compliance than before it, and that they do not outperform other countries. We postulate four possible explanations behind the relative weakness of the EITI: a limited mandate, its voluntary nature, stakeholder resistance, and dependence on strong civil society.

Highlights

Summary. — Transnational standards for disclosure have become a defining feature of global governance and sound economic development, yet little is known about their effectiveness
Since we cannot assign units randomly to an experimental and control group, our analysis follows a quasi-experimental design and allows for only correlative interpretations regarding the relationship between Extractive Industries Transparency Initiative (EITI) participation and governance and economic development metrics
The results indicate that, in a strong majority of governance and economic development metrics, EITI countries did not perform better than others

Summary

Introduction

Summary. — Transnational standards for disclosure have become a defining feature of global governance and sound economic development, yet little is known about their effectiveness. — Transnational standards for disclosure have become a defining feature of global governance and sound economic development, yet little is known about their effectiveness. Private actors such as firms and nongovernmental organizations are becoming involved in the design and operation of transnational rules that aim to increase transparency. 2 This study statistically explores the efficacy of transnational disclosure standards for the important case of the Extractive Industries Transparency Initiative (EITI). The EITI was created in 2002 to improve the domestic governance in resource-rich countries by bringing more transparency and more accountability to the collection of revenues. The EITI was structured as a transnational public–private partnership, bringing together resource-rich development countries, private actors such as transnational corporations and investor associations, and civil society organizations. EITI attempts to promote global transparency for the oil, gas, and mining sectors—sectors that are notorious for their opacity. 3 The EITI operates on the principle of having free, full, independent, and active assessments of the ways that extractive industries companies interact with government and impact communities and society. 4

Results

Discussion

Conclusion