Geothermal Criteria
The Geothermal Eligibility Criteria
and Background Document of the
Climate Bonds Standard &Certification Scheme
Updated: April 2023
NOTE: These Criteria can be used to certify Use-of-Proceeds Instruments and Assets, per the
Climate Bonds Standard v4.0

Revision

Date

Summary of Changes

Rev. 1.1

13 April 2023

Revisions to enable Use-of-Proceeds Instruments and Assets
Certification in line with release of CBS v4.0

Rev. 1.0

May 2018

Final for IssuanceClimate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Definitions
Applicant: The term or name for any potential bond issuer, or non-financial corporate entity that might seek certification under the
Buildings Criteria.
Capital Expenditure (CAPEX): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants,buildings, technology, or equipment.
Certified Entity: The entity or part thereof which is being certified under the Climate Bonds Standard. Currently, Entity Certification
is limited to non-financial Entities or segregated segments thereof, for which the Climate Bonds Initiative has Climate Bonds
Standard Sector Criteria for Entity Certification.
Climate Bonds Initiative (Climate Bonds): An investor focused not-for-profit organisation, promoting large-scale investments thatwill deliver a global low carbon and climate resilient economy. Climate Bonds seeks to develop mechanisms to better alignthe interests of investors, industry and government to catalyse investments at a speed and scale sufficient to avoid dangerous
climate change.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify green bonds theproceeds of which are being used to deliver climate change solutions. This may be through climate mitigation impact and/or
climate adaptation or resilience. The CBS is made up of two parts: the parent Climate Bonds Standard and a suite of sector
specific eligibility Criteria. The parent standard covers the certification process and pre- and post-issuance requirements for
all certified bonds, regardless of the nature of the capital projects. The Sector Criteria detail specific requirements for assets
identified as falling under that specific sector. The latest version of the CBS is published on the Climate Bonds website.
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34 trillion of assets undermanagement. The CBSB is responsible for approving (i) Revisions to the CBS, including the adoption of additional sector
Criteria, (ii) Approved verifiers, and (iii) Applications for Certification of a bond under the CBS. The CBSB is constituted,
appointed, and supported in line with the governance arrangements and processes as published on the Climate Bonds website.
Climate Bond Certification: allows the applicant to use the Climate Bond Certification Mark in relation to that bond. Climate Bond
Certification is provided once the independent CBSB is satisfied the bond conforms with the CBS.
Critical interdependencies: The asset or activity’s boundaries and interdependencies with surrounding infrastructure systems.
Interdependencies are specific to local context but are often connected to wider systems through complex relationships that
depend on factors ‘outside the asset fence’ that could cause cascading failures or contribute to collateral system benefits.
General Corporate Purpose Bond: a bond the proceeds of which are not ringfenced for specific assets or activities, but which financegeneral OPEX and CAPEX of a company without disclosing the exact uses. SLBs are examples of general corporate purpose
bonds.
Green Bond: A green bond is a bond of which the proceeds are allocated to environmental projects or expenditures. The term
generally refers to bonds that have been marketed as green. In theory, green bonds proceeds could be used for a wide varietyof environmental projects or expenditures, but in practice they have mostly been earmarked for climate change projects.
Industry Working Group (IWG): A group of key organisations that are potential applicants, verifiers and investors convened by
Climate Bonds. The IWG provides feedback on the draft sector Criteria developed by the TWG before they are released for
public consultation.
Investment Period: The interval between the bond’s issuance and its maturity date. Otherwise known as the bond term or tenor.
Operating Expenditure (OPEX): Expense a business incurs through its normal business operations. Often abbreviated as OPEX,
operating expenses include rent, equipment, inventory costs, etc.
Sustainability-Linked Debt (SLD): Any debt instrument for which the financial and structural characteristics can vary depending onwhether the issuer achieves predefined Sustainability/ ESG objectives. Such objectives are measured through predefined KPIs
and assessed against predefined performance targets. Proceeds of SLD are intended to be used for general purposes.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry and NGOs convened by
Climate Bonds. The TWG develops the Sector Criteria - detailed technical criteria for the eligibility of projects and assets aswell as guidance on the tracking of eligibility status during the term of the bond. Their draft recommendations are refined
through engagement with finance industry experts in convened Industry Working Groups (see below) and through public
consultation. Final approval of Sector Criteria is given by the CBSB.
Use-of-Proceed (UoP) Bond: a bond the proceeds of which are ringfenced for specific assets and activities. Green bonds, blue
bonds, and transition bonds are examples of UoP bonds.

Geothermal Criteria- Climate Bonds Initiative

Page | 2

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Table of Contents
Definitions

2

1

Purpose of this document

52Geothermal energy’s contribution to climate change mitigation

5

3

Geothermal emissions

6

3.1

Direct emissions

6

3.2

Lifecycle emissions

6

3.3

Implications for criteria

7

4

Other social and environmental issues associated with geothermal

85Proposed eligibility criteria for geothermal power generation

9

5.1

Overview

95.2

Criterion 1: Emissions threshold10

Estimating direct emissions

11

5.2.1
5.3

Criterion 2: Emissions mitigation technology and/or plant design

11

5.4

Criteria 3 & 4: Environmental, health, safety and social criteria

126Potential use of CDM appraisals

13

7

Pure direct heat geothermal projects

138

Summary

14

Appendix A: Estimates geothermal power station emissions

15

Appendix B: Calculation of Combined Margins

17

Appendix C: Proposed method for estimating emissions

21

References

22

Geothermal Criteria- Climate Bonds Initiative

Page | 3

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

List of Figures
Figure 1: Decision tree structure of the criteria
Figure 2: Decision tree for estimating direct emissions

