Carbon Finance

ABSTRACT

Carbon finance is a new branch of environmental finance. Carbon finance explores the financial implications of living in a carbon-constrained world, a world in which emissions of carbon dioxide and other greenhouse gases (GHGs) carry a price. The carbon markets have become the fastest growing financial market in the world. Financial risks and opportunities impact corporate balance sheets, and market-based instruments are capable of transferring environmental risk and achieving environmental objectives. Issues regarding climate change and GHG emissions must be addressed as part of strategic management decision-making. This is a source of financing for mitigation projects and programmes. Market analysts estimate that should the industrialized nations adopt an aggressive emission reduction target of 50% or more by mid-century, and should they meet half of their emission reduction commitments through the purchase of project-based emission reductions from developing countries such as India, the market pursuant to the Clean Development Mechanism (CDM) could grow to $100 billion sales annually (a growth of 20 times compared to 2006). India has demonstrated an early mover advantage and has one of the largest portfolios of carbon finance projects in the world, with more than 700 projects having been approved by the designated national authority. However, other indicators demonstrate that India is not the market leader in the CDM. The paper suggests a few alternatives to improve India’s performance in the field.

Carbon Finance

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CARBON FINANCE

Carbon finance anticipates the availability and use of market based instruments that are capable of transferring environmental risk and achieving environmental objectives. It is the term applied to the resources provided to purchase green house emission reduction. Some of the drivers and markets of carbon finance are:  Government policies  Price of carbon  Investors  New financial products  Alternative...