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Why is it so difficult to fund projects that reduce emissions?

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By Robert Höglund

· 4 min read

The problem with funding carbon removal

It makes more sense not to emit carbon than to remove it. Avoided emissions projects are supposed to be the low-hanging fruit funded before large amounts of money are spent on expensive carbon removals. But there is a lack of mechanisms that lets donors, or carbon credit buyers, support projects that effectively reduce emissions.

One example is the recent news of over 90% of avoided deforestation credits being ineffective. This comes on top of investigations showing most renewable energy credits deliver much less benefit than they claim. A problem for both categories is additionality, that we cannot be sure that the projects are making something happen that otherwise wouldn’t have. Carbon standards Verra and Gold Standard have stopped issuing new credits from grid-connected renewable energy projects (aside from in the absolute poorest countries). And due to quality concerns, Gold Standard never offered REDD+ avoided deforestation credits in the first place. This leaves a few niche categories of avoided emissions credits to fund such as improved cookstoves, methane collection and collection of refrigerants, some of which also have quality issues.

With carbon removals, additionality is much less of a problem. The direct air capture plant would not be built unless someone wanted to pay for carbon removal. Thanks to this, and due to the difficulties with financing avoided emissions, more carbon will be removed in practice than what would be optimal in theory (where avoided emissions are always preferred, I’ve written about this previously here). This is especially true for the contributions companies, and individuals will make.

The option available

Right now, the best way to support projects that avoid emissions is likely to fund effective advocacy and policy organizations. Groups that make governments and decision-makers sharpen policies and invest more in the green transition. Funds donated to such advocacy projects can be many times more cost-effective per dollar spent than carbon credits (even assuming carbon credits worked). This is the conclusion of the research group Giving Green. They have spent thousands of hours evaluating the best donation opportunities to fight climate change, and their top recommendation is to support organizations like Clean Air Task Force. Last week, they released their white paper How to think beyond Net Zero, giving guidance to companies.

However, even if effective on the margin, advocacy projects can not scale to productively use the tens of billions of dollars that could be contributed by companies annually to climate projects. We also need new ways of getting money directly into effective avoided emissions projects. John Kerry, recently announced the Energy Transition Accelerator. It is a carbon credit generating program that aims to replace fossil-generated electricity with renewable energy in developing countries. The key difference from earlier initiatives is that it would be jurisdictional. Meaning taking a more centralized approach, involving governments, to guarantee that the net effect is reduced emissions and not just more renewable energy. It is a promising program, but would still have challenges with proving additionality and would not be suitable for offset claims.

Moving toward a greener future

A crucial part of the solution is to let go of the need to claim carbon neutrality. Traditional carbon credits can’t live up to the claims; buying expensive carbon removals makes it near impossible for large companies to offset their entire footprint; funding advocacy projects, grassroots organizations or R&D efforts are not at all translatable to neutrality claims. Accepting uncertainty and focusing on the expected impact of contributions is key. Those who want to support climate should be open to going beyond buying a specific amount of credits.

In summary, to help mobilize the funds for climate projects needed to reach global climate targets we need to keep innovating and evaluating current efforts. To make sure the money is used effectively we need to be humble and not just choose projects that allow for claims or are without risk.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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About the author

Robert Höglund is an advisor in carbon dioxide removal (CDR) and climate impact. He manages the charitable Milkywire Climate Transformation Fund, co-founded the CDR market overview, works with the NGO Carbon Gap, and writes reports and articles on carbon removal and corporate climate contributions. He is also a member of the EU Expert Group on Carbon Removals and of the Science-based Target Initiative's (SBTi) Technical Advisory Group.

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