9
21

List of Tables
Table 1: Overview of the proportions of global geothermal capacity in various emissions brackets according to [1]Table 2: Summary of estimates from the literature of direct CO2 emissions from geothermal power plants
Table 3: Illustrative worked example of the calculation of the operating, build and combined margins for Indonesia
Table 4: Examples for various geothermal power plants with differing illustrative combined margin estimates

15
16
19
20

List of Appendices
Appendix A: Estimates geothermal power station emissions
Appendix B: Calculation of Combined Margins
Appendix C: Proposed method for estimating emissions

Geothermal Criteria- Climate Bonds Initiative

15
17
21

Page | 4

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

1 Purpose of this document
The Climate Bonds Initiative (CBI) is an international, investor-focused not-for-profit organization aiming to develop tools to mobilize
the bond market for climate change solutions. The Climate Bonds Standard is a screening tool for investors and governments whichallows them to easily prioritize climate and green bonds with confidence that the funds are being used to adapt to and/or mitigate
climate change on an ambitious decarbonisation trajectory.
The Green Bond market is developing rapidly and in advance of widely accepted standards for use of proceeds, project evaluationand ongoing reporting. Correspondingly, there have already been calls for green bonds to be issued in relation to geothermal
projects. CBI is seeking to develop a standard for bonds linked to geothermal projects in response to current, and in anticipation of
future, demand.
This document sets out:••

Our understanding of the issues surrounding certification of geothermal projects, gained from discussion with industry
experts and a review of relevant literature available to date.
A set of proposed criteria for certifying geothermal power generation projects.

Certification of geothermal projects is less straightforward than for other renewables (see below). We emphasize that the criteria
may be adapted either due to feedback or future developments in the geothermal sector. To our knowledge, detailed low-carbon
criteria specific to geothermal projects have not been previously attempted. Therefore, this standard should be recognized as astarting point.
While the Technical Working Group (TWG) has done its best to present a comprehensive first version of the Standard, additions
and revisions are welcomed and encouraged as the Standard evolves. We recommend that the Standard be reviewed periodicallyin order to make it as robust, credible and practical as possible.

Development of low carbon standards for geothermal is an emerging area which has notpreviously received much attention.

2 Geothermal energy’s contribution to climate change
mitigation
Geothermal has conventionally been constrained to settings where water is heated from naturally fractured rock, creating steam
or hot water that flows to the surface when a well is drilled. This has allowed it to form a significant proportion of energy supply in
geothermally-active regions, but otherwise has limited its contribution to decarbonizing the world energy supply. Nevertheless, it
has been estimated that current global geothermal technical potential could be somewhere in the region of 10% of world primaryenergy consumption1.
Enhanced geothermal systems (EGS) technologies are currently being developed that create an artificial geothermal reservoir fromwhich heat can be extracted where there is hot rock but little natural permeability or fluid saturation [16]. The elimination of somegeologic limitations creates the potential to greatly expand geothermal’s geographical range. EGS has various technical, economic
and practical barriers to overcome before it could be widely commercially deployed. The technology is in the demonstration phase

1 Based on [9].

Geothermal Criteria- Climate Bonds Initiative

Page | 5

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

and could be commercial within a decade or two. If successful, the IPCC estimates that EGS could increase global geothermal
technical potential by an order of magnitude [10].
It is therefore conceivable that geothermal energy will play a much greater role in climate change mitigation efforts than it has todate. Investment in geothermal energy should be supported and incentivized to accomplish this. Standards and certification forinvestment products linked to geothermal projects could play a clear role in directing funds towards them. The range of assets
which this would cover would likely include geothermal power stations, direct heat applications (such as district heating), anddedicated transmission lines.
The low carbon policy and investment communities should anticipate the much greater
contribution to climate change mitigation that geothermal could make in future.

3 Geothermal emissions
3.1 Direct emissions
However, with this aspiration must come awareness that geothermal power plants can be responsible for greenhouse gas emissions.
Direct emissions of carbon dioxide (and to a lesser extent methane) result from the release of naturally occurring non-condensable
gases (NCGs) from the geothermal fluid during the energy extraction process2. Concentrations of NCGs in the fluid vary based on
the geology of the geothermal field.
Geothermal power plants are located in areas of natural geological activity with naturally high CO 2 fluxes released through different
conduits [2]. Nevertheless, the existence of a facility will affect the rate at which these naturally occurring gases are released to theatmosphere [2,5,8]. Any quantity of greenhouse gases, which would not have been released in the absence of the facility, can beconsidered additional and therefore anthropogenic3 [7]. Our understanding is that it is on this basis that geothermal emissions
estimates are presented in the literature. Any emissions figures used in this document should be similarly interpreted asanthropogenic in the sense that they contribute to the stock of greenhouse gases in the atmosphere resulting from human activity
in addition to any natural releases. Carbon emissions from soil degassing and other natural conduits in the setting would not be
considered within the scope of these emissions.
Geothermal plants can have virtually no direct emissions resulting from operational production. However, the potential range ofdirect geothermal emissions is vast; according to the literature we have surveyed, 4-1300 gCO2/kWh (see Appendix A).
Historically, about two-thirds of global geothermal capacity has released direct emissions of less than 100 gCO 2/kWh, while a third
has been above this figure [1]. Very high-emitting examples are rare, but, there are examples in the USA, New Zealand and Turkey[4,5,11]. In order to develop criteria that are robust to all eventualities, it is important to exhibit reasonable caution and be awareof such cases.

3.2 Lifecycle emissions
A lifecycle estimate would include both direct emissions resulting from plant operation as well as all other relevant 'cradle-to-grave'emissions attributable to the facility, including construction, decommissioning, and energy used for operation.

