Carbon finance

Carbon finance is the branch of environmental finance that covers financial tools such(a) as carbon emission trading to reduce the affect of greenhouse gases GHG on the environment by giving carbon emissions a price.

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 modify and GHG emissions must be addressed as factor of strategic supervision decision-making.

The general term is applied to investments in GHG emission reduction projects and the creation origination of financial instruments that are tradeable on the carbon market.

History

The market for the purchase of carbon has grown exponentially since its conviction in 1996.

The following is the estimated size of the worldwide carbon market according to the World Bank:

Volume millions metric tonnes, MtCO2

The 1997 Kyoto Protocol recognised Clean developing Mechanism CDM allowing the offset of emissions in developed countries by the investment in emission reduction projects in developing countries like China, India or Latin America.

Joint Implementation JI, is another mechanism that makes investments in developed countries to generate emission reference for the same or another developed country.