Community Benefits Frameworks: Shortcomings and Opportunities for Greater Impact
Community benefits frameworks have a long history in the United States, helping to secure tangible benefits for local communities from proposed development projects while safeguarding against potential burdens.
These frameworks have been used in both public and private construction for decades. Many of the earliest successful agreements were applied to large-scale urban infrastructure development projects, such as in 2001 to build the Los Angeles Staples Center. Today, community benefits frameworks are being applied to new sectors, including clean energy and transportation projects (from offshore wind to electric buses), as well as new geographies, with many renewable projects taking shape in more rural parts of the U.S.
As the deployment of clean energy projects accelerates, new projects often face local opposition which can lead to project delays and even cancellation. While not a silver bullet, community benefits frameworks can help increase public acceptance of and defuse local opposition to clean energy projects, increase a project’s chance of gaining permitting approval, cultivate trust between project developers and communities, and generate benefits for host communities.
To better understand how benefits-sharing agreements and plans can work for host communities, the World Resources Institute and Data for Progress developed a database of community benefits frameworks with detailed information on 72 publicly available benefits-sharing agreements and plans across the U.S.
Here, we give an overview of the frameworks, outline what is included in the database and offer key findings for improving these frameworks based on an analysis of the benefits-sharing agreements it contains.
What Are Community Benefits Frameworks?Community benefits framework is an umbrella term for a wide variety of benefits-sharing agreements and plans that have been used across the U.S. (The methodology document about this database provides further details on how they were found, analyzed and categorized in the database.)
Examples of Community Benefits FrameworksType of FrameworkAcronymDescriptionCommunity Benefits AgreementCBACBAs are legally binding agreements between a developer or company and local community organizations. The agreements direct benefits from a project to local communities. The benefits are negotiated based on a community’s priorities.Host Community AgreementHCAHCAs are legally binding agreements between a developer and the municipality where a project will be sited. In some states and municipalities, HCAs are being incentivized or even required for renewable energy infrastructure projects.Project Labor AgreementPLAPLAs are pre-hire collective bargaining agreements between labor unions and developers or contractors. They set the terms and conditions of employment for specific projects, specifying wages, benefits and working conditions.Good Neighbor AgreementGNAGNAs are established on a voluntary basis and are legally binding agreements between a business or developer and a neighboring community. The parties can address specific impacts the business will have on the community and come to a mutual understanding that benefits all parties.Community Benefits PlansCBPCBPs are non-legally binding roadmaps reflecting how a developer is planning on engaging with communities across project stages. Although they often don’t include enforcement mechanisms, they can help pave the way for legally binding agreements.Source: Saha et al., 2024 and Gross, 2009
While agreements such as CBAs, HCAs and PLAs are typically voluntary, they have also been required by city and state law. Some states, including California, have enacted legislation requiring "legally binding and enforceable agreements" between the developer and community-based organizations for renewable energy and other projects. Detroit has a community benefits ordinance that requires developers to enter into a CBA with a neighborhood advisory council which is formed to represent local communities where projects will be sited. Community benefit plans are also established on a voluntary basis, although in some cases they are required. For instance, under the Biden administration, CBPs had to be submitted as part of developers’ applications to receive federal funding for grants and loans under the Bipartisan Infrastructure Law or the Inflation Reduction Act.
What’s In the Database of Community Benefits Frameworks?The Community Benefits Framework Database includes 72 publicly available agreements and plans signed between 2000 and 2023, but it is not comprehensive of all agreements and plans ever negotiated in the U.S.
Inside the Community Benefits Frameworks DatabaseQuestionAnswerWhat type of information is included for each framework?Information on framework type, sector, location, parties to the agreement or plan, the year it was signed, the duration of the agreement or plan, the categories of benefits provided, the mechanisms for monitoring, reporting and enforcement, and whether the agreement includes conflict resolution mechanisms.What sectors are covered?Energy, education, entertainment, mining, construction, solar power, transmission and others. Where were frameworks negotiated?All across the U.S., with California and New York together accounting for more than half of agreements and plans included in the database.When were the agreements signed?Between 2000 and 2023.Which category of benefits is most common?Education and financial benefits are the most common across frameworks, followed by employment and workforce-related benefits.What is the most common type of community benefits framework in the database?CBAs account for about 44% of the database; HCAs make up 25%; and almost 10% are CBPs. How many agreements include language on monitoring and reporting, enforcement, and conflict resolution?79% of frameworks include language on reporting and monitoring mechanisms. Only 48% include text on enforcement mechanisms.Key Shortcomings Observed in Benefit-Sharing AgreementsThe ultimate success of community benefits frameworks hinges on several factors. Although this article does not discuss all these factors, many have been explored elsewhere. With very few community benefit plans in the database, the following analysis applies to legally-binding agreements, such as CBAs, GNAs, HCAs and others, which make up about 90% of frameworks included in the database.
Here, we focus specifically on shortcomings we observed, especially in terms of how agreements are written:
1) Ambiguous, Aspirational Goals with Few Implementation DetailsThe level of detail in the reviewed agreements varied widely.
Some agreements are less detailed and only provide general promises, limiting opportunities for communities to seek recompense if benefits are not delivered. The agreements tend to lack clear metrics, timelines or enforcement mechanisms that give weight to provisions. For instance, an agreement that includes a benefits provision made by a developer to “strive to create local jobs” lacks a clear pathway to enact and enforce it.
Stronger agreements spell out specific benchmarks, timelines and responsibilities for implementing agreed-upon benefits. Such agreements typically include clear commitments with binding language and concrete actions. For example, a developer "shall provide 100 affordable housing units" within a specific timeframe, or a developer "will hire 30% of workers locally."
One agreement, negotiated for a mixed-use building development in Washington state, obligates developers to begin construction on 200 units of affordable housing within four years. This CBA specifies not only the number of affordable housing units, but also articulates how affordable housing is defined, and includes specific requirements to ensure the units are large enough for families.
Examples of Common Language Patterns Across Strong and Weak FrameworksStronger Agreements Weaker Agreements Characteristic Example Characteristic Example Firm, binding language around developer’s responsibilities “Will provide 1,000 new reusable bottles...” Vague, subjective language around developer’s responsibilities “Make commercially reasonable efforts to construct...”; “should secure adequate funding for...”, or “Will make good faith efforts to provide a sufficient number of reusable bottles...” Specificity of benefit “Will hire 50% of new workers from [local municipality].” Goals or objectives instead of concrete benefit “Endeavor to hire 50% of new workers from the surrounding area” or “attempt to reduce...”Beyond what language is included, there are also patterns in which language is absent from weaker agreements. For instance, enforceable language, with terms like “binding,” “penalty,” and “independent monitoring” are rare. Similarly, clear and measurable targets, with phrases like “specific outcomes,” “measurable benchmarks,” and “timelines” are often absent or underdeveloped.
Key Takeaway
Clear, measurable targets and timelines can help ensure that commitments are actionable and enforceable, and developers can be held accountable. In particular, it is important to include specific language about benefits, who is responsible for delivering them and by when, as well as important details that may arise in implementing benefits.
2) Few Details on Negotiation Process and How Benefits Are ChosenThe agreements included in the database, for the most part, provide no information about the negotiation process, how the benefits were chosen, the specific criteria used to determine the benefits, who will qualify for the benefits and — perhaps more importantly — who will not. Including this information can enhance transparency, build community and developer trust and confidence in the agreement, and help with effective implementation of the agreement.
From the agreements themselves, it is not clear how benefits were chosen and which party influenced the different parts of that process. Most agreements use the term “benefits” as a catch-all phrase. Often, they are activities the developer undertakes to address a project’s negative impacts, or benefits that naturally arise from the project, such as new jobs or tax revenue. At times, compliance with existing laws, such as adherence to the Americans with Disabilities Act or to “local laws and regulations,” is also framed as a benefit, raising questions about whether the developer carried out community engagement in good faith and to what extent community groups were part of the decision making process.
Robust benefits-sharing agreements should include additional tangible benefits requested by local communities that enhance their long-term prosperity. For example, Chevron and the city of Richmond, California entered into a community investment agreement over Chevron’s plan to modernize its Richmond refinery. This agreement details a three-month timeline of the city and developer’s community engagement efforts and the process — two local community workshops organized by the developer and public hearings held by the city’s planning commission — to identify benefits prioritized by the local community.
To boost groups’ capacity to negotiate for specific benefits, some developers have set aside funds for community groups to cover expenses during the agreement negotiation. The developer of the New Bedford HCA , for example, committed to reimbursing the city of New Bedford, Mass., up to $90,000 for costs incurred from negotiating the agreement, among other things. Another example from Philadelphia is the SugarHouse Casino CBA, in which the developer agreed to pay up to $35,000 in legal fees incurred by the authorized community signatories. Such funds can help level the playing field between the two groups by helping communities hire legal help or gain access to third-party expertise.
Although such dedicated funds can be helpful, it is important that agreements include explicit language allowing communities the independence to choose their own legal representation and third-party experts.
Key Takeaway
A well-documented process that includes details on the negotiation and community engagement process as well as how the proposed benefits were arrived at can help with accountability, public trust and effective implementation. Having sufficient time and adequate resources can help community members and organizations represent their interests and secure tangible benefits during the negotiation process. Leveraging data and tools to identify and prioritize benefits most useful to a community — something technical or legal experts can help with — is important to ensure positive outcomes.