2 Emissions due to soil degassing, while acknowledged, are little understood and ignored here for practical purposes.
3 For example, it has been estimated that 8-16% of the CO2 emissions from geothermal systems in Iceland are attributable to the operation of geothermal power

plants [2]Geothermal Criteria- Climate Bonds Initiative

Page | 6

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Geothermal plants can be understood as belonging to one of three lifecycle emissions categories, in comparison with othertechnologies:
1.
2.
3.

Low: less than 100 gCO2/kWh; comparable to other low carbon alternatives, in the best cases negligible
Moderate: 100-365 gCO2/kWh; higher emitting than other renewables, but still an improvement on fossil fuel power plant
alternatives
High: over 365 gCO2/kWh4; comparable to a fossil fuel power station; may however still be an improvement on fossil fuelcarbon intensity within a given country.

With respect to the other components of lifecycle emissions - emissions resulting from construction, energy use, etc. - there is very
little information or transparency in the literature (see review in [5]). The few studies which do present details on these components
suggest that they can be up to (but not necessarily typically) 24% of overall lifecycle emissions, or in absolute terms up to (again,
not typically) 58 gCO2/kWh [17,18].

3.3 Implications for criteria
There are two main implications for the criteria. Firstly, given the potentially wide range of emissions, it is key that a standard would
be able to distinguish those facilities that have, as the IPCC put it, “significant environmental advantages relative to a referenceelectricity mix dominated by fossil fuel sources” [8]. This means certifying geothermal plants that are a big improvement on fossil
fuel alternatives. But also there is a need to avoid certifying moderate-to- high emitting geothermal facilities that would be likely
to displace lower-emitting renewables. The aim is to certify geothermal investments suitable for a portfolio of ambitious low carbon
investments, consistent with meeting a radical decarbonisation trajectory which limits global temperature rises to 2˚ Celsius.
This requires establishing a counterfactual against which to compare geothermal emissions which:(i) takes the possibility of displacement into account; but also (ii) compares geothermal fairly with alternatives by including othernon-combustion emissions. In practice, the latter means incorporating an estimate of greenhouse gas emissions due todecomposition of biomass from hydroelectric reservoirs.
The lack of information on lifecycle emissions from geothermal in the literature implies two things. Firstly, that methodologies toassess lifecycle emissions as a whole from geothermal are underdeveloped and unlikely to be practicable for the purposes of theStandard. Secondly, that it is infeasible to compare geothermal directly to a counterfactual in terms of lifecycle emissions. We
therefore propose to base the criteria on direct emissions only. Direct emissions represent a lower bound estimate of lifecycle
emissions. While acknowledging this, for want of relevant information to adjust estimates, we define a low-emitting geothermal
facility as one with direct emissions of less than 100 gCO 2/kWh.
The challenge is to develop criteria for certifying geothermal projects that are robust, yet limit transaction costs by being simple
and transparent. We are not aware of any pre-existing standards for low carbon certification specific to geothermal. In fact it isfair to say that scientific understanding of geothermal emissions is, with respect to some issues, limited and still evolving. We
therefore wish to emphasize that this document and these criteria are part of a broader learning process and may be subject t orevision as the evidence base develops. Further, we hope that facilities certified under this standard can contribute to this evidence
base, reflected in the requirements for measuring emissions (see Criterion 1).
The two key determinants of a geothermal project’s potential to reduce emissions compared tothe counterfactual are: its specific geological setting and the carbon intensity of the technology
it will be replacing.

4 This figure represents the lowest possible lifecycle emissions of a fossil fuel power station, that of a very efficient combi ned-cycle gas turbine power station [15].

Geothermal Criteria- Climate Bonds Initiative

Page | 7

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

4 Other social and environmental issues associated withgeothermal
Geothermal projects can have a number of other environmental impacts including [10,12]:
•
•
•
•
•

Other air emissions, e.g. ammonia and hydrogen sulphide
Some degree of surface water extraction which may be returned to water bodies with increased heat content
Potential to contaminate groundwater by the presence of hazardous chemicals, e.g. arsenic, in geothermal fluid
Reinjection or disposal of condensate which is more chemically concentrated than the original fluid
Contaminants from drilling activities

All of these impacts are generally considered manageable with proper procedures and regulation.
In addition, EGS raises concerns regarding contamination of surface waters or soil; and noticeable earthquakes which, very
occasionally, damage property (induced seismicity). Experts believe that earthquake damage can be avoided with propermonitoring. There are also concerns that EGS has high water requirements and may be unsuitable in water-stressed areas.
A standard would need to ensure that other potential environmental impacts and concerns overinduced seismicity are being addressed according to internationally recognized best practice.

Geothermal Criteria- Climate Bonds Initiative

Page | 8

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

5 Proposed eligibility criteria for geothermal power generation
5.1 Overview
The emissions of geothermal power plants are generally better-documented and understood than direct heat applications. For thisreason, the criteria below apply only to power generation, with the aspiration to develop standards for direct heat projects at alater date (see Section 7).
The objectives of the numbered criteria are to:
1.
2.
3.
4.
5.

Distinguish low emitting from high-emitting geothermal applications and ensure emissions are well below acceptable levels
Ensure moderate-to-high emitting geothermal which is likely to displace lower-emitting renewables is not certified
Ensure geothermal can still be certified in a country with a negligible fossil fuel alternative.
Where emissions are too high, or unknown, give credit to mitigation technologies which will reduce them to acceptablelevels.
Exclude projects that do not meet acceptable standards in terms of environmental impact, health, safety and induced
seismicity.

Figure 1 summarizes the decision tree represented by the criteria.

