Filling the Governance Gap: Corporate Commitments and Environmental Externalities in the African Oil Sector

We examine whether oil and gas corporations fulfill their Zero Routine Flaring commitments in Africa to understand the role of privately enforced sustainability initiatives in the absence of effective host governments. Consistent with firms following through on commitments, gas flaring in continuously operated blocks declines by 35%, with larger reductions in countries with the weakest preexisting governmental oversight and environmental performance. Despite the scope for trade, block divestitures from committed to uncommitted firms are rare. However, when these divestitures do occur, they are associated with an almost 70% increase in flaring. Given the infrequency of divestitures and substantial improvements for continuously operated blocks, commitments are associated with a net reduction in carbon dioxide-equivalent emissions of 43 million metric tons. Overall, our findings suggest that corporate sustainability efforts to meet privately enforced commitments may be particularly beneficial in areas where public governance is an ineffective constraint on corporate behavior.