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What is a Climate Project and How Does it Work?

Image Noah Buscher on Unsplash

When discussing climate action, the term "climate project" often comes to mind. Sometimes also referred to as a climate protection project, carbon project, or carbon offset project, even though often criticized in the last couple of years these initiatives are essential for addressing climate change in a scalable manner.

Content:

What is a Climate Project?

A climate project is an effective initiative or program designed to demonstrably avoid, reduce, or remove greenhouse gases (GHGs) from the atmosphere, thereby positively impacting climate mitigation.

4 Key Criteria for Climate Projects

 

Each climate project must meet four key criteria:

Additionality: Additionality is crucial for climate projects, determining whether a project leads to additional climate mitigation effects compared to what would have happened in the absence of the project. Different types of additionalities used to assess and validate climate projects include:

  • Environmental Additionality: Ensures that the project results in environmental benefits beyond what would have occurred without it, providing genuine and measurable environmental improvements. If the project‚Äôs emissions reductions or removals would have occurred regardless of the payment for Carbon Credits, the resulting credits are not additional.
  • Financial Additionality: Occurs when a climate project is not financially viable without the revenue from selling Carbon Credits. The project would not be implemented if it relied solely on traditional funding sources because it would not be financially attractive or feasible.
  • Regulatory Additionality: Achieved when a climate project goes beyond existing legal or regulatory requirements, implementing actions or reductions that are not mandated by current laws or regulations.

 

Exclusion of Double Counting: This criterion ensures that each Carbon Credit, once verified, can only be sold and retired once. A Carbon Credit cannot be claimed, i.e. purchased or traded and accounted for on both the Voluntary Carbon Market (VCM) and the Compliance Market simultaneously. The same applies within the VCM; only one company can retire and claim one Carbon Credit. To ensure this, each Carbon Credit is assigned a unique serial number, with each serial number representing one ton of reduced CO2 emissions or equivalent. After a Carbon Credit is sold, the corresponding certificate must be retired.

 

Permanence: Permanence in climate projects refers to the long-term durability and stability of the carbon sequestration or emission reduction achieved by the project. It assesses whether the carbon benefits claimed by the project will be maintained over a significant period, typically decades or even centuries, ensuring that the CO2 reductions are not reversible.

 

Regular Independent Audits: Regular independent audits involve the systematic and periodic review of a project's activities, compliance with the methodology, standard frameworks, and outcomes by an external, impartial entity.

 

These four key criteria for climate projects are laid down in the standard frameworks across all common and well-established standards worldwide and are crucial for ensuring transparency, accountability, and credibility in climate projects.

The Life Cycle of a Climate Project

 

A climate project has a defined life cycle across all applied requirements from the certification schemes. This life cycle can vary in length and underlying monitoring phases but is generally consistent for ex-post verified Carbon Credits.

It is important to note that there are differences between a project’s life cycle, crediting period, and overall project duration.

The life cycle describes the ideal project duration of a climate project, meaning that after it has completed one cycle, the project can exist without the revenue from Carbon Credits. In this case, the project life cycle is equal to the first crediting period.

In the second case, if a project still cannot financially sustain the project activities after the first life cycle, it can apply for a second crediting period. In this scenario, the life cycle repeats itself.

Life cycle of a climate project with ex-post verification of carbon credits

1. Feasibility study:

To start a project, the project developer needs to do a feasibility study. A feasibility study of a climate project is a comprehensive assessment conducted to determine the practicality, viability, and potential success of the project before significant resources are committed. It involves analyzing various aspects to ensure that the project is technically, economically, environmentally, and socially feasible.

2. Project Design and Financing:

As a second step the methodology and requirements are assessed by the project developer, as well as the initial financing plan of the project. Identifying potential initial funding sources and financing options such as grants, loans or private investments are part of this step. This pre-financing is not in conflict with financial additionality. These pre investments are important to get the project started as they might be of high-risk. Risks such as projects failing to get validation or price fluctuations should be considered. Another possibility is also considering early-stage revenue from selling ex-ante Carbon Credits.