Figure 1: Decision tree structure of the criteria

Geothermal Criteria- Climate Bonds Initiative

Page | 9

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

5.2 Criterion 1: Emissions threshold
Criterion 1 requires the direct operational carbon intensity of the geothermal power plant to be lower than a threshold. Carbon
intensity is measured in gCO2 per kilowatt-hour. For ease of estimation and verification, as explained in Section 3, only directemissions are included, that is, non-condensable CO2 released from the geothermal fluid due to the operation of an electricitygenerating or co-generating plant, determined by geological setting.
The appropriate threshold is based on the ‘combined margin’ metric used by the UNFCCC and IFC for assessing the emission factor
of an electricity system. The metric acts as a counterfactual emission intensity for comparison with renewable projects (i.e. indicateswhat emission intensity would be in the absence of the renewable project). The metric combines estimates of the carbon intensityof the existing grid (the ‘operating margin’) and its future intensity given recent trends (the ‘build margin’). We propose a simplified
version with lighter information requirements based on publicly available data. This is justified by the fact that, while the UNFCCC
and IFC need very detailed calculations because they may be assigning monetary payments (for example, via the Clean Development
Mechanism) to quantified carbon savings, our purpose is to simply make a binary ‘yes/no’ decision on whether a facility can beconsidered a low carbon asset.
Use of the combined margin addresses the potential issue of displacement of other renewables by moderate or high emitting
geothermal through the build maring component. The aim of the criterion is to encourage geothermal wherever it is low-emitting
or a significant improvement on fossil fuel alternatives (which it will be in the majority of cases), while screening out cases where it
is higher emitting than alternatives or an insufficient improvement to be deemed a low carbon investment.
Facilities with direct emissions of less than 100gCO2/kWh are deemed to be low emitting, which is comparable with other low
carbon options (renewables or nuclear) on a lifecycle basis.
The combined margin calculation is set out in Appendix B, which also contains worked examples of facilities in contexts, which
would, and would not, pass Criterion 1.
Criterion 1: Emissions threshold
Criterion 1
Exclude the project if:

𝑑𝑖𝑟𝑒𝑐𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑐𝑎𝑟𝑏𝑜𝑛 > 𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑙𝑦 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑡ℎ𝑟𝑒𝑠ℎ𝑜𝑙𝑑 (gCO2/kWh)- WHERE annual direct CO2 emissions

𝑐𝑎𝑟𝑏𝑜𝑛 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 = 𝑛𝑎𝑚𝑒𝑝𝑙𝑎𝑡𝑒 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦5 × 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑓𝑎𝑐𝑡𝑜𝑟6- AND -

𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑙𝑦 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑡ℎ𝑟𝑒𝑠ℎ𝑜𝑙𝑑 =combined margin of national grid(see Appendix B) ambition margin- or 100 gCO2/kWh, whichever is higher
In the case of a co-generating plant, the denominator of the carbon intensity formula should also include a term for end
use energy in heat applications.
Applicants must also undertake to measure field emissions before and after the construction of a new facility, or therealization of any other project that could alter the rate of release of NCGs.

5 Nameplate capacity and all other quantities should indicate the net output of the plant, that is overall output less any electricity used to power the plant.
6 Typically 85-90% for geothermal plants

Geothermal Criteria- Climate Bonds Initiative

P a g e | 10

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

The ambition margin is likely to be determined through an iterative process, and be country-specific based on available
information on what is typical, and what ambitious, for geothermal plants in the relevant country. It may be zero incountries where the combined margin is already low - geothermal power stations would simply need to outperform the
combined margin. In countries where the combined margin is high, investors will need reassurance that the facility
significantly outperforms probable fossil fuel equivalents, therefore it will be greater than zero. See Appendix B worked
examples for further discussion.
Facilities with negligible or low direct emissions, that is less than 100 gCO2/kWh, are deemed to be comparable with otherlow carbon options (renewables or nuclear) in lifecycle terms and need not be compared with the threshold. This allows
geothermal facilities in countries with very low fossil fuel capacity and a resulting very low combined margin, such as
Iceland, to still be certified.

5.2.1 Estimating direct emissions
In terms of the practicalities of estimating carbon intensity, gas and fluid chemistry sampling are routine as part of the site researchand exploration necessary for plant design. An initial estimate of emissions could be made at the point in the exploration process
at which full-size production wells have been successfully drilled and are producing at a sufficient flow rate for power generation.
Technical advice on estimation of direct emissions, which we have received from geothermal industry experts, is presented inAppendix C.
The extent to which a geothermal facility accelerates or increases the release of NCGs, thus causing anthropogenic emissions, may
not in all cases be conclusively settled. We accept the possibility that estimates may be refined. For this reason, it is a requirementof certification that field emissions are measured both before and after the construction of a new facility, or the realization of any
other project that could alter the rate of release of NCGs. In the event that a peer- reviewed study shows that anthropogenic
emissions can be deemed to be zero or to have changed, materially affecting the decision to certify or not certify an investment,
certification will be reviewed It is hoped that this requirement will also add to the currently limited scientific evidence base on thisissue.

5.3 Criterion 2: Emissions mitigation technology and/or plant design
Apart from a site’s geological characteristics, technology and/or plant design can also influence the degree to which noncondensable gases are released to the atmosphere.
For example, in the case of a binary system, a second working fluid is used to drive the turbine with the result that the geothermal
fluid can be returned to the reservoir in (in most cases) a fully closed loop, which prevents release. However, in rare cases in abinary system NCGs may be vented rather than re-injected with the rest of the fluid7. Therefore, at present we state Criterion 2 asrequiring the total reinjection of the geothermal fluid into the reservoir, either via a binary system or some other plant design. This
criterion may be updated to include further suitable technologies in the light of later technical advice.

