Climate Finance Blending Distorts Carbon Markets, Undermines Emissions Cuts
Climate finance from wealthy countries can be combined with international carbon offset trading, influencing greenhouse gas reductions. If finance blendings are not regulated, high-income countries may reduce their emissions less, and low-income countries may lower their emissions too much. This might skew the carbon market. By allocating blended finance based on their financial contributions, this distortion can be corrected. For global emissions to decrease, countries need to set more ambitious emission targets. When finance blending helps low-income countries access funding for mitigation projects, it can lead to increased global greenhouse gas reductions.