3. Project Design Document Preparation:

The third step is crucial. The project developer has to prepare a Project Design Document (PDD), which contains all relevant information (goals, location, project start, duration) of the project as well as a monitoring plan and how emission reductions and removals are achieved and calculated. All this must be in alignment with the standard framework and according to the chosen methodology. The PDD can be compared to a business plan.

4. Validation of the Project Design:

An independent auditor, also called Validation and Verification Body (VVB), that usually is accredited by the standard, reviews the Project Design Document. This review can also contain on-site visits and interviews with stakeholders. An example of a VVB is T√úV Nord.

5. Registration under a Standard:

Only after a successful validation can a project be registered under a standard.

6. Implementation and Monitoring:

As a next step the climate project is implemented and starts with the first monitoring phase. During the monitoring phase the project developer or operator monitors and documents all occurring and necessary data of the project activities as well as the progress during this phase. The duration of the monitoring phase can be between one and several years, which also depends on the methodology, standard and scope of the project. 

7. Verification:

Each monitoring phase must be verified by a VVB in the end. This verification is similar to the initial validation and checks the reported data, the corresponding amount of Carbon Credits and other project activities.

Circle within the life cycle:

A project must be monitored continuously during the crediting period. For verification purposes the continuous monitoring is separated into different monitoring phases, each ending with a verification and the subsequent issuance of Carbon Credits.

8. Issuance of Carbon Credits:

After a successful verification, the certified amount of Carbon Credits can be issued in the standard registry. In this case that means that the Carbon credits are issued ex-post, so after the emission saving, reduction or avoidance has already happened during the monitoring phase.

10. Retirement of Carbon Credits:

After a Carbon Credit is issued, it can only be sold once and must be immediately retired within the registry to avoid double counting.

To sum it up: A climate project always needs to have a permanent impact on mitigating climate change. How many crediting periods are needed and therefore how long a project  runs, can vary and depends on the Voluntary Carbon Market (VCM).

Different Types of Climate Projects

Climate projects depend on the sales of Carbon Credits. To develop a climate project and to estimate and later on calculate the amount of carbon credits, a project is developed under a certain methodology. Methodologies exist for various technologies and even entail different modules to be more specific for certain conditions.

Examples are

  • Nature-based Solutions (NbS) such as Afforestation, Renaturation, REDD+ (Reducing emissions from deforestation and forest degradation¬†and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries) or Improved Forest Management (IFM)
  • Renewable Energy such as solar, wind to replace fossil fuel-based energy sources
  • Energy Efficiency projects like upgrading buildings, appliances, and industrial processes to use less energy and reduce emissions.
  • Carbon Capture and Storage technologies to capture CO2 emissions from industrial sources and store them underground.

Different types of climate projects have specific advantages and challenges. For example related to biodiversity, costs, duration, the integration of local communities, and political barriers. All these points must be considered when developing a climate project under a certain methodology.

Sustainable Development Goals and Climate Projects

Climate projects contribute to the United Nations Sustainable Development Goals (SDGs) in numerous ways, creating a holistic impact that extends beyond climate change mitigation. Here’s a detailed look at how these projects can support various SDGs:

Poster of the Sustainable Development Goals (SDGs)

1. No Poverty (SDG 1)

Climate projects often create jobs and stimulate local economies, particularly in developing regions. Renewable energy projects, for instance, can provide affordable energy, creating new economic opportunities and improving living standards.

2. Zero Hunger (SDG 2)

Agroforestry and sustainable agriculture projects enhance food security by improving soil health, increasing agricultural productivity, and supporting local food systems. These projects can help communities become more resilient to climate impacts, such as droughts and floods.

3. Good Health and Well-Being (SDG 3)

Climate projects that reduce air pollution (e.g., improved cookstoves, renewable energy) directly benefit public health by reducing respiratory and cardiovascular diseases. Improved access to clean energy and clean water also contributes to better health outcomes.

