The World Bank hopes to create a large scale “eBay for climate” through its auctions.
Its second pilot programme, which auctioned $20 million (£13.8m) of climate funds, attracted bidders from 12 developed and developing countries, ranging from large multinationals to small local businesses.
That’s expected to help reduce the equivalent of 5.7 million tons of Carbon Dioxide (CO2) emissions – or taking 1.2 million cars off the roads per year – by 2020.
Eligible projects will cut methane emissions from waste disposal including wastewater and agricultural waste. Methane is a highly potent greenhouse gas with a global warming potential at least 25 times that of CO2.
The auction by the Pilot Auction Facility (PAF) for Methane and Climate Change Mitigation tests multiple auction formats that are intended to attract private sector investment while efficiently reducing emissions.
John Roome, Senior Director for Climate Change at the World Bank Group said: “Through these pilot auctions, we are building up toward ultimately creating a large-scale ‘eBay for climate’ that gives the private sector a platform to gain access to funding. The result could be a significant reduction in climate pollution.”
The latest auction tested a ‘forward auction’ format, where the value of the contract was fixed at $3.50 (£2.4) per carbon credit and participants bid its purchase price.
The winners, including Shell and Statkraft, paid $1.41 (£0.97) for the right to sell credits back to the PAF at $3.50 (£2.4) per credit before 2020.
They can also sell the credits at a higher price if they are able to find other willing buyers. However to be eligible, emissions must be monitored and verified by a third party.