The European Parliament has given its final approval for tough new disclosure rules for energy and mining firms, just as Canadian premier Stephen Harper announces similar rules in London in a bid analysts say is designed to smooth over bad headlines on tar sands.
Ahead of next week’s G8 summit in Northern Ireland, the EU’s approval of the transparency laws slaps pressure on the remaining major economies not to have adopted similar measures - Canada, Russia and Japan.
The package of laws requires European companies to report payments of more than €100,000 made to the government in the country where they operate, including taxes levied on their income, production, profits, royalties, and license fees.
Once passed, the laws will oblige companies to disclose the payments they make at project level as opposed to country level only, so communities living near extraction sites will be able to better track the government’s earnings.
The EU deal goes beyond disclosure rules adopted by the United States in 2012 by including the logging industry along with mining and petroleum operations.
The Parliament approved the rules yesterday (12 June) by voting for amendments to the transparency and accounting directives. British Labour MEP Arlene McCarthy, who drafted the laws, said: "The vote today is history in the making. The new rules will be a major new weapon in the global fight against corruption, ensuring that citizens of resource rich countries can hold their governments to account for the exploitation of their natural resources.”
In 2008 exports of oil, gas and minerals from Africa were worth €295 billion, about nine times the value of international development aid.
“Canada is recognised as a world leader in promoting transparency and accountability in the extractive sector both at home and around the world,” Harper said in a statement. “I am pleased today to announce that we will be further enhancing this reputation by establishing new mandatory reporting standards for Canadian companies operating in this sector.”
NGOs hailed the move, which will open up the tax payments of Canadian-listed energy and mining companies. But analysts wonder about the timing and location of the announcement, which came during a supposed push to sell tar sands in London.
A source, who spoke on condition of anonymity, said Harper's announcement "could be well timed to push bad headlines on tar sands away".
"Again, it could be part and parcel of the charm offensive if you read between the lines. They are in dire straits as a government and need tar sands to succeed for the economy very badly."
Jess Worth, a campaigner with the UK Tar Sands Network told EurActiv: “I think it’s interesting that with one hand they’re trying to put a positive spin on one of the world’s dirtiest industries while at the same time they are continuing to spread lies and misinformation about the EU’s Fuel Quality Directive in order to block the passage of the directive.”
Canada has attempted to undermine the EU’s revision of the Fuel Quality Directive (FQD), which proposes labeling oil from tar sands as 20% more polluting than other fuels. Analysts say the move would effectively kill the EU demand for oil from tar sands as member states as the European Commission requires them to decarbonise their fuel mix by 6% by 2020, against a 2010 baseline.
As part of Canada’s attempts to sell tar sands to the EU, ministers have pointed to Canada’s transparency as a fuel provider compared to other countries, for example in the Middle East.
At a Brussels conference in March, Jeffrey Sundquist, who heads the London office of Canada’s Alberta province, told European Climate Commissioner Connie Hedegaard that the proposed FQD revision discriminated against Canada for its high transparency in reporting its CO2 emissions compared to other oil producing countries.
The proposed transparency rules will add to Canada’s claim that it is a reputable fuel source. A Canadian government statement said its aim was to “enhance transparency and accountability around material payments by extractive companies to all levels of governments domestically and internationally, including taxes, license fees and other receipts.”
Worth continued: “Obviously more transparency and accountability can only be a good thing because it’s sorely lacking at the moment but it doesn’t take away from the fundamental problem which is that tar sands is highly energy intensive to extract … and that the local destruction of the ecosystem is unparalleled. And no amount of transparency can mask that tar are fundamentally unsustainable as a fuel.”
Bas Eickhout, a Dutch Green MEP, said that the Canadian transparency "should be welcomed". But he added: "It's obvious Canada is getting nervous about the future of their tar sands, also after decisions of the province of British-Colombia not to grant a pipeline connection to the Pacific Ocean. Clearly, now the Canadian government wants to show its transparency of their extractive industry."
But Eickhout told EurActiv that real transparency on Canadian extractives would come from the accounting of emissions from tar sands, which it denies are more polluting than other fuel sources. "So if the Canadian government is serious about transparency, they should be welcoming European efforts to improve the real accounting of all emissions that coincide with the extraction of tar sands."
The transparency rules may also have been aimed at placating indigenous groups on extractives like tar sands, who may wish to know how much the government earns from oil recovery in or near their territories.
Eloise Todd, the Brussels director of poverty group ONE, told EurActiv she expected the European Council of Ministers' approval of the rules to be a sure thing. She added: The important thing it note that this comes at a critical time, ahead of the G8 in Northern Ireland next week. It seals the deal for a number of the G8 countries. In terms of leading by example it’s a great time."
Todd expressed satisfaction with the rule on project level reporting, saying: "Never before have they had to declare that ... It’s easier for citizens, civil society and investors to track [the money]. This information is power to local people."
Bono, the co-founder of ONE, said: “Today Europe sealed a deal that will enable ordinary people in Angola, Nigeria, and beyond to know how much oil, gas and mining companies pay to their governments – a great gamechanger for activists fighting extreme poverty. I have huge respect for all those who have worked relentlessly to seal this deal that will help fight poverty, hunger and injustice the world over. Hats off and glasses raised to the Irish Presidency and the European Parliament for getting it over the finish line. It’s a great momentum builder for next week’s G8 when more progress on transparency must be made, to help turbocharge the fight against extreme poverty and hunger.”
Michel Barnier, the European commissioner for the internal market, said: "With the new rules on country by country reporting, we have created a framework where businesses and governments must disclose revenues from natural resources. This framework will also contribute to the fight against tax fraud and corruption. But we must go further now and take measures on more transparency on tax for all large companies and groups – the taxes they pay, how much and to whom."
The amendments were agreed under the Irish EU presidency, with the Irish minister of finance, Michael Noonan, saying: “These new rules will encourage European companies to be more open about what they are paying to governments around the world. I believe that more transparent and more socially responsible companies will be better able to contribute to job creation and economic growth in Europe.”
EU Commissioner for the Internal Market Michel Barnier said: "I welcome this significant new advance in our efforts to make European companies more responsible and transparent ... This agreement ensures that the disclosure requirements for the extractive and forestry industries as recently agreed in the Accounting Directive apply to all companies of those sectors that are listed in the EU."