3) Differences in the Quality of Monitoring and Reporting MechanismsAlthough about 78% of agreements featured in the database include monitoring and reporting provisions, there are differences when it comes to the quality of these mechanisms.
Monitoring and reporting responsibilities are often assigned to the developers. However, agreements typically provide little to no practical details on how to monitor, measure or report progress on implementing the agreement. In most cases, developers are only required to create annual progress reports on their compliance efforts. The agreements often lack a clear roadmap specifying what exact metrics should be reported and monitored, how frequently, and by what methods. As a result, communities struggle to independently track a plan’s implementation and hold developers accountable when necessary.
Some agreements with strong monitoring and reporting elements require progress to be monitored and reported on by independent third parties, or through oversight committees that include community representatives. For instance, one agreement between commercial fishing associations and telecommunications companies in San Luis Obispo, California requires the companies to host an independent observer on their cable installation vessels equipped with monitoring tools and technologies to verify the companies’ compliance with the agreement. The Metropolitan St. Louis Sewer District CBA in Missouri includes a detailed provision for the formation of an oversight committee, which meets quarterly with an independent monitoring party to report on progress and verify compliance with the CBA terms.
Key Takeaway
Creating committees that include community representation or hiring independent monitoring parties to evaluate progress on commitments are examples of strong monitoring and reporting mechanisms. These approaches can allow for independent oversight, measuring progress toward commitments as a first critical step towards enabling communities to hold developers accountable.
4) Lack of Clear Enforcement MechanismsEnforcement mechanisms refer to clear processes for holding developers accountable and penalizing noncompliance with a benefits-sharing agreement. Even though most agreements in the database are legally binding and include language on monitoring and reporting mechanisms, only about half of them include language on enforcement mechanisms. The reason for this absence is unclear.
Some agreements are vague regarding what enforcement will look like, simply including provisions to “enforce findings” with few specifics. Other agreements include provisions about parties to the agreement meeting to confer and determine mutually agreeable steps to get a developer back on track.
In contrast, stronger agreements tend to include provisions about the preparation of a corrective action plan to review why a specified benefit has not been provided or a certain goal not achieved. They typically also outline how specific remedial actions will be negotiated to achieve compliance.
In some cases, monetary enforcement provisions are included, such as the accruing of interest in the case of late payments of host benefit fees or arbitration awards. For instance, the Dearborn Street CBA in Seattle, Washington, establishes that the developer will contribute $50,000 to the city’s housing funds for each housing unit that is not completed or commenced after a given timeframe.
Key Takeaway
Well-designed enforcement mechanisms like late fees, monetary penalties or other consequences for default can serve to incentivize developers to abide by agreements and result in material consequences from failure to do so. Without adequate enforcement, community benefits frameworks can be undermined, and developers may fail to meet their obligations once the initial political or public pressure fades.
5) Lack of Provisions for Agreement Amendment and RenewalAround 84% of agreements in the database include information on how long the agreement will last. Only a few agreements — about 14% — include provisions that detail whether an agreement can be amended or renewed. Even fewer include provisions outlining what happens to promised benefits if a project changes ownership.
Provisions that provide opportunities for renegotiation, renewal or responsibility transfer clauses can help ensure the long-term sustainability of the benefits. Without such provisions, the benefits of an agreement may not last beyond a project’s lifetime or could be threatened if the project changes ownership. For instance, agreements may include affordable housing or community center commitments but may lack provisions that ensure units stay affordable once a development is complete.
One good example of these practices is the case of the Stillwater Mining Company GNA, in which the continued operation of the Montana mine is affixed to the GNA regardless of the mine’s ownership. This ensures the GNA will be enforceable as long as the mine is operational. It also provides a good practice example of an agreement that was amended several times to keep pace with evolving circumstances.
Other agreements included in the database, such as the SunQuest Industrial CBA in Los Angeles, did not include such ownership provisions. In SunQuest Industrial’s case, the developer’s bankruptcy eventually led to the sale of the project land to a new developer who no longer wanted to honor the CBA. Some have pointed out that, for these reasons, CBAs should include language that ties the agreement to the land or property asset itself.
Key Takeaway
Agreements that include language on a procedure to renew, amend, or transfer responsibility of the agreement — in the case of project closure or ownership transfer — can help guarantee that an agreement’s provisions are sustainable, and that the community will receive the benefits that a developer agreed to provide.
Moving Forward: Scaling and Improving Community Benefits FrameworksDespite the Trump administration halting many federal investments in clean energy and the associated advancement of social, economic and environmental justice, the broader momentum for clean energy infrastructure will continue with or without the federal government’s support.
Community benefits frameworks will remain an important tool to ensure that all communities, especially Black, Indigenous, low-income, rural and other communities of color, can meaningfully engage in the development of clean energy projects and derive benefits from them. This community benefits frameworks database aims to showcase the variety of features used across frameworks to assist communities, developers and researchers in advancing projects that benefit communities.
Further research and analysis are needed on the outcomes and effectiveness of community benefits frameworks to yield community benefits. Such research can help inform future actions by policymakers, project developers and community organizations to ensure widespread positive community impacts from clean energy projects.
neighborhood-construction-community-benefits-frameworks.jpg Climate United States U.S. Climate Clean Energy transportation industry U.S. Community Benefits Frameworks Type Technical Perspective Exclude From Blog Feed? 0 Projects Authors Danielle Riedl Willy Carlsen Evana Said Devashree Saha Grace Adcox Catherine FraserUnloading Coal Exposure: Where Are Banks Now, and What’s Next?
Banks have long funneled billions into coal, sustaining the world's biggest source of energy-related emissions well past the point when investors were aware of the impacts.
While some banks are scaling back to manage risks and tap into clean energy opportunities, progress is slow. In 2023, for every $1 of financing for wind, solar and grids, banks facilitated $1.12 into coal and other fossil fuels. In 2022, that figure stood at $1.35. The direction is right, but the pace is deficient.
Despite pledges to stop funding new coal projects, many banks, especially in Asia, where coal dependence runs deep, remain entrenched. And the challenge extends beyond power plants; banks are deeply embedded in the entire coal value chain, from mining and manufacturing to transport and auxiliary services. Cutting these ties demands faster, more decisive action — but their integration across business lines, financial products, and operations adds complexity.
To assist banks in navigating these challenges, a recent working paper from WRI assesses where banks are now and what they need to do to comprehensively unwind their coal investment.
Where Do Banks Stand on Coal Now?The coal sector is global and complex. Mined from the ground, coal is not just burned for power ("thermal coal") but is also used to create steel ("metallurgical coal"). And the sector is massive: Today more than a third of electricity supply originates with coal.
Banks can be involved in coal in three different ways:
- Sometimes a financier has a very clear-cut connection to expanding or sustaining coal, as in project finance to build new coal plants or equity in a coal company. They may directly invest in coal, holding debt or equity in projects or companies.
- They can invest in companies which are reliant on coal but do not produce or burn it directly, such as companies that indirectly use coal in their energy mix.
- Financial institutions may provide banking, capital markets underwriting, dealmaking or other services to clients involved in coal. These activities support the coal sector, too.
In addition to choosing whether they invest in or provide these services, banks may choose to ask those they work with to progressively transition away from coal. Investors have an interest in reducing the risk and enhancing the competitiveness of their investments, and they may engage with companies in ways they believe will enhance their performance — for example, by offering incentives to encourage them to avoid risks associated with coal. Increasingly, investors use the lens of "transition finance" to talk about finance or guidance dedicated to encouraging clients, with words or cash, to transition their business away from coal. This, too, is a form of coal exposure — but one with more nuanced implications.
Though some banks still need to catch up, the new standard is for banks to have robust policies to stop investing in new coal power on a definite timeline. Now leading banks are pushing beyond this, thinking more comprehensively about how to fully extricate their support for the coal economy and how to finance its transition.
Quitting new coal power is now standardAround 70% of the world's top 100 commercial banks have made the commitment to exit coal. In practice, most banks begin quitting coal by stopping loans for new coal mines and power plants.
WRI research found that most of the world's top banks by size have committed to a coal power phaseout timeline in line with or more aggressive than the International Energy Agency's (IEA) 2040 target date for achieving net zero by 2050. Multilateral development banks (MDBs) are also setting principles to exclude coal activities from new operations.
Despite some differences, the trend is clear: Direct financing for new coal projects is drying up in most parts of the world. In 2023, most countries saw no new coal power plants. Outside of China, construction began on 3.7 GW of coal capacity, significantly lower than the 16 GW annual average from 2015 to 2022. The next step will be to move from excluding coal to divesting and transitioning existing investments.
Some banks are picking up momentumMany banks are moving into a more complex realm now, by steering clear of coal processing, heating, and industrial projects reliant on coal. About 10% of top commercial banks include financing for coal-related infrastructure in their coal exclusion and/or divestment policies. Strengthening oversight of coal-linked clients is also growing, with around 20% of major banks setting phaseout deadlines and tracking financed emissions to reduce coal exposure.
Few are moving toward the frontlineFew banks are proactively financing the low-carbon transition of existing coal power projects, leaving MDBs to lead efforts to retire coal plants early. private finance needs to play a more active role in financing coal retirement and transition. Despite new retirement plans and phaseout commitments, last year saw the lowest coal capacity retirement in over a decade. A key challenge is developing financial structures that cover transition costs while ensuring reasonable returns for private investors. But banks have the expertise and leverage to help.
