Auctions are ubiquitous. On any given day, somewhere in the world, bidders compete for energy, wireless spectrum, used vehicles, agricultural products—the list goes on. Auctions can help resolve uncertainties in the market, convening buyers and sellers to help them achieve the best possible price for goods or services that are otherwise difficult to value.
Auctions can also resolve uncertainties in the development sector, identifying the projects most likely to succeed and determining the right level of funding. To test this hypothesis in the climate arena, the World Bank has been piloting an approach to incentivize green projects in developing countries. The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) held its second online auction earlier this month, allocating $20 million in funding directly to the private sector for projects reducing methane emissions.
Vikram Widge heads the World Bank Group’s Climate and Carbon Finance Unit. He spoke from the UN Climate Summit about the new Pilot Auction Facility for Methane and Climate Mitigation (PAF).
Q. U.S. Secretary of State John Kerry and the Swedish Energy Agency just pledged $15 million each for the design of a new facility called the Pilot Auction Facility for Methane and Climate Mitigation. What is the PAF?
The World Bank Group is designing a new climate finance pilot that will support emission reductions in developing countries. Because of limited public resources available for climate investment, this facility leverages private capital to support projects that reduce greenhouse gas emissions and are at risk of being decommissioned due to the low price for carbon credits today.
The facility tests an innovative contract structure by offering put options through an auction to guarantee a minimum price for carbon credits that a project will generate, which gives private-sector buyers, such as projects developers and intermediaries, the security of knowing that they will be paid for investments they make to lower emissions.
We’re about 16 months away from the 2015 UN climate meeting in Paris, intended to reach an ambitious global agreement on climate change. Now, more than ever, there is a need for innovation to scale up climate action.
The Bank’s Carbon Partnership Facility (CPF) is helping blaze that trail.
The role of the CPF is to innovate in scaling up carbon crediting programs that promote sustainable, low-carbon economic growth in developing countries. In its first set of programs, the CPF moved past the project-by-project approach to larger scale through the Clean Development Mechanism’s Programme of Activities, catalyzing investment in methane capture from landfills, small-scale renewable energy, and energy efficiency.
Management of organic waste is a major dilemma for developing countries. It generates unpleasant odors and helps rats, flies, bugs and mosquitoes multiply and spread diseases. As it decomposes, organic waste generates methane, a gas that contributes significantly to global warming. Last year Daniel Hoornweg, Perinaz Bhada-Tata and Chris Kennedy predicted in an article in the magazine Nature that the global rate of solid waste generation is expected to triple by 2100. This is bad news because if the investment for solid waste management in developing countries remains as low as it is today, the world is at risk of irreversible environmental deterioration.
In the climate negotiations under the United Nations framework, we are used to seeing geographical blocs and other blocs at loggerheads. The tension draws attention, but it isn’t the only story of blocs at the climate conference.
In Warsaw Thursday, members of the Climate and Clean Air Coalition – 75 countries and international organizations working together – met and talked about their progress so far and work for the future to slow climate change.
What do these countries – among them, Nigeria, Sweden, the United States, Ghana, Mexico, the United Kingdom, Chile, Morocco, and Canada – have in common?
Answer: The firm belief that we can work together and substantially reduce black carbon, methane, and other short-lived climate pollutants.
Last week, the Telegraph newspaper in the United Kingdom reported that snow in the Himalayas was melting because of religious activity on the Indian subcontinent. The report, based on research by American and Indian scientists, found that burning of wood for cremations and incense sticks for religious ceremonies and marriages leads to emissions of black carbon and other compounds. This, in turn, accelerates the melting of ice and snow-covered surfaces.
There is a growing body of research looking at how black carbon is accelerating snow and glacial melting. A scientific paper published in India early this year associated forest fires and other biomass burning to the accelerated melting of one of the Himalayan glaciers. Scientists have even implicated black carbon emission from increased industrial activity in Europe for the retreat of glaciers in the Alps in the mid-19th century.
