A form of financing for projects tied to reductions in Greenhouse gas (GHG) emissions. Carbon finance places a financial value on carbon emissions and allows companies who wish to offset their emissions against carbon credits earned from sustainable projects.
Carbon credits are used by companies to compensate for their carbon emissions, by either adhering to emission allowances or contributing to sustainable projects. This is typically done through an exchange – or carbon financing – which takes the form of an annual payment to a project partner, be it public, private, NGO or other entity, for the emission reductions generated once the project is operational.
Carbon financing increases the financial viability of projects, creating an additional revenue stream and enabling the effective transfer of technologies and know-how. It provides a means of
leveraging new private and public investment in projects to reduce greenhouse gas emissions in developing countries and economies in transition.