Environmental finance combines conservation and economics to encourage sustainable behavior. Land trusts, which place conservation easements on land, are a common example. Property owners can receive tax deductions for placing an easement on their land. Carbon credit trading is another example used to regulate carbon emissions. Environmental impact assessments can identify areas for protecting the environment and saving money.
Environmental finance is not a term that is used frequently; however, it refers to the process by which conservation and economics can be combined in beneficial ways, usually to encourage more people to behave in an ecologically sustainable way. Land trusts are the most prominent example of environmental finance, and the way conservation and the economy can become partners rather than adversaries. Carbon credit trading is another example of environmental finance taking place on a much larger scale and being used to regulate carbon emissions around the world.
Since land trusts are the best example of environmental financing, it may be useful to explain more about them. A land trust, sometimes also referred to as a conservancy, is a non-profit organization that maintains trusts, usually by placing a conservation easement on the land. This easement restricts the type of activity that can take place on the land and, as such, protects it from being developed in perpetuity. An easement can restrict things like commercial development, but it can allow uses like agriculture, recreation, timber management, or natural resource extraction, among others. The specific facets of the easement are determined in partnership with the owner and the trust.
When a property owner places an easement on their land, they are often entitled to a tax deduction, a reduction in state income taxes owed, and/or a reduction in estate taxes paid on the property. This type of environmental financing encourages people to protect and preserve the land, and gives them a financial incentive to do so. Of course, land trusts are not the only example of environmental financing; they are simply the most common.
Cities, towns, or any municipality will often conduct an environmental impact assessment, or an environmental impact statement, before making any changes to land use. This can help identify areas where changes can be made to protect the environment and save money. Of course, that is the ideal goal; sometimes saving money becomes more important than protecting the environment.
Carbon emissions trading is yet another example of environmental financing. Companies that are low carbon could hold additional carbon credits as part of a cap-and-trade system that they can then trade with other more carbon-emitting companies. This is a very basic description of a cap-and-trade carbon emissions system, but it is frequently used around the world to encourage companies to develop better technology to reduce emissions. A similar system can also be used for water contaminants.
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