7 For example, this is the case at the Ngawha plant in New Zealand [6].

Geothermal Criteria- Climate Bonds Initiative

P a g e | 11

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Criterion 2: Emissions threshold
Criterion 2(Only applies to cases which have not passed Criterion 1)
Include the project (subject to further criteria) if mitigation technologies will be deployed at the facility such that releasesof NCGs to the atmosphere are rendered negligible.
At the current time, this is taken to mean any plant design (binary, combined cycle or other) that incorporates total fluid
reinjection8. The list of technologies that are assumed to reduce emissions to negligible may be expanded as the Standard
matures.

5.4 Criteria 3 & 4: Environmental, health, safety and social criteria
All projects associated with Climate Bonds must comply with the environmental regulations of the host country. In addition to thisrequirement we propose additional criteria to enhance EHS and social performance for all projects, and specifically for EGS projects.
The IFC has detailed guidelines9 for managing effluents, air emissions, solid wastes and water extraction which projects would be
required to follow. This would provide extra assurances where national regulation is lacking or insufficient.
Criterion 3: Emissions threshold
Criterion 3••

Projects are required to comply with best practice international guidelines / standards on environmental, health andsafety (EHS) for geothermal power generation (e.g. IFC/World Bank). As these detailed EHS guidelines containguidance on air emissions, note that compliance with them is a necessary but not sufficient requirement forcertification, as the emissions performance required for Climate Bonds certification is more stringent. In addition,
the IFC have advised us that the applicability of EHS Guidelines should be tailored to the hazards and risks establishedfor each project on the basis of the results of an environmental assessment in which site-specific variables are taken
into account.
Meeting IFC Performance Standards on Environmental and Social Sustainability10 are strongly recommended (e.g.
IFC PS5 Land Acquisition and Involuntary Resettlement, or IFC PS6 Biodiversity Conservation and Sustainable
Management of Living Natural Resources).

Criterion 4: Emissions threshold
Criterion 4
Any Enhanced Geothermal Systems project must comply with US Department of Energy Protocol for Addressing Induced
Seismicity Associated with Enhanced Geothermal Systems10.

Tightening and incorporating experience in monitoring and addressing the EHS and social
impacts of geothermal would provide further assurances over the environmental impacts ofcertified projects.

8 It has been suggested that processes which capture the CO2 for industrial use should also be considered under this criterion to result in zero emissions.

However,
CO2 captured for, for example, the soft drink industry, will still be released to the atmosphere, and this practice would most likely not result in any net reduction inemissions overall.
9 As set out in IFC environmental, health and safety guidelines for geothermal power generation available on the IFC website: www.ifc.org/EHSGuidelines.
10 Protocol for Addressing Induced Seismicity Associated with Enhanced Geothermal Systems (energy.gov)

Geothermal Criteria- Climate Bonds Initiative

P a g e | 12

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

6 Potential use of CDM appraisals
Projects that are accredited under the Clean Development Mechanisms by definition undergo a process of defining and estimating
the emissions likely to be due to both the project and the counterfactual, using a method very similar to the one proposed in thisdocument. A criterion automatically accepting such projects could at a stroke relieve the burden of estimation and verification
procedures outlined for Criteria 1 & 2.
Criterion 5: Potential Use od CDM Appraisals
Criterion 5(Where applicable supersedes Criteria 1&2)
If a Project Design Document (PDD) relating to the geothermal project has been reviewed and registered under the Clean
Development Mechanism, the project will be accepted without need to comply with Criteria 1&2, subject to scrutiny of
the PDD, and unless any serious concerns have been raised subsequent to registration.

This criterion will need to be modified to apply to any new mechanism(s) replacing the CDM in the wake of the Paris Agreement. In
addition, because only projects in Non-Appendix A countries have been eligible under the CDM, the geographical scope of thiscriterion is limited. Criteria 1& 2 would still need to be deployed for projects in other cases.

7 Pure direct heat geothermal projects
Developing criteria for direct heat projects is more difficult given that the established protocols described above and in Appendix B
for estimating counterfactual emissions may lack equivalents. Direct heat projects and emissions are less documented in theliterature, and in particular operational emissions. The evidence suggests lifecycle GHG emissions for pure direct heat projects in
the range of 14-202 gCO2e/kWh [10]. This compares with around 180 gCO2e/kWh for combustion of natural gas11. Reasons why
direct heat project emissions may be more difficult to estimate may include:••

Less necessity to understand the chemical properties of the geothermal fluid for engineering reasons
Need to factor in indirect emissions from electricity for geothermal heat pumps

Criteria for pure direct heat projects are not included in this document but could be developed at a later stage with better
understanding of these issues.

11 UK Department for Environment, Food and Rural Affairs conversion factor www.ukconversionfactorscarbonsmart.co.uk/

Geothermal Criteria- Climate Bonds Initiative

P a g e | 13

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

8 Summary
Geothermal energy could potentially play a much greater role in decarbonizing the world’s energy supply compared to pastexperience. However, there is a need to balance efforts to promote it with a recognition that some plants in some locations canhave high greenhouse gas emissions.
The criteria seek to filter out those plants that would have higher emissions than likely alternatives, through a combination of:•••

Estimating emissions via a simple methodology which aims to minimize workload and cost over what is already routine inproject development;
Allowing for the effect which mitigation technology can have on emissions;
Using a metric, which will flag up when moderate-to-high emitting geothermal projects would be likely to displacerenewable capacity, in order to encourage the lowest-carbon feasible technological option for a given context to be
pursued.

Additional criteria are proposed to limit environmental, health, safety and social impacts.
Criterion 5 describes a possible approach to include projects that have successfully registered under the Clean Development
Mechanism. However, standard criteria would need to be retained to assess projects in Appendix A countries.