Some banks are supporting the broader transition through the management of their coal and coal-related clients. With the rise of guidance on credible transition plans, banks now have more tools to assess their clients' pathways. Some banks, such as HSBC and Mizuho, have committed to helping their coal clients transition — but much more is needed to embed this support into standard practices and to ensure the credibility of these plans.
Meanwhile, those continuing coal financing have largely gone unnoticed, except by leading banks, watchful observers and analysts. Some banks continue to indirectly finance coal through subsidiaries, joint ventures, intermediaries and passive investments.
Facilitation of coal financing can also go off-the-book through bond underwriting and asset management, allowing coal financing to continue without proper oversight. Only a few banks have incorporated coal power underwriting into their coal exit policies and more accountable strategies are needed to address these risks.
Above all, ambition and innovation are needed to close action gaps and advance the frontlines.
Here to Help: Where Banks Should Start and How to ProgressNavigating the race away from coal requires careful planning, strategic execution, and continuous adaptation. Here's a three-step to guide the process:
1) Know where you areThis includes both understanding the extent of a bank's business entanglement in the coal value chain and evaluating the foundational elements needed for a successful phase-out — from top-level commitment, building internal capacity for implementation and establishing external channels for support, to communication and international cooperation. Checklists are a handy tool for banks to quickly and comprehensively scan gaps and resources.
2) Devise your prioritiesWhile mapping highlights broad trends of banks' coal phase-out practice, it is crucial for banks to improve and update their commitment and approach based on specific contexts and realities. A prioritization framework that guides banks in systematically assessing regulatory, market, technological and societal factors is helpful. Asking a series of recommended questions on each factor, such as how coal exit aligns with or contributes to a bank's overall strategy — whether in climate, sustainability, sectoral or country-specific approaches — can help identify the most urgent, feasible and impactful actions a bank should prioritize.
3) Stay measurableSetting clear, measurable metrics ensures actions are tangible and that progress can be reviewed effectively. We offer a metric-setting approach with corresponding examples (covering project, company and portfolio levels) to help banks set thresholds for their coal exit strategies. To drive progress in client transition, for example, our approach outlines a company-level method for assessing coal involvement and dependence using both relative and absolute values. These metrics evaluate involvement in new coal projects, economic and fuel reliance on coal, and emissions. They are applicable to coal producers, users and facilitators.
The three-step process — plan/review, decide, implement — is an ongoing, dynamic effort. Priorities should evolve, and metrics should gradually tighten. The tools provided are intended to standardize actions, ensuring they are both comparable and easily understood by a broader audience.
What's Next for Banks?Now that the complexities of coal financing are clearer and frameworks for action are in place, it's time to tackle some challenges beyond individual banks.
Quick wins for Asian banksAsian banks play a crucial role in driving the transition away from coal, due to their strong presence in global finance and history of funding coal-fired power projects.
While coal-investing nations like China, Japan and South Korea have pledged to halt overseas coal investments, the extent to which banks are translating these commitments into action remains uncertain. For instance, despite managing some of the world's largest assets, many Chinese banks have yet to publicly articulate clear, coal-specific financing policies compared to their global peers.
WRI's Net Zero Tracker found that China's Industrial and Commercial Bank of China, China Construction Bank and Bank of China were among the least ambitious and vocal when it came to phasing out coal power in their portfolios. To bridge this gap, Asian banks can take immediate steps: systematically assessing their coal exposure, updating financing strategies to align with transition goals and clearly communicating their coal exit plans.
The tough reality of existing coalTackling existing coal assets requires ambition and innovation, but it also presents opportunities. Banks' deep ties to coal projects and coal-dependent clients can become a powerful asset in driving the transition. Besides cutting exposure, banks can take an active role in financing the early retirement, replacement or repurposing of coal power plants. This is especially relevant not just for utilities but also for industries like steel and mineral processing that rely on their own captive coal plants.
Learn more about how legal protections offered to foreign investors in Asian coal plants could stymy efforts to transition off coal — and how new efforts can bring together stakeholders to overcome this challenge.
However, ensuring a credible transition requires more than intent — it demands newly engineered financing strategies, stronger oversight, and standardized transition metrics to track progress. Banks can step up by working closely with clients to understand their transition needs, designing financial products that de-risk transition and clean energy investments, and collaborating with regulators to align phaseout plans with policy shifts.
Scaling change through financial collaborationOffloading coal assets alone doesn't guarantee a real-world phaseout. After all, another bank may step in to finance them. Moreover, banks have a clear role to play in ramping up clean energy, without which the energy transition can't occur. To make coal exit actions truly effective, banks must work together, aligning policies across financial institutions to create a level playing field, setting industry-wide standards that reduce backtracking or greenwashing, and supporting clean energy.
Stronger collaboration within the financial sector can amplify the positive impact of coal phaseout policies. When banks apply stricter coal financing criteria, not only to their own portfolios but also to co-financiers and financial intermediaries, they help prevent loopholes and reinforce broader market shifts.
virginia-coal-plant.jpg Finance Finance climate finance Energy Type Technical Perspective Exclude From Blog Feed? 0 Projects Authors Ye Wang Yan WangHow Philanthropy Can Boost Adaptation Finance in Developing Countries
The deadly destruction around the globe from increased floods, scorching temperatures and other extreme weather events exacerbated by climate change is setting back progress on economic development in developing nations.
These events contribute to a vicious cycle of deepening poverty and worsening vulnerability to climate change. This means that investing in adaptation and resilience — helping nations and communities not just prepare for and recover from climate impacts but have the infrastructure in place to stand up to future climate-related challenges — is crucial to boosting their development and well-being. Investing more in adaptation also generates a stream of fiscal and economic savings by avoiding future losses.
Yet investments in developing countries seriously lag behind growing adaptation needs. Among developing countries, financing for adaptation and resilience remains far below the $215 billion to $387 billion needed annually by 2030. In Africa, for example, increased spending on resilience is critical for food security, improving livelihoods, protecting supply chains and avoiding health crises from heat and drought. Also, until recently, global financing for loss and damage has received little attention despite major climate related disasters impacting communities.
The Role Foundations Play in Climate ActionThe 2024 report of the Independent High Level Expert Group on Climate Finance (IHLEG) stressed the urgency of bridging the large financing gaps that impede spending on both mitigation actions and building resilience to climate change. Beyond private finance, it particularly emphasized the need to mobilize funding that won’t contribute to a nation’s debt, including grant financing or financing at well-below market rates. Given large-scale reductions in early 2025 in the United States and much of Europe, foreseeable levels of Official Development Assistance will help developing countries, but will not meet their growing needs. Alternative sources of concessional and grant financing will be needed to help fill the growing finance gap.
To help close financing gaps, philanthropy can and should step up. In 2023, philanthropic giving for climate change is estimated to be between $9.9 billion and $16.4 billion annually, of which only about $600 million (3.6% to 6.1% of the total) is for adaptation, according to the ClimateWorks Foundation. Philanthropic giving for climate change is only 1.1% to 1.8% of total giving, which was an estimated $885 billion in 2023 — suggesting ample scope for scaling up.
Foundations’ climate-related support to developing countries has been increasing, albeit from a low base. Their funding for Africa, for example, tripled over the last five years, reaching $112 million in 2022. Still, the overall level, at 6% of total foundation funding, is not enough. Funding has been directed mainly to climate mitigation, primarily to sustainable energy but also to cross-sectoral approaches such as low-carbon cities, methane carbon dioxide removal and climate-related capacity-building. Foundations have not publicly tracked their funding for climate adaptation but a new survey shows that foundations are paying more attention to adaptation investments. This shift is overdue.
In late 2023 at the annual United Nations climate summit (COP28), a coalition of 21 leading philanthropy organizations, including the Rockefeller Foundation, Aga Khan Development Network, Temasek Trust and the Shockwave Foundation, began calling for greater action by governments and private stakeholders toward transformational change on climate adaptation. The Adaptation and Resilience Funders Collaborative now includes 60 foundations working together to learn, coordinate, and invest in climate adaptation and resilience. Separately, the World Economic Forum’s Giving to Amplify Earth Action (GAEA) is building public and private partnerships in order to multiply financial contributions for adaptation and nature.
However, considering the rate at which the adaptation finance gap is growing, more still needs to be done to boost the scale of philanthropic resilience financing. Even if foundations increased their grant-making for climate change in Africa nine times over — by 900% — the total would still only reach $1 billion. While a significant amount, that would still be only 2% of the estimated annual adaptation finance needs in Africa up to 2030.
Key questions to ask are: “How can philanthropy dramatically increase its giving in new and different ways?” and “What are ways in which its contributions can better leverage the strengths of other development partners?” Several of the ideas presented below are tied to efforts by multilateral development banks (MDBs) to lend ever more with their limited capital. Leveraging MDB financing presents mutually beneficial results.
5 Ways Philanthropy Can Scale Climate FinancingThere are many opportunities for philanthropy to increase their contributions to adaptation finance, from giving at the local level for specific community-based adaptation projects to more broad-based giving for sectoral, national or even global approaches. Common areas of foundation support for climate change include supporting financing options and access to climate finance, helping integrate adaptation planning into national and sectoral development plans, and providing finance at the community level for local investments, disaster risk management and “build back better” programs. Many foundations already have long-standing close ties and partnerships across Africa and other developing regions and countries, creating vital opportunities for direct giving. In Africa, for example, important country-specific needs include improved information for project planning and supporting governments to understand their climate risks/impacts and prioritize and sequence the most cost-effective interventions.
