How to donate effectively for climate action

Almost daily, we receive news of extreme weather events that are becoming more frequent or severe due to climate change. One negative record follows another.

What will it take to stop climate change and global warming? What does the 1.5 degree threshold mean? What role do donations play? And how effective can and should they be?

These are the topics of my current blog posts. In the first part I try to put the 1.5 degree Celsius mark in perspective. In the second part I look at what is needed to limit global warming. And in this third part, I explain how donations can make the most effective contribution.

Donating effectively for climate action

Philanthropy often becomes most relevant when the state and the market are unable to perform their roles adequately, as the history of the development of the welfare state or medicine has shown. Similarly, nonprofit organizations play an important role in tackling climate change, and donations are therefore an important lever for climate action. They can have an impact that far exceeds, for example, the effect of CO2 offsets or the effect of individual behavioral changes in our everyday lives. However, this applies only to the most effective actions and organizations, and requires extensive research that we and our partners are conducting. But what does this mean in practice?

What role does climate philanthropy actually play?

Global philanthropic giving for climate change mitigation by foundations and individuals is estimated at 8-13 billion US dollars per year. Compared to the more than 1 trillion US dollars in annual climate-related investments, this may not sound like much, and a significant increase would be desirable. On the other hand, even at its current level, philanthropy is already making a critical contribution to ensuring that investments are made and that they are targeted to the most important areas.

Two current challenges to climate giving are particularly noteworthy:

1. Climate change mitigation remains a small part of the charitable giving market. The volume of giving for climate action has increased in recent years, but has recently stagnated at less than 2% of global giving. In Germany, too, the share of donations for environmental protection and nature conservation (including climate) is only about 3%, according to recent surveys. By comparison, according to the same survey, 20% of donations in Germany go to the “church/religion”.
2. Giving to combat climate change is unevenly distributed and often does not focus on the most important drivers and measures for reducing future emissions. The issues that receive the most public attention are also the ones that receive the most funding, such as renewable energy, especially wind and solar. There is a similar regional imbalance. Most of the funding continues to be concentrated in the U.S. and Europe; Africa, India and Latin America together received only 12% of total foundation funding for climate change in 2022. As a result, many donations are not making as much of a difference as they could.

In addition to increasing the volume of donations, it is therefore particularly important to better target funds to the biggest levers for tackling the climate crisis in order to make the greatest possible contribution to mitigating climate change.

Where do we start?

The need to reduce emissions in all sectors worldwide to achieve net zero makes the task very complex and offers many different starting points. However, this complexity does not mean that every action is equally impactful, and that it does not matter where to start. In climate action, too, we see large differences in the relevance of different fields of actions and in the cost-effectiveness of individual measures and different organizations.

How do we identify particularly promising areas for action?

In line with our general methodology, our research partners and we seek to systematically identify sectors and countries that are particularly important (i.e., produce a lot of emissions relative to other areas) and for which promising approaches to tackling emissions are available (i.e., they are tractable) but receive little attention (i.e., tend to be neglected).

At present, these criteria (still) apply, for example, to some high-temperature processes in industry, aviation and shipping, the cement industry, the development of energy production in emerging countries, and alternatives to animal products in agriculture.

Geographically, it is important that we focus on global greenhouse gas (GHG) emissions, taking into account future developments and emissions drivers in all countries, as mentioned in previous parts of this series. Effective climate giving is not about the most effective mitigation measures in Germany or Europe, but about the greatest possible reduction in GHG emissions globally - because that is the greatest possible contribution to climate action that a donation can make. From this perspective, in addition to China and the U.S., which are currently the largest GHG emitters, emerging economies such as India come into focus.

How do we identify high leverage opportunities?

The landscape of possible and necessary fields of action and individual levers has been systematized and in some cases prioritized, e.g. by the Systems Change Lab or Project Drawdown. Many measures can be implemented quickly (e.g., solar and wind energy). Others require further research and pilot projects (e.g., advanced geothermal or carbon removal).

In addition to focusing on sectors and countries where a large amount of emissions can be reduced or avoided, we also look for promising “impact multipliers”. These are activities that can have an outsized impact and therefore increase the cost-effectiveness of your donation. I would like to describe two of them in more detail.

