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    Carbon Finance Mechanism

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    rabi
    This document discusses carbon finance mechanisms. It outlines that carbon finance covers tools to reduce greenhouse gas emissions and explores financial implications of a carbon-constrained world. The key models discussed are the Kyoto Protocol's emissions trading, joint implementation, and clean development mechanisms. It also summarizes carbon finance concepts, models involving advanced payments, pooling of projects, and local bank guarantees, and identifies risks at different project stages.

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    Carbon Finance Mechanism

    Uploaded by

    rabi
    61 views13 pages
    This document discusses carbon finance mechanisms. It outlines that carbon finance covers tools to reduce greenhouse gas emissions and explores financial implications of a carbon-constrained world. The key models discussed are the Kyoto Protocol's emissions trading, joint implementation, and clean development mechanisms. It also summarizes carbon finance concepts, models involving advanced payments, pooling of projects, and local bank guarantees, and identifies risks at different project stages.

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    CARBON FINANCE MECHANISM

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    This document discusses carbon finance mechanisms. It outlines that carbon finance covers tools to reduce greenhouse gas emissions and explores financial implications of a carbon-constrained world. The key models discussed are the Kyoto Protocol's emissions trading, joint implementation, and clean development mechanisms. It also summarizes carbon finance concepts, models involving advanced payments, pooling of projects, and local bank guarantees, and identifies risks at different project stages.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    61 views13 pages

    Carbon Finance Mechanism

    Uploaded by

    rabi
    This document discusses carbon finance mechanisms. It outlines that carbon finance covers tools to reduce greenhouse gas emissions and explores financial implications of a carbon-constrained world. The key models discussed are the Kyoto Protocol's emissions trading, joint implementation, and clean development mechanisms. It also summarizes carbon finance concepts, models involving advanced payments, pooling of projects, and local bank guarantees, and identifies risks at different project stages.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    CARBON FINANCE

    MECHANISM
    Presented By:
    SUMESH RAUT
    074MSESP019

    1
    OUTLINES
    1. Introduction
    2. Function of carbon Finance
    3. Carbon Finance Concept
    4. Kyoto protocol
    5. Carbon Finance Models
    6. Risk Identification and Sharing
    7. Conclusions
    2
    INTRODUCTION
    CARBON FINANCE:
    Branch Of Environmental Finance.

    Covers financial tools such as Carbon Emission trading.

    Reduces the impact of Greenhouse Gases (GHGs).

    Explores the financial implication's of living in a carbon constrained


    world.

    Objective is to reduce Carbon emissions from economic activities.


    3
    Carbon Finance Concept
    Carbon Finance is based on the ability to monetize the sale
    of Carbon Credits to finance investment costs.

    Parties Involved in Carbon Financing:


    • Project Owner
    • Carbon Credit Owner
    • Banks
    • Host government
    • Multilateral Agencies
    4
    CARBON FINACE: Its Drivers and Markets

    FIG:1.1 Carbon Finance :Its drivers and Markets SOURCE: Wiley [Carbon Finance] 5
    KYOTO PROTOCOL
    • An agreement made under the UNFCCC (United nations Framework
    convention on Climate change)
    • Currently 192 parties of the UNFCCC have signed and ratified the
    Protocol.

    Proposed 3- flexible mechanisms to meet emission reductions


    obligations:

    1. Emissions Trading Schemes (ETS)

    Uses Cap and Trade Mechanisms obligation.


    6
    Cont….

    2. Joint Implementation (JI)


    Project based mechanism

    involves developing and implementing projects that reduce GHG emission, by


    generating carbon credits.
    Credits generated from this mechanism is know as Emission reduction Units(ERUs)

    3. Clean development Mechanisms (CDM)


    Allows industrialized countries to invest or finance a project in a developing countries.

     credits generated from this mechanism is known as certified Emissions Reductions


    credits(CERs) for having reduced emissions. 7
    Carbon Finance Models

    1. Advanced Payment Mechanism


    Advanced payment mechanism acts much like a loan provided by the
    carbon credit buyer.

    This mechanism is simple and relatively quick to arrange, comparable


    to conventional loan.

    Major disadvantage is that buyers are willing to provide upfront


    payments usually at advanced stage(after registration on UNFCCC ).

    8
    2.Pooling Model

    • The model structure follows


    mezzanine finance.

    • This mechanism aims to


    package a pool of projects and
    monetize their emission
    reductions .

    Fig 2.1 pooling model9


    3.Local Bank Guarantee Model

    • Similar to Pooling Mechanism.

    • Instead of providing debt the


    Investors provide a Letter of
    Guarantee for a Local bank.

    • With the Guarantee letter the


    Project owner is able to access
    finance from Local bank.
    Fig:2.2 local bank guarantee model
    10
    RISK IDENTIFICATION AND SHARING
    • Project Risks profile affects the
    ability of a CDM project to attract
    finance in two different ways:
    1. Directly by affecting the lenders
    willingness to invest
    2. Indirectly by changing the Carbon
    Credit buyer perception of risk.
    As figure 2.3 shows after financial
    closure the risk of project failure
    falls.
    Risk of under-performance persist
    high until the registration.
    Fig 2.3: Project Risks profile per stage (Source: First climate
    analysis) 11
    CONLCUSIONS
    Carbon Markets play an important role in shifting private
    investment flows toward climate change issues.
    Clean development mechanisms must be overcome by the
    quality of Carbon Credit revenues.
    Carbon delivery guarantee must be set to deliver carbon
    credits from quality projects in developing countries to
    buyers in developed countries.

    12
    THANK YOU!
    13

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