There are at least ten good reasons in favour of climate protection projects. To support climate protection projects, myclimate employs the concept of carbon financing. This enables the implementation of effective climate protection projects that would be impossible to execute without the income from emissions certificates. Through a performance-oriented focused arrangement under which funds are paid out only after a proven reduction in carbon, myclimate ensures that its projects are effective and sustainable. In the long term, the goal is that these projects will support themselves and continue regardless of CO₂ certificates.
The graphic below (Fig. 1) offers a transparent view of the entire project development cycle and the annual certification process in all its complexity, with all the parties involved. And because this process is so complex, further down there is a simplified, linear representation (Fig. 2) which explains the individual steps. The text then provides comprehensive, transparent details of these steps.
myclimate’s «Carbon Markets» team comprises around 30 specialists who work with an extensive global network of project partners. Projects are being registered with the highest quality standards. With over 20 years’ experience in project development, myclimate has earned a reputation as a reliable, well-connected project partner for high-quality climate protection projects, putting it in an ideal position to advance the best project ideas.
In simple terms, the project development and execution process breaks down into four steps:
At the outset of every new climate protection project is the project idea. There are many different ways this can come about. Often, we hear directly from organisations who have project ideas and need our support, or a new idea might emerge from one of our long-term partnerships.
Here are some typical scenarios for project acquisition:
Project idea note
Depending on the status of the project, there is often an initial idea that we develop further with the project partner, or in some cases there might already be specific project plans. The extent of this first project phase can vary greatly as we collaborate with a wide variety of partners – from experienced international NGOs who can take on numerous functions themselves and have the structures to do so, to small social enterprises which have local networks and knowledge but little experience in climate protection project development or certification, and require greater assistance.
And as well as projects that we develop with partners on the ground, there are also projects with experienced third parties. They manage the project themselves and myclimate purchases the climate protection certificates directly from them following thorough due diligence.
For new types of technology and more complex project types we will carry out a preliminary feasibility study. This determines whether the project is actually viable in the form described and whether it offers genuine added value for the climate, the environment and people, and how well this can be quantified.
At the end of the feasibility study is a project idea note (PIN) which records and defines all the framework conditions for the planned project.
Unfortunately, most project ideas are rejected at the feasibility phase, often because they don’t meet the minimum requirements. Typical reasons for the failure of project ideas include:
Even if the initial project idea often seems simple, it takes a lot of experience to develop it into a functional concept for a sustainable climate protection project which achieves measurable, certifiable emissions reductions, contributes to development on the ground, and can be readily financed.
In this highly complex process, the long-term expertise of the myclimate experts is especially important in drawing up a high-quality short list of feasible project ideas.
Would you like to submit a project idea?
Submit an idea for an international climate protection project
Submit an idea for a climate protection project in Switzerland, Germany, Austria or Liechtenstein
Submit an idea for an international climate protection project under the Paris Agreement (compliance carbon market)
Once the feasibility of the project has been determined it goes into the planning phase, starting with a thorough internal due diligence process.
As a climate protection foundation we place enormous importance on high-quality climate protection projects with high impact, both in emissions reductions and contribution toward sustainable development (SDGs), so it’s vital that we closely scrutinise every project.
SDGs: contribution to sustainable development in addition to carbon reduction:
A high-quality climate protection project with good project design is structured to ensure that as well as reducing emissions, it also contributes to many of the Sustainable Development Goals. Examples could include creating jobs, having a positive influence on the health of the local population through the use of cleaner technologies, involving local women’s groups, education campaigns, potential for building long-term structures through project activities which provide a source of income for the local population, promoting biodiversity, etc. Standards such as the Gold Standard focus extensively on measurable contribution to the promotion of Sustainable Development Goals through project activities. The extent to which projects contribute to the Sustainable Development Goals is monitored and verified over the course of the project (see: How does myclimate measure contributions to the SDGs?). myclimate’s communication of this project impact is always current, quantitative and (where reliable measurements are available) transparent, and can be viewed on the project website.
