Pioneering a New Financial Instrument to Help Combat Climate Change
Tuesday, September 16, 2014
To help keep finance flowing to projects that combat climate change, the World Bank and partners are developing an innovative pilot program that allows project developers and financiers to compete in an online auction to deliver the largest number of emissions reductions at the lowest cost.
The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) will auction price guarantees for CO2 emission reductions from projects. The auction, by selecting the cheapest mitigation opportunities offered, is expected to maximize the amount of emission reductions achieved per dollar spent. This could have huge implications for the future of climate finance: auctions and price guarantees have the potential for replication and scaling-up by the Green Climate Fund and others.