But foundations need new ideas for ways to invest in adaptation if they are to increase their giving. Here are five avenues for philanthropy to work proactively and innovatively with developing country governments and donors to scale up concessional climate financing. These proposals represent opportunities for expanding the quantity and improving the quality of MDB adaptation financing by crowding in, ideally, billions of dollars from large foundations seeking to achieve significantly larger impacts at a time when developing countries are facing increasing financial stress.
1) Co-Finance Projects with Multilateral Development BanksPhilanthropic organizations and each interested MDB can co-finance projects on climate adaptation, nature restoration and resilience-building, especially in low-income and climate vulnerable countries. Historically, philanthropists have contributed to numerous trust funds that MDBs manage for specific purposes, such as policy research and capacity-building. For example, at the World Bank, private non-profits are important contributors to its financial intermediary funds where partnerships combine resources to support global initiatives. But these funds have not been designed to co-finance large MDB projects with greater impacts than foundations could achieve on their own. By pooling philanthropic capital, such facilities could provide greater financing over a longer period, which many adaptation investments require.
Advocacy for this proposal is not new: It was proposed by the Center for Global Development as one argument for a large replenishment for the African Development Fund. By supporting MDBs’ country programs and projects through project-level co-financing arrangements, philanthropies can extend the scope and scale of their impact. Furthermore, in the case of adaptation, philanthropic grants are especially valuable because many adaptation actions reduce future climate risks but may not generate the financial returns required to repay MDB loans.
2) Provide Grant Financing for the Fund for Responding to Loss and DamageIn addition to providing grant financing for adaptation, philanthropies could support the new Fund for Responding to Loss and Damage operationalized at COP28. The fund was created to help developing countries that are particularly vulnerable to the adverse effects of climate change. Global financing of loss and damage has been largely neglected despite the major setbacks to economic growth and development caused by climate related disasters.
Even though developed countries should take the lead in financing loss and damage, there is also room for alternative sources of finance to help countries bear inevitable economic and social damages. In fact, the Fund for Responding to Loss and Damage says it plans to look at non-donor and private financing, although it has yet to broadly act on those intentions. Philanthropies already played a notable role in early awareness on the need for loss and damage financing at COP26 in 2021, contributing $3 million at that time. They could also help increase public pressure on developed country governments and catalyze support for the fund and support the development of innovative ways for non-donors to contribute to the Fund.
Philanthropy organizations are well-placed to provide some urgently needed early grant financing to augment the very limited funds pledged by countries so far to the Fund for Responding to Loss and Damage. The benefits of doing so would allow developing country governments to meet growing explicit and implicit government liabilities related to climate loss and damage without incurring greater debt. However, it is not realistic for philanthropies to cover a major portion of the total projected needs. In fact, the negotiating bodies (and governments generally) are nowhere near to an understanding of what those total needs might be, or even agreeing on a methodology for estimating them. By becoming financial partners, early philanthropic support could help inform open discussions over funding issues.
3) Create Global Funding Mechanisms to Leverage MDB Core CapitalThe G20 Triple Agenda Report has the innovative proposal for non-government investors — including philanthropy — to expand MDBs’ financing capacity by creating global funding mechanisms. Philanthropists and other stakeholders could finance a mechanism that would allow MDBs to leverage their core capital and increase the impact of their financing in two ways. First, the facility could use grant contributions to lower the cost of MDB lending by buying down the interest rate. Second, MDBs could use the grant contribution to leverage four to five times the amount of philanthropic giving. This multiplier effect is due to MDBs sharing the risk of MDB loans, thereby allowing the MDBs to lend more with a given amount of core capital. Contributions of several billion dollars by philanthropies could stimulate additional MDB lending of $10 billion to $20 billion.
In this context, the International Financing Facility for Education (IFFED) has been cited as a promising model, including by the G20 Expert Group. Through the IFFED, guarantees by willing countries enhance philanthropy’s cash contributions to create a financial base that MDBs can use to leverage up to 4 times and thus boost lending. In addition, philanthropists can provide grant contributions that lower the MDBs’ lending rates (such as down to the lower terms offered by the highly concessional International Development Agency). A climate financing facility could be designed using this model. It is estimated, for example, that a $2 billion grant from philanthropists channeled through an IFFED-like climate financing facility could increase MDBs’ concessional lending by as much as $10 billion, and by even more if it catalyzed private financing. This promises to significantly leverage philanthropic funding in the form of boosted levels of multilateral concessional climate financing.
A mechanism that either improves the terms of MDB lending or leverages their core capital in new ways will require a governance structure that provides appropriate voice and representation to philanthropy. As new mechanisms emerge to bring in significant non-government participation within the MDBs space — such as this and the previous two proposals — shaping inclusive governance arrangements will inevitably be an important issue to resolve.
4) Contribute to Disaster Risk Insurance PremiumsCountries are increasingly seeking disaster risk insurance due to their high exposure to the economic and fiscal shocks caused by major disasters. While it is true that countries cannot insure themselves out of climate risk, the opposite is also true — that even countries with robust climate adaptation programs face unforeseeable risks with macroeconomic and fiscal impacts. Sovereign disaster risk finance increases the financial response capacity of national and subnational governments to meet post-disaster funding needs without compromising fiscal balances and development objectives. While some risk management approaches are contingent financing which defers obligations, sovereign insurance products transfer risk to others.
International financial institutions and the private sector are active in finding contingent financing adaptation insurance products. For example, the IMF’s Catastrophe Containment and Relief Trust has provided direct debt relief to poorer countries hit by disasters, including climate shocks; the World Bank Treasury Disaster Risk Insurance Platform offers risk transfer solutions such as insurance, derivatives and catastrophe bonds; and private insurance companies participate in sovereign insurance, weather derivatives and macro-level risk pooling offerings.
For insurance products, philanthropies could step up to help developing countries pay for the premiums. The potential benefits to poor or climate vulnerable countries could be, on average, about 100 times the cost (although actual premiums depend, of course, on country-specific climate risks). This is not a new idea: In the past, bilateral donors have contributed that cost on behalf of low-income countries, such as when the European Union subsidized the premiums associated with parametric insurance under the Caribbean Catastrophic Risk Insurance Facility. This idea of involving philanthropies in risk-pooling not only provides potential benefits many times greater than the cost: it would also give philanthropies leverage to help convince countries to take important climate adaptation measures before a disaster hits.
5) Develop Better Climate Adaptation MetricsAs philanthropies scale up their partnerships with the MDBs, the need for better metrics of climate risk reduction, resilience-building and loss and damage financing needs will continue to grow. All stakeholders and financiers need better metrics on how much risk reduction can be purchased through specific actions. For example, WRI is working with the Gates Foundation and ClimateWorks on improved economic analysis and metrics of the costs of reducing climate vulnerability. In fact, a wide range of analytical approaches are being tested — everything from tracking inputs (expenditures) to outputs (project deliverables) to outcomes (net risk reduction). Some are geared to the project level and others at the national level; some support donor priorities and others try to incentivize private sector investment.
Foundations, as informed partners to donors, governments and communities, should continue supporting the research and technical assistance required for all parties to converge on commonly accepted metrics. As vested partners, philanthropy can and should play an important role in debates over how adaptation and resilience financing — and loss and damage financing — gets measured, monitored and evaluated in the years to come. In short, improved metrics would, according to the World Bank, “create incentives for countries, donors, and the private sector to engage in more and better adaptation; to more effectively report on what the MDBs and clients are doing; and to establish a global standard for financial markets and public procurement.”
Scaling Up Climate Adaptation Finance with Help from PhilanthropiesPoverty is a chief driver of vulnerability, and in the absence of improved adaptation, climate change will worsen both vulnerability and poverty. Therefore, the task of building climate adaptation and resilience falls on all countries and donors alike. Every government will need to understand how to better manage climate impacts from the macroeconomic level of sovereign risk down to the local level of affected communities and impoverished households. Philanthropies can scale up their valuable work in their more traditional areas such as:
- Supporting developing country governments to build knowledge and capacity to better understand the economic and social implications of their physical climate risks, and to prioritize and sequence the most cost-effective interventions.
- Providing finance at the community level and/or providing support mechanisms that allow central government funding to reach the local level, whether for local adaptation investments, disaster risk management or build back better programs.
- Helping to cover the cost of sovereign disaster risk insurance, an important yet under-implemented option to help low-income manage unforeseeable risks with macroeconomic and fiscal impacts.
In addition, philanthropies can dramatically help step up the level of climate adaptation finance by proactively engaging with donors and governments in new ways. The first four proposals, above, represent significant changes in the role and scale of philanthropy — none of which are impossible given the growing number of large foundations in the 21st century. To the extent that foundations can join together and speak with a common voice, their voice would be stronger and facilitate progress more efficiently. The unprecedented challenge of climate change adaptation itself requires a higher level of philanthropic engagement.
An earlier version of this article first appeared in the e-Book "Pathways to Unlocking Climate Finance for Africa," published by the Climate High-Level Champions Team under the UNFCCC.
climate-adaption-finance.jpg Finance adaptation finance adaptation climate change Climate Resilience climate finance Type Commentary Exclude From Blog Feed? 0 Projects Authors Marilou Uy Carter Brandon3 Ways to Manage Skyrocketing US Electricity Demand
From the introduction of electric lighting to the spread of personal computers, electricity demand in the United States grew almost continuously as it became increasingly integral to society and the economy. Around 2005, however, demand slowed, leading to stagnant load growth through the 2010s.
