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Carbon finance |
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Carbon finance is referred to as carbon credits that are generally used to finance green house gas (GHG) reduction projects. Carbon finance forms an integral part of Kyoto Protocol, as for implementation of any project proper finance is necessary.
Carbon finance is mainly required to finance all those projects that are formed to reduce green house gas emissions. In order to reduce GHG emissions several nations came together to form an agreement known as Kyoto Protocol. Thus it can be said that Kyoto Protocol is an international treaty created to minimize greenhouse gas (GHG) emissions, responsible for global warming. Kyoto Protocol, following its authorization in late 2004 by Russia has been established as a significant mean to monetize the benefits drawn from reducing green house gases.
Kyoto Protocol accompanied with European Union emissions rules have initiated a market in which companies and governments that are able to reduce green house gas level can trade ensuing emissions 'credits'. These credits are purchased by businesses and governments in developed countries, these organizations are usually close to exceeding their GHG emission quotas. This is also known as carbon finance.
Carbon credit trading and finance are followed by two categories of countries such as:
Developing countries: these countries can be categorized as that type of countries that don’t have to meet any targets for GHG reductions. These countries cann develop projects for GHG reductions as they can sell the ensuing credits to countries that do have Kyoto targets.
Industrialized countries: that also includes OECD countries (.i.e, the richest nations of the world) and also those countries that have transformed from centrally planned to open market economies.
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