How blue carbon financing can sustain blue carbon ecosystems protection and restoration: A proposed conceptual framework for the blue carbon financing mechanism

Abstract

Blue carbon ecosystems usually have high carbon capture and storage capacity and can play an important role in addressing global climate change. Accordingly, it has become a consensus of the international community to perform fundraising for blue carbon protection and restoration projects through blue carbon finance. However, there is limited knowledge about the mechanism, classification form and investment model of blue carbon finance, restricting the popularity of the corresponding emerging financing tool. In this article, we conducted a systematic literature review and i) systematically discussed the blue carbon international conventions and initiatives, ii) analyzed the current blue carbon trading mechanism and the status of blue carbon project development, and iii) developed a conceptual framework for the blue carbon financing mechanism. We found that the development of blue carbon projects is facing the problem of mismatch between supply and demand. Further. Although blue carbon finance has been practiced in many ways around the world, blue carbon financial innovation and practice are very limited. To address this gap, we developed a framework which builds on three components: blue carbon principles and guidance, blue carbon trading and financial market, and blue carbon projects. We argued that a wide range of blue carbon financial forms should be adopted to expand existing financing channels, propose to classify blue carbon financial products into blue carbon spot, blue carbon trading instruments, financing instruments, and supporting instruments, and provide a systematic overview and examples of the operation mechanisms and principles of different financial instruments. The conceptual framework proposed in this study provides a systematic and comprehensive financial solution for the development of blue carbon projects, offering both theoretical contributions and practical tools for the advancement of blue carbon finance. This research addresses critical gaps in the field and lays a solid foundation for future investment strategies and policy-making in blue carbon finance.