That era of stability is now over. In 2024, the national five-year forecast for electricity load was 5 times higher than 2022 predictions. Peak electricity demand is expected to increase by 128 gigawatts (GW) by 2029 — roughly 13 times the amount of electricity New York City consumed at its peak demand in 2023.
These latest load forecasts caught many by surprise and are creating turbulence across the energy sector. Electricity prices are already spiking. Utilities rushing to meet new demand are pushing to build more firm generation, including retaining — or even expanding — their fossil-fueled power plants. What’s more, new demand could put additional strain on an aging electricity grid that is overdue for upgrades and expansion.
State and federal energy regulators, as well as utilities and the federal government broadly, will be critical actors in addressing this new challenge, and they are actively pursuing solutions. Yet state and local policymakers can also play key roles — namely, by protecting their constituents from cost increases and addressing new sources of demand within their jurisdictions.
Here, we discuss some of the pathways available to state and local policymakers as they grapple with the challenges associated with rising electricity demand.
What’s Driving Increased Energy Demand in the US?There are many drivers of increased electricity demand in the U.S. One of the largest is data centers. One analysis estimates they could account for 44% of all U.S. load growth between 2023 and 2028. Thanks to increased demand for cloud services and the rise of complex artificial intelligence (AI) applications, private data center construction spending in the U.S. has surged to almost $30 billion a year, about double the spending in late 2022 when ChatGPT first came online. Since January 2023, over 50 GW of new data center capacity have been announced.
And data center construction is unlikely to slow anytime soon: Across the globe, capital expenditures for data centers are expected to exceed $1.1 trillion by 2029. A Lawrence Berkeley National Laboratory study predicted that data centers could account for 6.7%-12% of total U.S. energy consumption by 2028.
It’s not all ChatGPT and cat videos, however. A revitalized American manufacturing sector, spurred by the passage of the Inflation Reduction Act and the CHIPS and Science Act, has doubled real investment in manufacturing since 2021. Companies are now investing in new facilities to produce electronics, computer chips, electric vehicles, solar panels and more — all of which require large amounts of electricity to operate. Other heavy industries are also expanding: As of May 2024, companies have announced 3.8 GW of planned electrolytic hydrogen production facilities.
Electric vehicle (EV) adoption and building electrification are also driving new energy demand. Automakers sold a record 1.3 million EVs in the U.S. in 2024, accounting for around 8.7% of new cars sold. By 2030, EVs are projected to represent up to 46% of light-duty vehicle sales, requiring over 42.2 million charging points across the country.
Building electrification is also expanding, as improved performance and rebates nudge households toward electric appliances like electric water heaters and heat pumps. Overall, the residential sector is expected to see a gradual but steady 10% increase in electricity demand by the end of the decade.
The extent of load growth associated with each of these drivers varies by region. Large data center markets such as Silicon Valley, the Dallas/Fort Worth area, Phoenix, Chicago, and, in particular, northern Virginia are expected to be at the forefront of new data center expansion. Meanwhile, manufacturing investments are most concentrated in the Southeast and Midwest, including in Georgia, Tennessee, the Carolinas, Ohio and Michigan. And places like California, New York and New England are beginning to see electrification play a major role in increasing peak demand.
Electric vehicle charging stations in Bellingham, Washington. Electric vehicles and building electrification, combined with data center development and a resurgence in American manufacturing, are combining to increase energy demand in the United States. Photo by David Buzzard/Shutterstock What Are the Impacts of Increased Electricity Demand?Surging electricity demand is expected to have tremendous impacts on the U.S energy system, the country’s ability to fight climate change, and on electricity service and prices for households across the country. Some of these effects are already being felt: For example, multiple major technology companies are reporting increases in their greenhouse gas (GHG) emissions due to extensive data center development.
As companies and utilities race to build the infrastructure that can meet future demand, there is pressure to meet new loads with clean generation. Because of their sustainability commitments, many tech companies are investing in solar and storage, as well as new sources of clean, firm energy like nuclear and geothermal. In September 2024, Constellation Energy announced that it would restart one of the reactors at Pennsylvania’s Three Mile Island nuclear plant as part of a power purchase agreement with Microsoft to support the company’s data center operations. Other companies have explored “co-location” models, in which a data center is built on-site with new or existing generation.
Some utilities and companies, however, are looking to retain or even build new fossil fuel generation to meet demand. Cloud computing startup CoreWeave, for instance, recently announced that its new Kenilworth, New Jersey data center would be powered by an existing on-site 25 MW gas-fired power plant. In Nebraska, the arrival of new data centers led the Omaha Public Power District to delay retirement of two coal-burning generators next to a disadvantaged community. On a wider scale, between December 2023 and July 2024, utilities across the country revised their Integrated Resource Plans to add 20 GW of new gas capacity and delay retirement of 3 GW of coal plants by 2035, likely driven by new demand sources. Together, this greater use of existing fossil fuel resources, as well as new development of natural gas plants, could increase power sector GHG emissions and air pollutants after years of progress.
Greater demand could also translate into higher energy bills for consumers. One report from global consulting company ICF estimates that increased demand will likely drive electricity prices almost 20% higher by 2028, with regions like Texas and New England potentially seeing even larger increases. Already, load growth is leading utilities to pass costs on to customers. Dominion Energy, which serves northern Virginia, the world’s largest data center market, recently estimated that its residential customers would see a 50% increase in their electricity bills by 2039 to support the buildout of new generation facilities. These prices may go up even further, as the U.S. Energy Information Administration predicts the price of natural gas to increase by over 20% in the next few years.
Large load demand can also present an economic threat to the electricity system by creating “stranded” costs and assets. Utilities must build new distribution, transmission, and, depending on the area, generation infrastructure to serve new demand. They rely on stable estimates of power demand to plan their spending on these large, capital-intensive projects. However, efficiency gains and market volatility in the industries driving new large electricity loads, particularly among data centers, mean that there is significant uncertainty about the extent of future growth in energy demand. This means that utilities could be at risk of overbuilding for demand that never materializes, leaving other utility customers with the costs for unused or underutilized “stranded” assets.
Finally, greater demand could pose a threat to grid reliability by adding stress to an already overtaxed electricity system. The U.S. power grid is aging: Over 70% of the country’s transmission lines are more than 25 years old, with many approaching the end of their 50- to 80-year lifespans. Furthermore, extreme weather exacerbated by climate change is leading to more frequent weather-related power outages. This is especially worrisome considering new data center demand, since data centers operate with requirements for high levels of server “uptime” above 99%. While some projects are exploring how data center loads can become more flexible and put less stress on the grid during times of high demand, they are still in their early stages.
How Can We Address New Demand for Electricity in the US?This new reality of increased load growth presents challenges for policymakers. The biggest drivers of heightened demand — data centers, manufacturing and electrification — all represent major opportunities for economic development in communities across the U.S. Yet increased load threatens to slow down progress in fighting climate change and reducing air pollution, burden consumers with higher electric bills, and further stress an already over-taxed grid.
At the federal level, the new Trump administration has put its full support behind encouraging new data centers and producing significantly more oil and gas to meet energy demands. At a state and local level, policymakers must strike a delicate balance between economic development interests and commitments to energy affordability, reliability, public health and emissions reductions.
A few key tools can help them effectively manage electricity load growth in their jurisdictions:
Installing solar panels on a rooftop in Oak View, California. Clean energy can help meet growing needs for electricity in the United States. Photo by Joseph Sohm/Shutterstock Manage Sources of Electricity Demand DirectlyThe most direct avenue for tackling energy demand issues is to look to the sources of load growth themselves. That means directly mitigating the impacts of data centers, new manufacturing, and building and transportation electrification.
Economic development policies can help regulate new sources of demand. Many states, for instance, attract data center investment using favorable sales and property tax breaks. Policymakers could ty these tax breaks or other economic incentives to desired outcomes, such as meeting certain energy performance standards or procuring renewable energy. For example, in Arizona, data centers that attain a green building certification can extend the state’s transaction privilege and use tax exemption from 10 to 20 years. And in Illinois, data centers must be either carbon-neutral or certified under one or more accepted green building standards to qualify for the state’s sales tax exemption.
Meanwhile, zoning laws give local governments significant power to impact energy demand in their communities. In data center-heavy Loudoun County and Fairfax County in northern Virigina, policymakers recently revised zoning laws on data centers in response to local concerns about load growth, noise pollution and proximity to residential areas. Local governments can also use their zoning and permitting processes to promote the production of renewable energy at large industrial facilities.
Connecting new loads to the grid adds costs to the electric system, which may be borne by ratepayers through increased electricity prices, as opposed to by developers. States have powers to address this cost allocation issue. In 2025, legislators in multiple states — including Virginia, Georgia and California — introduced bills aimed at understanding and reducing data center development’s energy cost burdens to consumers. The bills direct state energy regulators to act on these cost issues, such as through analysis and ratemaking.
Governments outside the U.S. are also directly addressing electricity demand. In May 2024, Australia announced that all data centers serving federal agencies must achieve “excellent” or greater environmental performance standards by July 2025. And in 2023, Germany adopted an Energy Efficiency Law requiring all data centers in the country to meet specific energy efficiency metrics and source 100% of their electricity from unsubsidized renewable energy sources by 2030.
Address New Generation NeedsOn the supply side, policymakers can look for ways to use clean energy to meet increased demand. Cities and states can directly procure clean energy for themselves or their communities through a variety of mechanisms, including green tariffs and power purchase agreements. Decisionmakers can also promote clean energy development through codifying clean energy commitments and incentives. For examples, almost half of all states have legally binding GHG reduction and/or clean or renewable energy goals, which provide foundational support for clean energy buildout. Ongoing development, expansion, and enforcement of these types of laws can help ensure the new energy load is met by clean sources.