Of course, it’s also in our own interests to carry out due diligence checks. Only well-designed projects with the right technologies in the right places and with reliable, experienced partners on the ground will succeed in the long term. And finally, the financing concept of a climate protection project only functions if it is proven to achieve the desired emissions reductions over the entire duration. So for us, this check is an essential step in the project development, because it allows us to decide whether or not we want to support a project in the long term.
Due diligence and assessment
In its due diligence process, myclimate assesses the potential risks of the project to determine where difficulties might lie, and how serious they are. This includes a detailed review of the project, in particular the following components:
Finally, we examine further criteria in detail, such as the expected climate impact of the project, the accuracy (or source of uncertainty) of calculations for emissions reductions, the availability of long-term incentives for project success, as well as social and environmental integrity.
Social integrity and/or participation:
For myclimate, the focus is on so-called “community projects”. These projects emphasise the involvement of participants, increase the impact on communities and thus enable the greatest possible influence. In project planning, participants are incorporated into decision-making through Local Stakeholder Consultations (LCS). They have an opportunity to help shape the projects to maximise the positive local impact. For landuse and forestry projects (LUF), this is analogous to the Free Prior and Informed Consent process. This process means that the participants have a say in the design of the project so it genuinely reflects the specific requirements and conditions in the location. In addition, the project participants take part in capacity building and training sessions.
Environmental integrity and safeguarding principles:
All projects have to meet a catalogue of safeguarding principles to exclude potential negative effects from the project in such areas as human rights, protection of minorities, protection of landscapes, protection of cultural values, environmental protection (environmental integrity), etc. This criterion may seem self-evident at first glance, but only the standard’s extensive catalogue of integrity criteria ensures that there are no undesirable side effects from the project.
Obviously, a due diligence check always includes a site visit so we can get a clear idea of the situation and identify possible risks.
Another key issue examined in due diligence is additionality. Only projects that would not be implemented without additional funds for climate protection can be supported with climate protection financing. This means that projects that are already profitable or required under law are excluded from financing.
Additionality:
Through an arduous process, all projects must prove that they are additional to the NDCs of the project countries. That means they use new, innovative project technologies that are additional to the measures already planned, or they support existing technologies but would be impossible without the financing through CO₂ certificates. A specific example from the range of myclimate stove projects: the production of a stove, for example, might be EUR 15–20. The local project partner does not give it away for free, but sells it at a heavily subsidised price, for example for 1-5 euros. This is a conscious decision based on the experience and knowledge of the project partner. Households would not have enough money to pay the full price at once. The project is also additional because the stoves can be subsidised thanks to the money from the CO₂ certificates, and would otherwise be unaffordable for people. As well as projects with subsidy models, there are also projects that introduce pay-as-you-go or the savings group model.
Only when this due diligence process is reviewed by multiple reviewers in our project team do we decide for or against a project.
How long does a project take?
- A project always has a beginning and an end.
- A certified climate protection project can last five, ten or 15 years.
- The contracts are usually for five years with an option to extend if the project goes well.
- Important: Carbon finance is always one of several sources of funding for a project.
- In the case of community-based projects, which make up a large proportion of the projects in myclimate's portfolio, this is usually the most important.
When does a project end? See box "What happens to the projects afterwards?"
Contracts
If myclimate decides to pursue a project, this is the point when we start negotiations with the project partner, sitting down with them to set contractual objectives and agreements.
In the implementation phase we develop the definitive project design (project design document, or PDD) according to the requirements of the certification standard under which the project is to be developed.
Project description
This project design document describes in great detail how a project is structured, what the situation would be without the project (baseline scenario), and how this is measured and parameterised. Then we establish the measures by which project progress will be documented and how the actual emissions reduction achieved is to be tracked, and in this way quantified, through recording of these parameters.
Validation
The PDD is reviewed by external auditors. At the project location, the auditor determines whether the project plan and the description of the baseline are in line with actual conditions and whether the project complies with the certification standards. This expert will also examine the extent to which the planned project and the documentation of project progress are feasible, whether the project complies with other requirements of the standard, and whether the calculation principle for emissions reduction is in line with the principle of conservativity.
