Carbon Finance: A Guide for Sustainable Energy Enterprises and NGOs

GVEP International, in partnership with the Ashden Awards for Sustainable Energy, has published a guide for energy entrepreneurs who want to link their businesses to carbon finance. The guide, which is part of a series also covering Investment Finance and End-User Finance, aims to provide recommendations on their first steps to assess their businesses’ potential and guide them through the complexities of the ever-evolving carbon market.

Topics covered include the key concepts of carbon finance, the application process, balancing the up-front costs of accessing Carbon Finance and future revenue from Carbon Credit sales, investment planning, engagement with investors and potential partners and the common pitfalls faced by entrepreneurs entering the carbon market. Finally, the guide provides a list of online carbon finance resources.

Access to finance for small-scale energy projects in developing countries is one of the major constraints to their expansion. In recent years, the availability of carbon finance through emissions trading or ‘Carbon Credits’, has been creating opportunities for entrepreneurs in the process of developing sustainable energy projects.

However, it is mainly larger enterprises have been able to profit so far. Often expectations are high but not all are aware of the steps required to access carbon finance. This guide acts as a starting point for anyone hoping to enter the market by laying out the various carbon finance options and describes the procedures for accessing them.

Accessing carbon financing mechanisms is rarely, if ever, a straightforward process – hence the need for a concise, practical guide, including examples, calculations and cases studies. The guide is intended for project managers who want to know how to estimate the carbon emissions saved by their project and for entrepreneurs, who want to be able to consider carbon finance in their investment plan.

The guide answers questions such as:

  • What information do I need to gather to assess the potential of carbon finance?
  • What level of investment is needed up front?
  • How do I determine the possible revenue from carbon finance?
  • What are the challenges in getting carbon credits?
  • What will investors look for in assessing the feasibility of my project?
  • How do I approach potential carbon credit buyers?
“GVEP International often gets asked questions on carbon finance from the many enterprises it is working with. Thus, we tried to make this guide very practical” – says David Disch, co-author of the guide. “There is so much written on carbon finance but most of it is theoretical and very detached from the questions a small size biogas enterprise or a cook stove manufacturer has on the issue. Drawing on input from various experts and illustrative case studies, this little guide can help small and medium enterprises to understand the complexities and allows them to evaluate the pros and cons of the financial and technical requirements to access carbon finance.”
By creating a commercial value for reducing greenhouse gas emissions, carbon markets can provide an additional source of revenue for a sustainable energy project to expand and overcome the barriers to its implementation. This increases the commercial viability of a project, and can therefore play an important role in sustaining and growing these enterprises.
Within this context, carbon finance can be an opportunity – although the process to access carbon finance is cumbersome and not suitable for all types of businesses.
Dr Anne Wheldon, Senior Adviser at the Ashden Awards for Sustainable Energy, hopes the guide will help to overcome the entry barriers faced by smaller projects: “The complexity of the carbon markets means that it’s often only large players that can put the resources into getting access to carbon finance” – she says. “This guide to carbon finance will be very useful to small organisations, such as our Award winners in developing countries. They are often the ones doing the work that brings real social benefits as well as cutting carbon.”
Download the Carbon Finance guide here.
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