Geothermal Criteria- Climate Bonds Initiative

P a g e | 14

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Appendix A: Estimates geothermal power station emissions
Overview of estimates of geothermal power station emissions from the literature
The last global overview of carbon emissions from geothermal power stations seems to have been Bertani and Thain (2002) [1],which provided information on 85% of global geothermal capacity. While it is not ideal to refer to a study that is so old, there does
not appear to be a more recent, updated comparable study. Table 1 shows the proportion of global geothermal capacity in various
emissions brackets according to this study.
Table 1: Overview of the proportions of global geothermal capacity in various emissions brackets according to [1](gCO2/kWh)% globalcapacity

0-50

35%

Comparable with the best low carbon alternatives

50-99

28%

Comparable with, or slightly higher(*) than, less good low

Direct emissions

Comments

carbon alternatives (e.g. nuclear)
100-199

13%

Not as good as other low carbon alternatives, high end comparablewith direct combustion of natural gas (~180
gCO2/kWh)

200-49921%

Higher emitting than direct combustion of natural gas, upper half
comparable with CCGT power station

500+

3%

Comparable with higher-emitting fossil fuel power station(*) Note:

As described in Section 3, direct emissions represent a lower boundestimate of total lifecycle emissions. A full lifecycle estimate for directcomparison with other technologies would be higher than the directemissions shown here.

These figures indicate that, at least historically, up to around two-thirds of geothermal capacity is comparable to other renewables.
But they also indicate that investors should be aware that geothermal power has the potential to be higher emitting than otherrenewables, or even comparable to fossil fuel power stations. Table 2 presents further estimates from the literature, for comparisonand geographical breakdown.

Appendix

P a g e | 15

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Table 2: Summary of estimates from the literature of direct CO2 emissions from geothermal power plants

Country and/or
Plant
International

Ref(gCO2/kWh)

Weighted average

122

1

Range

4-740

1

binarydry steamflash

negligible
27

3

Weighted average

98

4

Range

11-3704

Weighted average

80-1005,6Range

30-5705

Icelandrange

26-181

2

Kizildere plant, Turkey

emissions if plant were not used to
produce industrial grade CO2

1,300

USA

average:•••

California (*)

New Zealand180(*) Note:

Appendix

Estimates

Quantity5

As described in Section 3, direct emissions represent a lower boundestimate of total lifecycle emissions. A full lifecycle estimate for directcomparison with other technologies would be higher than the directemissions shown here.

P a g e | 16

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Appendix B: Calculation of Combined Margins
Calculation of Combined Margin (used in Criterion 1) and worked examples
We adopt the approach taken by the UNFCCC and IFC [19,20] in using the combined margin emission factor as the baseline carbon
intensity of the national electricity system against which the carbon intensity of geothermal facilities should be compared. The
combined margin is used by UNFCCC in assessing Clean Development Mechanisms proposals. It is defined as follows:

CM = weight OM × OM + Weight BM × BM
where:
CM is the combined margin;
OM is the operating margin, the direct emission factor of existing power plants;
BM is the build margin, a projected direct emission factor of the most likely forthcoming additional capacity; andWeight OM, Weight BM are weights summing to 1 reflecting the relative importance of these two factors.
We propose the following modifications to the OM and BM:•••

In the CDM methodology [20], there are different options for calculating the operating and build margins. The information
requirements are quite high, and the formula relatively complicated for some of these. We recognize the importance of
precise information in calculating these quantities when monetary payments will be attached to estimated carbon savings,
as with the CDM. However, the purpose of the Climate Bonds Standard is to act as a simple screening tool, and it isimportant that information requirements are kept relatively light. We propose using the simplest option (4) for estimating
CO2 from combustion.
Non-combustion direct greenhouse gas emissions from renewables are not included in the OM and BM calculations in [19]and [20]; that is CO2 and methane emissions from decomposition of biomass in hydroelectric reservoirs, as well as
geothermal emissions. In order to compare like with like, we propose to include estimates of these in our modified
calculation. However, data is lacking on these emissions for many locations, and where this is the case, the methodology
suggests reasonable proxies based on the available data.
The CDM Methodology bases the build margin on a sample of the five most recent power units to have started to supply
the grid, as representative of ongoing trends in capacity. In order to make the methodology as transparent and accessible
as possible, we use EIA data to derive the average annual increase in generation of different plant types as representativeof ongoing trends.

The formulae for the OM, BM and CM are then as follows.
CM = shareFF × EFFF + shareH × EFH + shareG × EFG + shareO × EFO
where
EFFF is the emissions factor (in gCO2/kWh) of fossil fuel plants in the country, taken from the International Energy
Administration CO2 Emissions from Fuel Combustion series;
EFH is the estimated emissions factor of hydroelectric plants in the country, i.e. direct emissions from decomposition inhydroelectric reservoirs, based on the most comprehensive international assessment of these emissions to date [23];EFG is the estimated emissions factor of geothermal plants in the country, based on any available relevant literature onthese plants; if none is available, the international average of 122 gCO2/kWh (see Table 2) is used;
EFO is the emissions factor of all other renewables and nuclear, assumed to be zero;
shareFF, shareH, shareG, shareO are the shares of annual electricity generation from each source, calculated from US Energy
Information Administration International Energy Statistics.

Appendix

P a g e | 17

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

BM=

growthFF
growthTOT

×

EFFF

+

growthH
growthTOT

×

EFH

+

growthG
growthTOT

× EFG

+

growthO
growthTOT×

EFO

where:
growthFF, growthH, growthG, growthO, growthTOT are the average annual increase of fossil fuel, hydroelectric, geothermal,‘other’ and total generation over the most recent five years for which data is available, in TWh.
FINALLY:
CM = 0.5 × OM + 0.5 × BM
where the weight values for non-intermittent renewable projects recommended in the CDM methodology are used.

