Carbon financing in construction: review of benefits and barriers

Abstract

The buildings and construction sector is responsible for 37% of global GHG emissions. Given the inefficacy of traditional methods in reducing GHG emissions, the adoption of sustainable strategies including low-carbon materials, energy-efficient practices, and the integration of renewable energy has become essential. Among these, Carbon Financing (CF) stands out as a mechanism that not only reduces emissions but also provides economic opportunities, making it highly attractive to investors. CF enables stakeholders to earn and trade carbon credits by reducing emissions allowing construction firms to monetise their environmental efforts. Hence this study aims to systematically review the benefits and barriers of CF for sustainable construction. The study conducted a systematic literature review on Carbon Financing (CF) in construction utilising the PRISMA framework. From an initial 126 articles, 91 articles were shortlisted for detailed analysis. Findings reveal a range of CF instruments categorised as primary products and derivatives, to manage carbon emissions and enhance market liquidity. Additionally, the study highlighted both the economic and environmental benefits of CF, including promoting green job creation, attracting investments in sustainable energy, and supporting biodiversity conservation. However, factors including lack of understanding, limited policy support, and a need for innovative CF products have been discovered as challenges faced in CF adoption. The study concluded that CF holds significant potential for transforming the construction sector into a more sustainable industry. This research contributes to the existing body of knowledge by providing a blueprint for integrating CF into construction practices while setting the stage for further research and practical application towards global sustainability goals