World Bank sets date, start price for $25 million U.N. CO2 credit auction

Reuters News
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Posted: May 28, 2015 6:42 AM

By Susanna Twidale and Barbara Lewis

BARCELONA (Reuters) - The World Bank will on July 15 hold a first of its kind auction worth $25 million for U.N.-backed carbon credits from projects designed to cut methane emissions, the bank said on Thursday.

The Pilot Auction Facility will offer tradable put options, giving project owners the right to sell credits to the bank’s Methane and Climate Change Fund at a set price.

The reverse auction will start at $8 per metric ton (1.1023 tons) of carbon dioxide, almost 16 times higher than the current market price for U.N. carbon credits.

The auction comes at a time when investment in carbon-cutting investments under U.N. programs has slowed as countries debate the design of a new global climate pact to come into force in 2020.

Germany, Sweden, Switzerland and the United States have contributed around $50 million to the fund, which is hoping to raise $100 million to help finance schemes to cut greenhouse gas emissions blamed for global warming.

To be eligible for the auction projects would need to come from a pool of certain projects registered under the U.N.'s Clean Development Mechanism (CDM) and meet the Bank’s own environmental health and safety social criteria.

The CDM, the U.N.'s main carbon market set up by the Kyoto Protocol, has helped to channel more than $350 billion to carbon-cutting projects in developing countries by allowing investors to earn credits they can sell for use in meeting emission targets in richer nations.

But the pipeline of new projects has stalled as prices for CDM credits have fallen below 50 cents per metric ton from more than $20 seven years ago, making many plans unprofitable.

Brice Quesnel, a senior carbon finance specialist at the World Bank, said discussions are already taking place about a second auction which could be open to emission-reduction projects certified outside of the U.N. process by voluntary organizations.

"We would probably need six months, at least, after the first auction before the second would take place," he said at an industry event in Barcelona.

The deadline for bidders to apply to participate in the auction is June 25.

(Reporting by Susanna Twidale and Barbara Lewis; editing by Jason Neely)