Worked examples
Table 3 and Table 3 below show some worked examples. Table 3 shows the step-by-step calculation of the combined margin forIndonesia. Table 3 shows for illustrative purposes whether facilities would pass Criterion 1 in a variety of scenarios. Five countries
are shown with varying levels of geothermal, hydroelectric and fossil fuel capacity, hence varying combined margins. The tables
show whether four separate facilities, with direct emissions of 25 gCO2/kWh (negligible), 75 gCO2/kWh (low), 180 gCO2/kWh(moderate) and 400 gCO2/kWh (high) respectively, would pass Criterion 1. The examples assume that the ambition margin iscontext-specific and that Criterion 2 is not (for simplicity) applicable.
••••

Appendix

The scenarios show that low-emitting facilities will be certified under all conceivable circumstances. However, moderate
and high-emitting facilities may not be certified under the following circumstances:
If the country already has high levels of renewables;
If renewable capacity has recently been increasing much more rapidly than fossil fuel capacity, or fossil fuel capacity has
been declining;
If the ambition margin is set relatively high, based on an assessment of what is typical and what ambitious for a given
country and its geology

P a g e | 18

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Table 3: Illustrative worked example of the calculation of the operating, build and combined margins for Indonesia
Indonesia

Quantity

Sourcefossil fuels

88.0%

[21]

hydroelectric

6.8%

[21]

geothermal

5.1%

[21]

other

0.1%

[21]

761 gCO2/kWh[22]

fossil fuels

761 = 865 gCO2/kWh
0.88

Combining information from [21] with [22]hydroelectric

24 gCO2/kWh

Derived from average CO2 and CH4 fluxes for a low latitude non-Amazonianhydroelectric reservoir presented in [23]; combined with data on capacity andreservoir size of a sample of Indonesian hydroelectric reservoirs in [24]geothermal

63 gCO2/kWh

Weighted average from three Indonesian geothermal plants presented in [25]% electricity generation

GHG intensity
Grid, CO2 from combustion only

other
Operating margin

assume direct emissions are zero
OM = 0.88 × 865 + 0.07 × 24 + 0.05 × 63 = 765 gCO2e/kWh

Option 4 in [20]fossil fuels

10.1 TWh/yr[21]hydroelectric

0.3 TWh/yr[21]

geothermal

0.3 TWh/yr

[21]

other

0.03 TWh/yr

[21]

total

10.7 TWh/yr[21]

BM = 10.1 × 865 + 0.3 × 24 + 0.3 × 63
10.7
10.7
10.7
BM = 817 gCO2/kWh

Similar methodology suggested in [20] adapted
to use most accessible publicly available information

CM = 0.5 × OM + 0.55 × BM
= 0.5 × 765 + 0.5 × 817
CM = 791 gCO2/kWh

Formula in [20]Average annual increase in generation, 2008-2012

Build margin

Combined margin

Appendix

P a g e | 19

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Table 4: Examples for various geothermal power plants with differing illustrative combined margin estimates
Examples of application of Criterion 1 with respect to illustrative 25 gCO2/kWh, 75 gCO2/kWh, 180 gCO2/kWh and 400 gCO2/kWh geothermal power plants in different countries with differing
illustrative combined margin estimates

Case

Carbon-intensive gridCountry

Indonesia

Estimated
Combined Margin(illustrative)

262 gCO2/kWh

Guatemala

185 gCO2/kWh

Carbon-intensive fossil
fuel plants, but large
share of renewables

No fossil fuels (almost)

Iceland

25 gCO2/kWh

75 gCO2/kWh

180 gCO2/kWh

400 gCO2/kWh

Yes, well below combined margin; ambition margin
unlikely to be set high enough to exclude thisDepends on context-specific information andfacility.
ambition margin. Though high, still represents a
Fossil fuel capacity has been very rapidly increasing significant improvement on the likely alternative,
so possible that it may pass.
in Indonesia, therefore the facility represents asignificant improvement on the likely alternative.

791 gCO2/kWh

Kenya

Efficient fossil fuels, butlarge share of
New Zealandrenewables

Does a geothermal facility with these emissions pass Criterion 1?

No, exceeds threshold.
Depends on context-specific information on what isYes, below combined
Kenya has a high share of hydroelectric which has
typical for geothermal in Kenya and resulting
margin in all cases
recently been increasing, while fossil fuel capacity
ambition margin.
Yes, below
and also less thanhas not.
combined margin
100 gCO2/kWh.
No, exceeds threshold.
in all cases andProbably. Combined margin is low, so ambition
also less than 100
Fossil fuel capacity only accounts for 32% of
margin could be zero, in which case the facility is
gCO2/kWh.
generation in Guatemala and has been declining,
beneath the threshold.
while hydroelectric has been increasing.
No, exceeds threshold.
Fossil fuel capacity only accounts for 27% of generation in New Zealand and has been declining, while all
renewables have been increasing.

119 gCO2/kWh

Yes, below 100
gCO2/kWh.

46 gCO2/kWh

Notes:

No, exceeds threshold.
There is almost no fossil fuel capacity in Iceland compared with which the facility would be an
improvement. The combined margin results from estimates of high- latitude hydroelectric reservoir
emissions and existing geothermal emissions.

Combined margin estimates are illustrative, but have been arrived at through the same calculation steps as in Table 3. They should not be taken as the definitive
estimates which would apply in these countries. In particular, significant data gaps remain for estimates of hydroelectric and geothermal emissions.