Further, reducing the timelines associated with permitting and siting of new large-scale generation and transmissions facilities can help ensure that necessary infrastructure additions keep pace with growing demand. States are well situated to act on this issue. For example, California and New York established new boards and authorities to oversee and streamline certain permitting and siting processes. Cities and towns also have a stake in large-scale projects, since infrastructure could be sited in their jurisdiction. Local leadership and staff can actively engage with state counterparts to define challenges and determine solutions to permitting and siting issues for critical generation and transmission development.
State and local governments can also support adoption of distributed energy resources (DERs), such as solar and energy storage, to address load growth. Distributed energy can directly lower consumers’ energy bills, enhance resilience and reduce strains on the grid. However, restrictive or unclear local laws and permitting processes can add significant barriers to adoption. Local action can be particularly critical for unlocking distributed energy: Research found that participation in SolSmart, a national designation and technical assistance program designed to help local governments reduce red tape related to solar installations, was associated with an 18-19% increase in installed solar capacity per month.
Expand Transmission CapacityTransmission is the key link between electricity supply and demand. Yet large-scale transmission buildout has slowed to a crawl over the past 10 years, threatening the ability for both new demand sources to connect to the grid and for new electricity generation facilities to come online. Having more transmission capacity, particularly between states and regions, would ease concerns about system reliability while enabling huge swaths of clean energy to interconnect and meet new demand.
State policymakers have authority to regulate how utility transmission plans are conducted and to introduce requirements and incentives that encourage transmission capacity growth. Multiple states like Minnesota, Massachusetts and California have passed laws requiring utilities to consider grid-enhancing technologies, which are designed to add more carrying capacity to existing transmission lines. Meanwhile, the Montana legislature ordered its Public Service Commission to establish an incentive for building new transmission lines with “advanced conductors” capable of transmitting more energy than standard technologies.
Finally, under two landmark federal orders issued last year, transmission providers are required to integrate state and local laws and regulations when conducting long-term transmission planning. State and local government staff can provide relevant data points to ensure their priorities are captured in transmission providers’ planning processes. Additionally, states have large roles in transmission planning scenario development and cost allocation through these orders.
Charting America’s Energy FutureThe U.S. needs more electricity than ever. Rapid data center growth, a rebounding American industrial sector and residential electrification are all increasing demand for electricity at a rate not seen for decades. If left unaddressed, this new demand spike could increase greenhouse gas emissions, inflate consumers’ bills and make the U.S. grid less reliable.
Fortunately, policymakers at all levels have a menu of options to choose from, with many are already working on solutions. Acting quickly is imperative for connecting critical new loads to the grid while ensuring that everyone can keep the lights on reliably, affordably and cleanly.
data-center-us.jpg Energy United States Clean Energy renewable energy electric mobility Buildings Type Commentary Exclude From Blog Feed? 0 Projects Authors Ian Goldsmith Zach GreeneCarbon Dioxide Removal Must Be Scaled Responsibly. But What Does That Mean?
Carbon dioxide removal (CDR) has grown from a little-known concept to a fast-growing field in the last several years. Beyond the climate benefits from removing carbon dioxide (CO2) from the atmosphere, many CDR approaches may also benefit people and the environment, like creating jobs to boosting soil health or reducing local ocean acidification. However, CDR projects can also come with unintended consequences or negative impacts, so robust governance frameworks must be in place to minimize any damages.
Comprehensive and fit-for-purpose governance frameworks are needed, for example, so that oil and gas industries don’t rely on CDR to justify their continued fossil fuel production. These frameworks can also help protect communities that already face increased pollution and harm from the fossil fuel industry from additional risks tied to land, water and energy use that may come from these new CDR facilities.
As the carbon removal industry ramps up, there is a growing emphasis on “responsible” carbon removal to ensure communities don’t experience harm and have access to local benefits. But what does this mean concretely? In the context of ensuring robust governance, what can be done to improve policy and regulation to deliver responsible outcomes?
Here, we answer some of these questions.
What Does Responsible Carbon Removal Entail?Responsible carbon removal emphasizes the importance of sustainably and safely deploying a range of CDR approaches that use chemicals, rocks, biomass, soils, the ocean and more to complement efforts to drastically reduce greenhouse gas emissions without exacerbating any historical harms to communities or the environment.
At a project level, this includes thoroughly assessing the social, economic and environmental impacts of CDR projects and minimizing negative effects while equitably distributing benefits. At a policy level, it entails the creation of policies and regulations that ensure that CDR contributes to real climate benefits, while protecting communities and ecosystems.
Achieving responsible carbon removal therefore requires robust governance to minimize these trade-offs. In addition to its global climate benefit, it must deliver local tangible benefits like improvements to air quality or revenue to invest into communities and ecosystems rather than exacerbate inequities or environmental harms of other industries. It must also entail inclusive decision-making and complement — not substitute — ambitious emissions reductions.
Without public trust and community support, CDR projects may struggle to gain any social license and scale, limiting their ability to contribute to climate goals. For instance, other clean energy projects that did not adequately engage communities have faced delays or cancellations. Ensuring responsible implementation by industry and governments is therefore key to building that trust.
Key Questions to Inform Responsible CDR PolicyBelow we answer three key questions about the role of policymaking to ensure the responsible deployment of CDR.
How Can Policies Ensure that CDR Maximizes its Benefit to the Climate?Scientific consensus is clear: Removing carbon dioxide from the atmosphere will be necessary to complement efforts that drastically reduce greenhouse gas emissions by mid-century to prevent further unprecedented warming across the Earth. There are however various concerns (including from academics and NGOs), ranging from the risk of delaying emissions reductions, to the need for more accurate measurements of projects’ net climate benefits. Some policy measures and safeguards can help address these risks:
Setting Separate Targets
Without adequate policy measures in place, scaling CDR in the next decades could risk shifting focus and resources away from the urgent need to reduce emissions today and transition away from fossil fuels. This risk is known as mitigation deterrence.
Separate long-term climate targets for emissions reduction and CDR can help address this risk, with some U.S. states, like California and Washington, providing early examples. This might be more easily achieved in states or countries with net-zero policies and greenhouse-gas reduction mandates, through which the role of CDR can be responsibly defined.
Under this approach, CDR is planned and accounted for separately based on a quantitative assessment of expected residual emissions. This clarifies how much CDR is planned to reach net-zero, ensuring transparency and preventing CDR from being misused to offset emissions that could instead be reduced.
Examples of separate targets in the USU.S. State PolicyCalifornia- • 2020 law mandates California meet net-zero greenhouse gas emissions by 2045
- • Mandates 85% emissions reductions below 1990 levels by 2045.
- • Remaining 15% to be addressed with CDR to achieve net zero.
- • Set a 95% greenhouse gas emission reduction goal by 2050.
- • Committed to reach net-zero that year.
- • Remaining 5% to be addressed with CDR.
Policymakers must refrain from planning for CDR to sustain fossil fuel use, which would undermine emissions reduction efforts and risk derailing climate targets. Emitting CO2 now and removing it later does not prevent its consequences: CO2 emissions cause irreversible climate damage, which CDR cannot undo.
Scaling CDR will also be constrained by sustainability limits on land, water and energy availability as well as societal impacts.
Lastly, CDR technologies are still largely in development. There is uncertainty as to the extent to which they will scale in the coming decades. Relying on the promise of a massive scale up to address residual emissions is therefore risky, highlighting the need to rapidly reduce emissions to the maximum extent possible.
Ensure Projects Maximize Net-Negativity
CDR projects must be net-negative. If a project’s emissions exceed removals, it is not net-negative and does not result in net carbon removal.
Policymakers can encourage net-negativity in several ways:
- Prioritize renewable energy use: Energy intensive CDR approaches like DAC must prioritize renewable energy to avoid fossil fuel emissions. However, the U.S. grid is not yet fully decarbonized and diverting limited renewable energy to power CDR at the expense of providing clean energy to buildings or transportation, could slow broader climate progress. Policymakers should prioritize funding projects that co-locate with renewable energy sources and incentivize the development of dedicated renewable energy infrastructure for CDR operations.
- Prohibit enhanced oil recovery (EOR): Policies must prevent CDR from prolonging fossil fuel dependence through EOR, which uses captured CO2 to extract more oil. While some argue EOR could be net-negative under some conditions, the climate math remains uncertain and the continued fossil fuel extraction negates the climate benefit of removals. More importantly, using DAC-derived CO2 for EOR also risks damaging public trust in CDR and therefore must be avoided. Some states, like California, have already prohibited this practice for carbon capture and sequestration and CDR projects, setting a precedent for stronger safeguards.
Establish High-Quality and Harmonized Measurement, Reporting and Verification Practices
Robust and harmonized measurement, reporting and verification (MRV) standards is the cornerstone of responsible CDR. MRV must prove that a project provides net-negative emissions, and permanently sequesters CO2, which is typically verified via third party verification.
Despite a number of efforts to advance best practices, the current MRV ecosystem for CDR is uncoordinated and unregulated. Without common standards it is unclear what constitutes high-quality MRV, risking a race to the bottom when it comes to quality.