Multiplier 1: Changing the policy environment

One such particularly promising lever for change is “advocacy”—that is, “lobbying for a good cause”—which focuses on the political framework. There are two reasons for this:

First, much of our ecological footprint - the way we live, work, eat and travel today - has been shaped over decades by the political environment of our societies and economies. Many things are effectively “locked in” from an individual perspective - without public transportation and bike lanes, it is difficult to give up your car; without charging stations, the switch to electric vehicles hardly works; without attractive meat-free alternatives, reducing meat consumption remains a difficult choice for many. Many of the building blocks of our society and economy can only be made truly sustainable through systemic change; individual behavior change is important, but often (very) limited in scope and impact.

Second, philanthropic giving represents only a fraction of the public and private investment in climate change mitigation. Donations should therefore be used to ensure that the vast public and private resources are used as effectively as possible. Two examples:

1. For ~100 euros you can buy and retire an EU emissions allowance and thus reduce the amount of allowances available to European industry by 1 ton of CO2 - a ton that European industry then needs to save elsewhere. But if you instead use these 100 euros to support an organization that is successfully working to reduce the EU-wide cap of allowances (just as the EU agreed to in 2022), then the market may be reduced by millions of tons of CO2.
2. For 1,300 euros you can pay Climeworks to capture 1 ton of CO2 from the air and store it underground permanently. This is a small contribution to testing and scaling up the new Direct Air Capture (DAC) technology. However, if you instead use the 1,300 euros to support a non-profit that successfully advocates for more government funding of DAC, billions of dollars in additional funding will be available.

Such strategies are inherently uncertain and do not always lead to success. But they don’t have to: their leverage is so great that it is sufficient for organizations to achieve major successes on a fairly regular basis. The impact of a single success is so great that the inevitable failures along the way can be “paid for” and still result in a much higher overall return on investment and cost effectiveness.

Multiplier 2: Measures to influence global emissions

Another impact multiplier is to focus on measures that also contribute to reducing or avoiding emissions outside the country or region in which they are implemented. In these cases, interventions in countries that only account for a relatively small proportion of (future) global GHG emissions can nevertheless lead to major emissions reductions globally.

One example of this is investment in the research and development (R&D) of new climate action technologies in the USA and Europe. While the share of these regions in global greenhouse gas emissions is declining, their capacity for innovation is increasing. The U.S. and Europe lead the world in their ability to drive the development of new, clean technologies, both in the early stages of R&D and in the later stages of deployment. Investments in R&D in the U.S. and Europe therefore pay global dividends by making new technologies available and driving down their costs worldwide.

A good example is Germany’s subsidies for the solar industry at the turn of the millennium. From a purely national perspective, this was a very expensive measure with limited direct CO2 savings. From a global perspective, however, the subsidies played a major role in reducing the price for solar cells by 90 percent between 2010 and 2020, and in rapidly increasing the amount of electricity generated from solar energy worldwide. This is why experts still talk about the “German gift to the world”.

Conclusion

The multi-stage approach described above has repeatedly enabled our research partners and us to identify organizations that reduce or avoid 1 ton of CO2 or more for every euro donated to them - by focusing on the most promising areas of action and the highest impact interventions, and by being particularly efficient in implementing them. The following illustrates the comparative impact of such a donation:

• The cost of (trustworthy) carbon offsets is typically in the range of 23-25 euros per ton of CO2 with leading German organizations such as myclimate or Atmosfair.
• The CO2 price for gasoline, heating oil, and gas in Germany – i.e., the price that is used to price (some) external effects of emissions while creating incentives to switch to climate-neutral alternatives – rose to 45 euros per ton of CO2 at the beginning of 2024.
• In 2023, prices in the EU Emissions Trading System (EU ETS) averaged just under 84 euros per ton of CO2. This is the price industry is willing to pay (at least for now) because it is below its potential abatement costs.
• According to the German Federal Environment Agency, the social costs of GHG emissions, i.e. the cost to society of “doing nothing”, already amounted to more than 200 euros in 2022.

Even with a very conservative estimate, an effective donation with an estimated abatement effect of about 1 ton of CO2 per euro is thus at least 15-30x^[1] more effective than typical alternatives.

Donate now. Or go back to the first article or second article of the series.