How do climate projects work?

The main purpose of a climate project is to ensure that greenhouse gases emitted into the atmosphere are reduced. There are various ways to achieve this, with a market that is continuously evolving with new projects and increasingly better methods for measuring emission reductions.

Last updated: 2024-05-27

Woman with a cooking stove

There are two general types of climate projects - those that prevent new emissions, and those that capture greenhouse gases already released into the atmosphere.

Transition to Renewable Energy

One method that is easy to measure and simple to understand involves projects that produce renewable energy. This is of extreme importance, as 82% of the world's energy still comes from fossil fuels. By creating renewable energy, which does not cause emissions, we make it possible for people to stop using fossil fuels. For example, when we build wind power in India and connect more people to the electrical grid, they no longer need to use diesel generators or burn coal, which is often the case before the project is implemented. This is counted as an avoidance climate project, which ensures that fewer greenhouse gases will be emitted going forward. There are plenty of reasons to focus on countries such as India and Indonesia for these types of projects, rather than European countries or the US. Wind power can still be too expensive to be built without assistance in the Global South, and the infrastructure and knowledge may not be in place. The focus on fossil energy is also often big due to corporate interests and lobbying. These are conditions that prevent a climate project from happening without support, a concept known as additionality. Wind power can produce the same energy in Sweden, but the marginal benefit in a more fossil-dependent country is higher since it avoids burning coal and diesel and contributes to improving living standards locally.

Biogas Projects

Another type of avoidance climate project involves capturing greenhouse gas emissions from various processes and converting them into energy — known as biogas projects. These projects typically involve installing advanced technology so that greenhouse gases from the biological decomposition of organic material, such as in landfills or wastewater, are not released into the atmosphere. Instead, they are captured and converted into energy. As a result, we directly avoid emissions and put the energy to good use!

Efficient Cooking Methods

Another type of project, also within the avoidance category, aims to improve cooking methods. In many countries, food is cooked over open fire, leading to deforestation as more people need wood for the cooking process. By offering better equipment, the individuals responsible for cooking (often women) usually do not need to gather as much fuel (wood) for the fire. This saves both trees and time, and the improved equipment also results in less air pollution, which has positive health effects. These projects have significant potential benefits but are more challenging to implement because they involve behavioural change and are often harder to measure the results of. The potential impact is however prominent.

Tree Projects

Another type of climate project focuses on trees and forests. This kind of project can fall within both categories of climate projects—both avoiding and capturing greenhouse gases. Projects may involve reforesting deforested areas, planting trees in areas that previously had no forests, or protecting existing forests (the number of trees on Earth has decreased by 46% since humans began farming). Projects of this kind are crucial as trees store carbon dioxide from the air, with many added potential benefits such as increased biodiversity, improved microclimate, etc. However, we at GoClimate have chosen not to invest in forest-related climate projects. The main reason is that although such projects are necessary and important for the reasons mentioned, the complexity of managing these projects is significant, and we believe that we can achieve the most positive effect by financing other types of climate projects.

Technical Projects

According to the IPCC, it will be necessary to remove large amounts of carbon dioxide from the atmosphere in the coming years. Technical projects, or ”removals”, are a rapidly growing field where many companies compete to develop the most effective and cost-efficient methods to capture carbon dioxide from the atmosphere and store it sustainably, long-term. For example, ClimeWorks uses giant fans similar to mechanical trees, and other companies create biochar for storage in the soil. These types of projects are continuously monitored and evaluated by several initiatives. Currently, the cost of removing one ton of CO2e from the atmosphere using these methods is high, with ClimeWorks charging roughly $1200 per ton of CO2e. Less costly alternatives include biochar - cheaper, but still expensive. Critics argue that these technologies have difficulties scaling up to necessary levels and can distract from the primary task of reducing emissions. Additionally, payments to private companies create a lack of transparency and third-party certification of the climate benefits. (However, we are convinced that the development of these types of projects is necessary and look forward to seeing how the market grows!)

The Cost of Climate Financing

As the projects vary significantly, so do the prices, and there is currently no fixed price for a ton of carbon dioxide. Furthermore, all projects have administrative costs—if no one designs, administers, and monitors the project, then will be no project and its quality cannot be guaranteed. Part of the funds also goes towards certification, to ensure the quality of the project. This prevents projects that do not provide any benefit and protects against corruption and inefficiency.

Here you can learn more about how GoClimate selects climate projects! We offer climate financing in carefully selected certified climate projects. If you do not already have an understanding of your emissions, we have services that can help you with that. Are you looking to finance climate projects and already know your company's climate footprint?