Establishing a federal MRV function or an independent and authoritative standards body within government, that is free from vested interests is essential to ensuring a high-quality, transparent MRV ecosystem for CDR. This would provide accountability and verify that CDR projects deliver on their promised removals.
To avoid a proliferation of efforts, such a body should harmonize with existing efforts rather than duplicate them. In the long-term, a standardized MRV framework is critical for carbon removals to be recognized in national reporting and contribute toward countries’ nationally determined contributions, as well as to avoid perverse incentives that may result in double counting.
How Can CDR Policies be Designed to Avoid Reinforcing Existing Inequities?As policymakers develop frameworks for carbon removal, embedding equity and environmental justice principles is critical to ensure that benefits are maximized, risks are minimized and both are distributed fairly.
Low-income Black, Latino and Indigenous communities in both rural and urban areas, already bear disproportionate pollution burdens and poor health outcomes compared to higher-income, majority-white communities. Policymakers must prioritize designing safeguards to prevent exacerbating existing inequities and burdens, ensuring that historic harms are neither repeated nor worsened, while maximizing the potential improvements and benefits for host communities.
Require Meaningful Community Engagement
A recent survey found that 73% of voters support being consulted on new carbon removal projects, highlighting strong public demand for early and meaningful engagement. Strong policy frameworks must establish clear requirements for engagement that goes beyond informing potential host communities, especially on project siting and community benefits. Communities should have the opportunity to actively shape decision-making processes and should be compensated appropriately for their input and time. Policies should require developers to communicate transparently about the benefits and potential risks of a project and acknowledge that genuine community engagement includes the possibility of project rejection. Policies should provide clear, enforceable mechanisms to respect and act upon a community's decision to decline a project, ensuring future efforts in that location are appropriately reconsidered or redirected.
Strengthening Community Benefits as a Standard Practice
Community benefits plans can provide a structured framework for integrating community voices, outlining expected benefits, and ensuring that local priorities shape project implementation. While they do not carry the legal weight of a community benefits agreement, the plans are a critical tool for building trust, addressing community concerns and fostering long-term partnerships.
Community benefits plans have already been used in a handful of projects across sectors, however, they are not yet the norm. These plans should become standard industry best practice, with developers proactively adopting them rather than waiting for mandates. By voluntarily implementing community benefits plans, companies can demonstrate a commitment to equitable development, making projects more viable and reducing opposition.
While community benefits plans set the foundation for engagement, legally binding community benefit agreements codify commitments to tangible, enforceable benefits for communities. They can guarantee specific local benefits, such as revenue-sharing arrangements, infrastructure investments, or workforce development programs and provide accountability mechanisms that ensure developers deliver.
Policymakers can encourage or require community benefit agreements by embedding them into state-level policies or permitting requirements. This can provide a stable framework for equitable project development and ensure that communities hosting CDR projects receive durable economic and social benefits.
For communities to fully benefit from CDR projects, they must have the legal expertise, technical knowledge and negotiation skills to advocate for their interests when engaging with developers. Many historically marginalized communities lack the resources to navigate complex agreements, assess project risks or negotiate strong community benefits, often resulting in vague or insufficient commitments that fail to deliver long-term value.
To address this, policymakers and industry leaders should invest in capacity-building initiatives, such as legal support funds, community-led training programs and technical advisory services. Empowering community organizations as intermediaries and establishing publicly funded legal aid or negotiation support teams would help level the playing field, ensuring that communities can secure enforceable agreements that maximize both economic and environmental benefits.
Advance Innovative Benefit Models
Achieving equitable CDR deployment may also require initiatives that go beyond traditional benefit-sharing models. One promising pathway is creating opportunities for local communities to hold equity stakes in CDR projects, creating more enduring economic benefits while also fostering deeper trust and alignment between developers and host communities. CDR projects can generate revenue through carbon credit sales, corporate sustainability investments, government incentives and CO2 utilization in commercial products, making these benefit-sharing models potential opportunities for co-benefits.
For example:
- Community profit-sharing agreements: A percentage of the project’s revenue could be allocated directly to local community funds, supporting infrastructure, education or healthcare projects.
- Co-ownership models: Communities or local organizations own a portion of the project, granting them both financial benefits and decision-making power.
Examples from renewable energy sectors can provide examples for CDR. For instance, the Saulteaux First Nation in Canada partnered with a renewable energy company to co-own and operate a wind power project. The community holds a majority ownership stake, which has provided sustained and long-term financial returns, ensured local decision-making power and fostered community trust in the project’s development.
Establishing federal-level guidance and best practices for these models will help ensure consistency across projects while allowing for local customization. Transparent monitoring protocols, accessible reporting channels and clear enforcement mechanisms will be critical to ensuring these profit-sharing and ownership structures deliver on their promises.
Robust policy frameworks that center community decision-making and ensure equitable distribution of benefits are needed to ensure that CDR deployment supports environmental justice goals.
How Can CDR Policies Protect Lands, Ecosystems and Natural Resources?Building public trust in CDR will require careful evaluation of potential resource use, and community and environmental harms and action to prevent them.
Like any other industry, CDR uses resources like water and minerals. In addition, CDR facilities such as DAC plants require infrastructure such as CO2 pipelines, which occupy land. Responsible CDR projects should not only minimize any negative impacts of resource use, but should also be sited in locations that do not exacerbate resource concerns such as water shortages. To protect communities and ecosystems, projects should carry out environmental and social impact assessments and include legal mechanisms to ensure ongoing responsibility for mitigating any environmental harms that occur, while considering their entire value chain.
Conduct Environmental Impact Assessment and Mitigate Impacts
Conducting both robust MRV and environmental impact assessments can identify resource needs, environmental impacts, human health impacts including cumulative pollution burdens, and help project developers plan to mitigate any negative impacts.
In the U.S., National Environmental Policy Act requires that for projects using federal funding or require a federal permit that federal agencies carry out environment impact assessments and provide environmental statements for any construction, permitting or planning action with significant environmental impact. Projects can choose to complete assessments even without federal involvement, a practice that CDR projects should pursue to plan for unintended impacts that could impede a project’s viability. Since environment impact assessments can be expensive for companies, state and local governments could establish grant or loan programs to support the process.
Environmental impact considerations and strategiesEnvironmental FactorKey Considerations and Mitigation StrategiesWater- • Different CDR approaches have varying water needs (e.g., solvent DAC is more water-intensive than sorbent DAC).
- • Projects with high water demand should be sited in water-abundant regions.
- • Effluent water must meet environmental standards for temperature and cleanliness.
and Biodiversity
- • Some CDR approaches, such as marine-based methods, may disrupt ecosystems, though full impacts remain uncertain.
- • Biomass-based CDR can threaten biodiversity if it leads to deforestation or land conversion. The sustainable sourcing of biomass feedstocks is also important (e.g. avoiding purpose-grown crops).
- • Certain methods, like enhanced rock weathering, may provide co-benefits (e.g., improving soil health), but mineral inputs must be free of contaminants.
- • CDR competes with other land needs (e.g., food and energy production).
- • Biomass feedstocks for CDR can displace food production, leading to emissions from land conversion.
- • Projects should avoid using land-intensive feedstocks and prioritize siting on repurposed industrial sites or brownfields.
- • Some solvent-based DAC systems may degrade and release pollutants, requiring safeguards against unintended chemical emissions.
- • Certain carbon management systems can be designed to capture co-pollutants like ozone, particulate matter, SOx and NOx, benefiting areas with high air pollution.
- • Some technologies, like Climeworks, can even produce net-positive water, adding a potential co-benefit to CDR deployment.
Implement Rigorous Environmental and Safety Standards
CDR projects must adhere to existing environmental and safety regulations, and policymakers should work with the emerging CDR industry to update and strengthen regulations and standards over time.
This includes having robust plans in place to mitigate adverse impacts such as excessive water use, chemical spills and carbon leakage while also implementing emergency response systems to protect nearby communities from unforeseen hazards. These measures will not only enhance environmental safeguards but could also foster public trust and confidence in the responsible deployment of CDR technologies. CDR projects should also plan for long-term responsibility for remediation of any adverse environmental impacts.
U.S. lawmakers have also begun developing policies to support the responsible deployment of some CDR technologies. Aspects of approaches like DAC are already largely covered by federal policies, such as the EPA’s regulation on sequestering CO2 in deep underground geologic formations. Many CDR approaches are however quite novel, meaning that the regulations that apply to these projects were written before they existed. This means that significant regulatory gaps remain, and comprehensive safety standards must be updated in response to development of these new approaches, including DAC, to ensure regulation is fit-for-purpose.
Creating Safe Frameworks to Scale CDRAs the field continues to evolve, policy frameworks must prioritize equity, environmental integrity and community empowerment to prevent CDR from replicating past harms.
A commitment to strong safeguards, inclusive decision-making and durable accountability measures will be essential to ensuring that carbon removal meaningfully contributes to long-term climate goals. If not implemented with high standards and adequate safeguards, CDR risks being scaled in ways that neglect public safety and environmental sustainability, diminishing its purpose as a climate solution and further endangering our ability to meet national and global climate goals.
climateworks-dac-mammothplant.jpg Climate United States carbon removal carbon removal legislation & policy U.S. Climate U.S. Climate Policy-Direct Air Capture Type Technical Perspective Exclude From Blog Feed? 0 Projects Authors Hannah Harasaki Danielle Riedl Haley Leslie-BoleBeyond the Thermometer: 5 Heat Metrics That Drive Better Decision-Making
The way scientists and policymakers measure heat as they seek to combat rising temperatures across the world’s cities requires more nuance than just looking at the daily outdoor temperature. There are a variety of tools that can help show a more complete picture.
