Output-based Aid and Carbon Finance

Carbon finance is an output-based approach to mitigating climate change. Under the Kyoto Protocol’s project-based mechanisms—the Clean Development Mechanism and Joint Implementation— projects in developing and transition economies that reduce greenhouse gas emissions can receive “carbon credits." Carbon revenues can help project sponsors close the financing gap between climate-friendly projects and conventional projects, and can help industrial countries reduce their cost of compliance with the Kyoto Protocol.

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