The Potential for Climate Auctions as a Mechanism for NDC Implementation

Climate auctions are an innovative climate finance mechanism, with high potential to support nationally determined contribution (NDC) implementation and deepening through efficiently leveraging private investment. The World Bank has developed the climate auction model through the work of the Pilot Auction Facility for Methane and Climate Change Mitigation (PAF). The PAF delivered cost-effective methane and nitrous oxide abatement by offering publicly-funded price guarantees for future climate results to private sector companies that competed to buy the price guarantees via an auction. This report proposes that climate auctions may be an attractive option as part of a transition towards the greater use of market-based instruments to support NDC implementation and achieve more ambitious climate results. The report reviews the broader policy context and develops three implementation modalities through which climate auctions can support NDC implementation. The report also discusses when the model is valuable and appropriate, reviewing the overarching conditions for climate outcome opportunities to be suitable for the use of climate auctions