Note the calculation would result in a very low combined margin in the world’s predominant geothermal country, Iceland, where the fossil fuel alternative is negligible. However, facilities which
are below the 100 gCO2/kWh threshold, or which mitigate their emissions as described under Criterion 2, will still be eligible for certification, The proposed criteria therefore still envisage plentyof opportunity for geothermal in countries which already have a low share of fossil fuels.
Appendix

P a g e | 20

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

Appendix C: Proposed method for estimating emissions
Figure 2: summarizes the recommended process for estimating direct emissions under Criterion 1.
Figure 2: Decision tree for estimating direct emissions

This process acknowledges the following practical considerations in determining direct emissions:••

Appendix

Wellhead non-condensable gas estimates may not be available, and a proxy measure based on potential emissions
determined from geological setting may be the only viable option
The release of direct CO2 emissions due to the operation of the power station may result in lower natural releases. Thisshould be taken into account when these can be estimated. This can only be achieved once the power station is inoperation. It is proposed that this could be used in the case of retrofit of existing stations, or for re-applications forcertification of facilities that were initially rejected.

P a g e | 21

Climate Bonds Initiative - Geothermal Criteria Document
Updated: April 2023

References[1][2]

Bertani, R, & Thain, I (2002, July). Geothermal Power Generating Plant C02 Emissions Survey. IGA News, (49), 1-3.
Armannsson, H, Fridriksson, T, & Bjarni Reyr Kristjansson. (2005). CO2 emissions from geothermal power plants and naturalgeothermal activity in Iceland. Geothermics, (35), 286-296.

[3]

GEA (2013), ‘Promoting Geothermal Energy: Air Emissions Comparison and Externality Analysis’, report by the US Geothermal
Energy Association[4]

Sullivan et al. (2012), ‘Geothermal Life-Cycle Assessment - Part 3’, report for Argonne National Laboratory[5]

Bayer et al. (2013), ‘Review on life cycle environmental effects of geothermal power generation’, Renewable and Sustainable
Energy Reviews 26 (2013) 446-463[6]NZGA (2009), New Zealand Geothermal Association website: www.nzgeothermal.org.nz/emissions.html
Aksoy et al. (2015), ‘CO2 Emission from Geothermal Power Plants in Turkey’, presented to the Proceedings World Geothermal
Congress 2015, Melbourne, Australia, 19-25 April 2015

[7]
[8]

Goldstein, B et al. (2011), ‘Geothermal Energy’ in IPCC Special Report on Renewable Energy Sources and Climate Change
Mitigation, Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA[9]

Stefansson, V (2005). World geothermal assessment. In: Proceedings World Geothermal Congress 2005, Antalya, Turkey, 2429 April 2005, available at: www.geothermal-energy.org/pdf/IGAstandard/WGC/2005/0001.pdf[10]

IPCC, 2011: IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation. Prepared by Working Group IIIof the Intergovernmental Panel on Climate Change [O Edenhofer, Pichs-Madruga, R, Sokona, Y, Seyboth, K, Matschoss, P,
Kadner, S, Zwickel, T, Eickemeier, P, Hansen, G, Schlömer, S, von Stechow, C (eds)]. Cambridge University Press, Cambridge,
United Kingdom and New York, NY, USA[11]

Kaplan and Serpen (2010) ‘Developing Geothermal Power Plant for Geothermal Fields in Western Turkey’, Proceedings World
Geothermal Congress 2010, Bali, Indonesia 25-29 April 2010[12]

IFC (2007), ‘Environmental, health and safety guidelines for geothermal power generation’, International Finance Corporation[13]

Strand and Rosendahl (2012), ‘Global emissions effects of CDM projects with relative baselines’, Resource and Energy
Economics 34 (2012) 533- 548[14]

Jacobson (2009), ‘Review of solutions to global warming, air pollution, and energy security’, Energy and Environmental Science
2009, 2, 148-173[15]

UK Parliament (2011), ‘Carbon Footprint of Electricity Generation’, POSTnote 383, available at:www.parliament.uk/documents/post/postpn_383-carbon-footprint-electricity-generation.pdf[16]

US Department of Energy (undated), ‘What is a Enhanced Geothermal System (EGS),
www1.eere.energy.gov/geothermal/pdfs/egs_factsheet.pdf[17]

Clark, C, Sullivan, J, Harto, C, Han, J, Wang M (2012), ‘Lifecycle environmental impacts of geothermal systems’ in Proceedings,
Thirty-Seventh Workshop on Geothermal Reservoir Engineering Stanford University, Stanford, California, January 30 - February
1, 2012[18]

Karlsdottir, MR, Palsson, OP and Palsson, H (2010), ‘Factors for Primary Energy Efficiency and CO2 Emission of Geothermal
Power Production’, Proceedings World Geothermal Congress 2010, Bali, Indonesia, 25-29 April 2010[19]

IFC (2013), ‘IFC Greenhouse Gas Reduction Accounting Guidance for Climate-Related Projects’, IFC Climate Business
Department, International Finance Corporation[20]

UNFCCC (2015), ‘Tool to calculate the emission factor for an electricity system: Version 05.0’, United National Framework
Convention on Climate Change, https://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-07-v5.0.pdf accessed
January 2016[21]

US Energy Information Administration International Energy Statistics: www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm,
accessed January 2016

[22]

IEA (2015), ‘CO2 Emissions from Fossil Fuel Combustion, 2015 Edition’, International Energy Agency
Barros et al. (2011), ‘Carbon emission from hydroelectric reservoirs linked to reservoir age and latitude’, Nature Geoscience
4:593-596, September 2011
GEO (undated),Global Energy Observatory power plant database, http://globalenergyobservatory.org/, accessed January 2016

[23]
[24]
[25]

Appendix

Yuniarto et al. (2015), ‘Geothermal Power Plant Emissions in Indonesia’, Proceedings World Geothermal Congress 2015,
Melbourne, Australia, 19-25 April 2015

P a g e | 22