I am an asthmatic. Walking or biking behind a black-smoke-belching truck makes me choke, I mean really choke. I am sure it sounds familiar to other asthmatics or to those who have friends with respiratory problems.
The World Health Organization last month classified outdoor air pollution as a leading carcinogen. It particularly singled out particulate matter – the stuff that makes up the black smoke from those diesel trucks – as a carcinogen for humans.
On the heels of that news came word from China that record-air pollution levels nearly shut down one of northeastern China's largest cities, Harbin, forcing schools to suspend classes, snarling traffic and closing the city airport. An index measuring particulate matter reached a reading of 1,000 in some parts of the city, home to some 11 million people. A level above 300 is considered hazardous, while the WHO recommends a daily level of no more than 20.
Imagine the fate of my fellow sufferers, the asthmatics. Needless to say there was surge of hospital emergency room visits in Harbin on October 21.
One key to addressing climate change is attracting private capital to finance low-carbon sustainable development. For 2013, the World Bank estimates over US$1 trillion will flow to developing countries from private sources. In order to increase capital flows to finance low-carbon investment, many forms of innovation are needed. One source of innovation could come in the shape of results-based finance (RBF). RBF, also known as pay-for-performance, was pioneered in the health sector and serves as the backbone of anticipated payments for protecting forests. It is increasingly being considered as a means for financing the adoption of low-carbon development pathways and greenhouse gas (GHG) emissions abatement. RBF provides payments for success, and only upon the delivery of pre-defined, verified results.
To see how such a results-based approach to mobilizing private sector funding could work in methane reduction, the World Bank convened - at the request of the G8 - a dedicated study group which looked at the role that pay-for-performance mechanisms could play. The resulting report from the methane finance study group found that, when implemented, pay-for-performance provided by a credit-worthy third party can be a powerful catalyst for private investment. There is potentially much wider scope for the use of pay-for-performance mechanism in climate finance for its deployment to target other GHGs in addition to methane.
Reduce, Reuse, Recycle… Recover. As the population in large cities worldwide grows, waste management becomes an even bigger challenge. Recycling programs can divert large amounts of materials from landfills but some garbage still needs to be disposed of in landfills or Energy From Waste (EFW) sites. EFW facilities are capable of recovering energy from garbage that would otherwise be unused in landfills.
EFW and landfill gas capture systems operate on similar principles: produce steam to turn a turbine which generates electricity. The difference is the fuel used to produce the steam. Landfill gas based electricity generation relies on methane from the decomposition of organic material, while EFW facilities combust the solid waste. Both are good options as they prevent methane gas from escaping into the atmosphere. Methane has a global warming potential 72 times that of carbon dioxide. Both options sound good, so which is better? The better question is: ‘How much land and money do you have’?
Graph shows concentrations of atmospheric Co2 for the last 800,000 years, with measurements, starting from 1958, made at Mauna Loa in Hawaii. - Image courtesy of World Meteorological Organization
Scientists monitoring atmospheric concentrations of CO2 from a mountaintop in Hawaii recently reported that the presence of this greenhouse gas exceeded 400 parts per million (ppm) for the first time in at least three million years – a period when temperatures were much warmer than today. The significance of this seemingly dry statistical trend is stunning as reported in the New York Times:
From studying air bubbles trapped in Antarctic ice, scientists know that going back 800,000 years, the carbon dioxide level oscillated in a tight band, from about 180 parts per million in the depths of ice ages to about 280 during the warm periods between. The evidence shows that global temperatures and CO2 levels are tightly linked.
In addition to the location in Hawaii, several other Global Atmosphere Watch stations from the Arctic to the Equator reported CO2 concentrations exceeding 400ppm.
Experts believe that in order to limit warming to 2°C – a goal based on expected impacts – concentrations should rise to no more than 450 ppm, a level we may reach in only about 25 years based on current trends.