Some measurements, like land surface temperature, can help compare different parts of a city. Others, like air temperature, heat index or wet bulb globe temperature describe the regional conditions across a neighborhood or urban area. Increasingly, experts look to more complex data, known as thermal comfort indices, to show the impacts on people where they live.
After 2024 was recorded as the hottest year on record researchers project a nearly 3 degree C (5.4 degree F) rise in temperature by 2100 if we don’t significantly reduce global greenhouse gas emissions. This increase would disproportionally impact cities — where the urban characteristics, such as miles of pavement and lack of green space, can add another 1 degree C (1.8 degrees F) warming — and the more than 4 billion people who live in them.
As part of the global weather system, extreme heat can span across broad geographic areas, but individuals experience it at very local scales. Choosing the best metric to measure a desired outcome appropriately will be critical for cities worldwide to effectively address the challenge of urban extreme heat as temperatures continue to rise.
Traditional Ways of Measuring HeatWhen we talk about heat exposure, we are referring to a series of different heat sources that make someone hot. Suppose a person stands outside during a heatwave: direct radiation from the sun, reflected radiation from surfaces like roads or buildings, ambient air and moisture in the air, all contribute to how hot that person can feel.
Here are a few of the traditional heat metrics, their uses and limitations:
Land Surface TemperatureLand surface temperature (LST) is calculated from satellite data and measures the temperature of surfaces, including roofs, treetops and roads. LST doesn’t mean much to the everyday person, however, because it’s easy to calculate anywhere on Earth, researchers use it for scientific heat mapping and, for many years, have considered it the go-to for urban heat analysis. LST is useful in comparing different parts of cities and evaluating which surfaces are likely to absorb heat and slowly re-radiate it throughout the day. However, LST isn’t helpful for understanding people’s heat exposure because it doesn’t account for most of the ways humans experience heat: Even if a person is standing on cool grass, they will feel hot if they’re in the sun on a warm, humid day.
Air TemperatureAir temperature measures the temperature of the air about two meters above the ground. Because it is easily modeled and understood, air temperature is the measurement local news organizations and other outlets use in their reporting. It’s measured with a simple thermometer and gives a clear picture of a location’s ambient weather condition, minus any other factors (like humidity or sunlight) that might make a person feel hot. Because air temperature looks at the background conditions, air temperature is an ideal metric for analyzing and comparing temperatures across time.
Across a neighborhood or city, though, air temperature can be difficult to measure. Consistent measurements over a wide area rely on weather stations, which can be geographically sparse and expensive to maintain, or on low-cost sensors, which can be faulty and prone to breaking. Scientists then have to interpolate the data between observed points and model the temperature distribution across an area.
However, air temperature doesn’t capture other atmospheric or environmental factors, like the number of trees that provide shade,, that can affect how hot a person might feel in a particular area or neighborhood. Plus, it would take something really big, like a body of water or an entire neighborhood of cool roofs to significantly affect the air temperature of an area. So, if cities want to address the impacts of local heat exposure, air temperature would not provide enough specificity to inform human-scale interventions designed to protect people’s health.
Heat Index and Wet Bulb Globe TemperatureMeteorologists calculate what the temperature “feels like” using the heat index, a metric that adjusts air temperature based on humidity. For example, when humidity and temperature are high, the body has a harder time regulating its temperature through perspiration. In contrast, low humidity at a high temperature — often called “dry heat” — would feel cooler because low moisture in the air leads to the faster evaporation of sweat, which cools down the body. Heat index can therefore predict how the body will react to the weather on a given day, making it a helpful tool for determining if it’s safe to work outdoors or play sports.
Wet bulb globe temperature (WBGT) is a similar metric, but it considers direct sunlight and wind speed in addition to air temperature and humidity. This metric can provide additional insight into heat exposure by determining how much hotter a person feels in the sun and with limited breeze.
Heat index and WBGT are measured with special thermometers or weather stations and interpolated like air temperature. Given that both these measurements account for more variable heat sources, heat index and WBGT are better indications of heat load— the cumulative impact of heat from the environment on a person —than temperature alone. But, just like air temperature, they don’t vary much across space and, therefore, cannot always account for changes across the local environment.
A man cools himself under a water spray in Krakow, Poland. Traditional methods for measuring heat don't always take into account how much heat people can feel on a hot day. Photo by Bogdan Khmelnytskyi / iStock.These traditional methods often used to measure heat sources do not describe all the dimensions of how someone feels heat or its impact on their health, which can vary widely from person to person. Environment, for example, plays a significant role and can change the impact even within a single city. Residents of downtown Los Angeles, with its crowded city blocks and lack of green space, will experience heat differently than those on the west side of the city who might benefit from the cooling effects of the Pacific Ocean.
Each heat measurement has utility and can inform different interventions — from cool roofs to early-warning heat alert systems. However, these traditional methods of measuring heat don’t account for the full scope of how heat affects people in their neighborhoods. For city officials to ensure their interventions adequately address the growing impacts of extreme urban heat, cities should also use thermal comfort modeling.
Measuring Heat with Thermal Comfort ModelingWhen someone stands outside on a hot day, direct radiation from the sun, reflected radiation from surfaces, ambient air temperature, wind level and humidity all simultaneously affect them. Thermal comfort metrics calculate the cumulative effects of these collective heat sources, providing our most detailed assessments of human heat exposure.
If, for example, a person walks down an asphalt street with partial shade coverage from trees at noon on a hot, humid day, thermal comfort metrics provide a sense of their heat exposure, combining factors such as sunshine filtering through the tree canopy, the hot asphalt below their feet and the weather around them. If the person walks back along the same street at 6 p.m., a thermal comfort metric can predict that they’ll feel cooler because of the longer shadows and the lower air temperature, even if the heat from the asphalt may have increased.
Thermal comfort is measured using a set of instruments, including specialized thermometers and a wind meter. But, more frequently, it is calculated using three-dimensional models that consider meteorology, direct and reflected radiation, tree canopy, buildings, land use, and shade. Scientists increasingly use metrics like the Universal Thermal Comfort Index, Mean Radiant Temperature, or Physiological Equivalent Temperature to calculate thermal comfort. In Singapore, for instance, planners model thermal comfort to pilot urban design interventions that reduce heat exposure, including wind corridors, green buildings and shade that can cool the spaces where people feel the hottest.
Thermal comfort metrics are calculated at very local scales — in radiuses between one and five meters — which capture variations in shade, vegetation, surfaces and other relevant aspects of a city’s design. As a result, thermal comfort indices help scientists not only understand individuals’ heat exposure but also heat-resilient infrastructure that could potentially mitigate that exposure.
Modeled metrics are also useful in prioritizing and locating interventions. Because thermal comfort metrics use modeling, they can show the local effects of constructing a new park, planting trees, or orienting buildings to provide shade to pedestrians. Modeled air temperature can similarly inform the impacts of scaling interventions, like cool roofs, across a whole city.
In recent years, improved high-resolution data availability around the world has made it possible to calculate thermal comfort modeling more accurately and cheaply, making these metrics feasible to use alongside traditional methods. Now, scientists and policymakers have more options when assessing extreme heat: They can choose the right indicator, physical scale and time-period to look at how the city affects how hot people get and how hot they feel.
Matching the Right Metrics to Local Heat GoalsAs temperatures continue to rise in cities worldwide, interventions to mitigate extreme heat will become increasingly important. Using the right metric to evaluate the impact of these interventions is critical in considering how, where and when the changes will be effective.
Different stakeholders have varied goals related to heat. As they plan for more heat-resilient cities with better infrastructure and co-benefits for cooling across sectors, they should select appropriate metrics for measuring and informing those goals. Some policies and projects will focus on protecting human health during heat events, while others might prioritize reducing the formation of ground-level ozone or lowering burdens on energy grids. Each goal depends on a different kind of heat metric and data to help plan and prioritize its implementation.
Potential heat-related goals and tracking metricsHeat Related GoalMetrics to Inform Implementation Lower citywide temperaturesAir temperatureProtect pedestrians outdoorsThermal comfort indices Set safety limits on outdoor activitiesHeat index; wet bulb globe temperatureKeep people cool in transit stops or in public spotsThermal comfort indices Reduce indoor heat exposure and energy useAir temperature; land surface temperature of roofsReduce the formation of ground-level ozoneAir temperatureEntire cities experience heat, but so do individuals, so city officials should consider interventions that target heat at a citywide scale to move the needle on ambient outdoor temperatures while also prioritizing local- to neighborhood-scale change to impact people’s day-to-day heat exposure.
Just as different metrics are appropriate for different goals, the same is true of metrics for measuring the effectiveness of different interventions. For example, cool roofs reduce heat across a neighborhood, so their effect is best measured by looking at regional air temperature. Shade protects individuals by lowering their heat exposure, and so it can be best understood through thermal comfort metrics.
As the risks of extreme heat continue to intensify in cities, leaders and policymakers need a diverse set of tools to understand and respond to risks. Simply knowing that it’s hot in a city is not enough: Choosing the right metric for each dimension of the heat problem can point policymakers and residents toward deeper knowledge of their local challenges and potential solutions.
urban-heat-measurement.jpg Cities Urban Efficiency & Climate Climate climate science Type Explainer Exclude From Blog Feed? 0 Projects Authors Ruth Engel Eric Mackres Madeline Palmieri Eillie Anzilotti