Registration
Once the project has passed this validation step, the climate protection project is officially registered with the relevant standard. Here, myclimate only works with the most credible standards (see What do companies need to know when selecting effective climate protection projects?)
Once a climate protection project has undergone all these steps, the real work is just getting started – because we are committed to making the project a success in the long term. That means, for example, not just planting trees or distributing improved stoves, but also ensuring that the trees grow for many years and the stoves are used for longer.
Monitoring and reporting
The most important tool for reviewing long-term project progress is monitoring. All the parameters defined in the project design for determining emissions reduction according to the requirements of the standard are gathered anew each year. This data (monitoring parameters) and the resulting calculation of emissions reduction achieved are recorded by myclimate and the project partners in a monitoring report (reporting).
Verification and certification
The annual reports are then verified by independent, recognised audit organisations like SGS or TÜV. For land use and forestry projects, this verification occurs every five years. Only when the monitoring reports are verified externally are they also reviewed by the standard. The standard then issues the CO₂ reduction certificates (certification) in the amount of the emissions reduction determined by monitoring reports. As a result, myclimate ensures that the impact on the environment, society and the economy are sustainable and that the climate protection is effective.
As well as monitoring the project continuously, we regularly update the initial due diligence process to keep track of changes in the situation on the ground and where necessary respond to them. Changes can happen any time – there might be a shift in the structures of the partner organisation or the political situation in the project country, or the project might not be progressing as hoped – this is why regular updates are important. In the event of changes we assess how we should respond, the measures required to advance with the project, and in extreme cases whether we need to bring the project to a close.
What happens to the projects "afterwards"?
The aim is usually for a project to be able to exist independently of CO2 certificates in the long term. However, there are basically three options:
- The project has been completed and the measure can be continued on a self-sustaining basis (sustainable business model).
- The project partner continues the project with other sources of funding, e.g. grants or with the help of other project developers.
- The project itself has been completed and has achieved its objectives.
If the monitoring of ongoing project operations yields positive results, the emissions reduction certificates are generated in the registry of the official standard in question (for example, Gold Standard or Plan Vivo). These CO₂ certificates are then transferred to the account (registry) of myclimate. If our customers decide to support our climate protection projects with financing through emissions certificates, these certificates are retired in the myclimate registry. This ensures that each certificate is only used once. The money that myclimate collects for this goes to the project fund illustrated in Fig. 1, from which myclimate can pay out climate protection contributions to the projects it supports.
The project partners only receive payment in the amount of the emissions reductions that the project has achieved in the previous year (see: Can I be sure that my money really reduces the promised amount of CO2?).
This ensures that project partners on the ground are motivated to ensure long-term project success. In the end, this has a positive effect on the climate as well as the sustainable development of the project. At the same time it prevents large payments to project partners at the beginning of the project, which could disincentivise long-term implementation.
For some projects, financing over the entire term of the project is not always suitable – for example, the financing requirement at the beginning of the project might be higher than ongoing costs in the ensuing years. If, for example, implementation requires water filter systems at the beginning of the project – something that project partners are often unable to finance on their own upfront – myclimate will facilitate upfront payments. In these cases, myclimate carefully weighs up the risks and the amount of the upfront payment to strike the right balance between payments required for implementation and long-term incentives for emissions reduction.
As a charitable foundation, myclimate ensures that at least 80 per cent of the climate protection contributions paid for project development and implementation are used (see: Use of funds). This 80 per cent goes to the myclimate project fund that is used for project development and implementation. The remainder – a maximum of 20 per cent – is used to cover operational and internal costs (see graphic).
However, in recent years internal costs have been lower, which means we are able to ensure even greater climate protection. This is because, as a foundation, we invest surplus gains directly into meaningful and effective projects.
Overall, the project review process is highly extensive and time-consuming, but absolutely necessary. Closely scrutinised project ideas that comply with myclimate standards are the basis for successful climate protection financing.
