Mechanisms to Prevent Carbon Lock-in in Transition Finance

Carbon lock-in occurs when high-emission infrastructure or assets continue to be used despite the possibility of substituting them with low-emission alternatives thereby delaying or preventing the transition to near-zero or zero-emission alternatives. Transition finance which focuses on the dynamic transformation and decarbonisation of hard-to-abate sectors frequently faces the issue of carbon lock-in particularly in considerations of investment feasibility and eligibility.