A reduction in the price of a brown collateral (below its market value) to penalize owners of such collateral and encourage them to move from brown technology to green and clean technology for a sustainable environment. Green collateral is used, and encouraged to be deployed, instead. Brown collateral is considered a contributor to carbon footprint and as such constraints (in terms of carbon taxes and brown collateral haircuts) are imposed by market regulators.
Due to brown collateral constrains, businesses and investors are keener than before to remove brown collateral from their balance sheets (as a means to mitigate a default, reputational and fire sale risk.
