Carbon finance is a term used to describe and explores the financial implications of living in a carbon-constrained world—a world in which emissions of carbon dioxide and other greenhouse gases carry a price. Thus, carbon finance represents one specific dimension of environmental finance:
- Explores the financial risks and opportunities associated with a carbon-constrained society
- Anticipates the availability and use of market-based instruments that are capable of transferring environmental risk and achieving environmental objectives.
World Bank definition
Carbon finance is the term applied to the resources provided to a project to purchase greenhouse-gas emission’s reductions. (World Bank 2006). Carbon Finance diagram