4. Quality Education (SDG 4)

Renewable energy projects in off-grid areas can power schools, enabling better educational facilities and opportunities. Additionally, some climate projects include educational components that raise awareness about sustainability and climate change.

5. Gender Equality (SDG 5)

Many climate projects prioritize the inclusion of women, providing them with job opportunities, training, and leadership roles. Projects that reduce the time spent on gathering fuel (e.g., improved cookstoves, microenergy credits) free up time for women and girls to pursue education and economic activities.

6. Clean Water and Sanitation (SDG 6)

Projects focusing on watershed management, reforestation, and wetland restoration enhance water quality and availability. These initiatives protect water resources and ensure sustainable access to clean water for communities.

7. Affordable and Clean Energy (SDG 7)

Renewable energy projects, such as solar, wind, and hydroelectric power, provide affordable and clean energy alternatives, reducing reliance on fossil fuels and expanding energy access to underserved areas.

8. Decent Work and Economic Growth (SDG 8)

Climate projects generate employment in various sectors, including renewable energy, reforestation, and sustainable agriculture. They also promote green economies, encouraging investment in sustainable practices and technologies.

9. Industry, Innovation, and Infrastructure (SDG 9)

Certified climate projects drive innovation by developing and deploying new technologies for energy, waste management, and carbon capture. Infrastructure improvements, such as enhanced grid systems and sustainable transport, are also key components.

10. Reduced Inequalities (SDG 10)

By focusing on inclusive development, climate projects help reduce inequalities. They often target marginalized communities, providing them with resources, training, and opportunities to improve their socio-economic status.

11. Sustainable Cities and Communities (SDG 11)

Urban climate projects, such as green buildings, sustainable transport, and waste management, contribute to making cities more sustainable, resilient, and livable. These projects help reduce urban carbon footprints and improve the quality of life for residents.

12. Responsible Consumption and Production (SDG 12)

Projects that promote energy efficiency, waste reduction, and sustainable resource management encourage more responsible consumption and production patterns. This helps in conserving resources and reducing environmental impacts.

13. Climate Action (SDG 13)

Directly addressing climate change, certified climate projects reduce greenhouse gas emissions, enhance carbon sequestration, and increase resilience to climate impacts. They play a critical role in global efforts to limit temperature rise and mitigate climate risks.

14. Life Below Water (SDG 14)

Marine conservation projects, such as those that protect coastal ecosystems and reduce pollution, contribute to healthier oceans and marine biodiversity. These projects support the sustainability of fisheries and protect vital marine habitats.

15. Life on Land (SDG 15)

Reforestation, afforestation, and biodiversity conservation projects protect and restore terrestrial ecosystems. These initiatives help maintain biodiversity, improve land productivity, and enhance ecosystem services.

16. Peace, Justice, and Strong Institutions (SDG 16)

Climate projects that involve community participation and transparent governance contribute to stronger institutions and more peaceful societies. They promote environmental justice and ensure that the benefits of climate action are fairly distributed.

17. Partnerships for the Goals (SDG 17)

Climate projects often involve collaborations between governments, NGOs, private sector, and communities. These partnerships enhance the effectiveness of climate action and leverage diverse resources and expertise to achieve the SDGs.

In summary, certified climate projects are instrumental in advancing the SDGs by providing multifaceted benefits that encompass environmental sustainability, social equity, economic growth, and institutional development. By addressing climate change, these projects inherently support broader sustainable development objectives, creating a more resilient and equitable world. When choosing to support a climate project, a company or individual should always align their values with the SDG contribution of the project.

Conclusion:

Climate projects are vital components of the global strategy to combat climate change. They provide the mechanisms necessary for significant emissions avoidance, reductions, or removals, foster sustainable development, and contribute to a healthier, more resilient planet. By continuing to support and expand these initiatives, we can make meaningful progress towards a stable and sustainable future for all.

OCELL is developing Improved Forest Management climate projects using data-driven technologies.

Find out more about the projects.