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Sept. 15 (Bloomberg) -- A planned World Bank facility will employ options to spur climate-protection investment using rules created by carbon markets.

The Pilot Auction Facility for Methane and Climate Change Mitigation will use auctions “to maximize the use of limited public resources,” the Washington-based bank said today in an e-mailed statement. Investors will bid for tradable put options giving the right to sell emission reductions to the facility at guaranteed prices.

The approach could be used in the future for greenhouse gases other than methane and may attract investment from other institutions including the United Nations Green Climate Fund, which is raising about $10 billion. There’s less incentive to build carbon-reduction projects after the value of UN Certified Emission Reductions plunged 99 percent in the past six years, according to data from the ICE Futures Europe exchange in London.

“Hats off to them for testing an innovative approach,” Ash Sharma, vice president of the Nordic Environment Finance Corp. in Helsinki, said by phone. “No one facility can mop up all these credits. There are a lot of projects out there that need support.”

Several donors are considering pledges to the facility, including Germany, Sweden, Switzerland and the U.S., the bank said.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Dan Weeks, John Deane

Bloomberg