Carbon trading financing has proven to be quite effective in its initial phase as part of the Clean Development Mechanism policies. This is essentially financing through other, richer countries receiving emissions credits in exchange for investing in projects within developing countries that would reduce greenhouse gas pollution. Examples of the success of this project include the electricity generation of the Air Hitam sanitary landfill which uses biogas produced from inactive landfills; but above all the Takon palm oil mill in Sabah. It has an “annual input capacity” of 129,600 cubic meters/year of EFB for palm oil production. This can not only amount to a “monetary value” of $2 million on average per year, but will also reduce the threat of methane release as an externality of palm oil production. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay In theory, however, this does not promote sustainability for recipients of emissions credits in richer countries as they are trying to get out of reducing their emissions. own greenhouse gas pollution. Taking ethics out of consideration, carbon trading can lead to more renewable projects for a green economy. Funding also comes from the Green Technology Financing Scheme along with support from Islamic banks. The GTFS secures promising green projects by providing 60% of financing needs with a low interest rate of 2%, to reduce risk for financial institutions. Furthermore, this is a serious effort by the Malaysian government as the program was planned to allocate RM3.5 billion (US$850 million) into sustainable projects, which would also encourage further lending from banks. This was successful because within 3 years 109 projects were financed under the program. [24] As an Islamic country, Malaysia can take advantage of Islamic banking to further de-risk green projects by sharing profits through Mudarabah and Musharakah arrangements, allowing the bank and entrepreneur to provide assets and both parties collect the profits; also using banking skills for “profit generation and financial management”, necessary for green projects that require extended periods of time to consolidate the value of returns as an investment. Furthermore, it is a pro-Islamic belief that the environment must be well maintained, which could (although unlikely) influence the decisions of Islamic banks. However, the green market is hampered by the lack of coordination between industry experts and financial institutions, causing information asymmetry. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay Sustainable projects are relatively still a young sector (especially in Southeast Asia) where financial institutions may feel uncomfortable with financing traditional businesses with expected returns. But it can be expected that this obstacle can be circumvented as more and more nations become familiar with methods of reducing CO2. At the same time, the financing of green projects can therefore be independent of the financial problems of the current economy; if its execution were to be successful, financial institutions could eventually produce a suitable financing structure for green projects, with sufficient experience. This proves to be a key element in supporting a functioning green economy.