World Bank expands funding opportunities to reduce methane emissions

The World Bank on Monday (Feb. 29) communicated that its May auction (first announced during COP21 in Paris) will make available a budget of $20 million for carbon credits to be assigned to projects that cut methane emissions, through the Pilot Auction Facility (PAF), as reported by Reuters.

Methane is one of the greenhouse gases responsible for climate change, and it is considered to possess 25 times the warming potential of CO2. This is the second auction organized by the World Bank (the first was held in June 2015), and its eligibility criteria have been expanded to include also methane cutting projects outside the CDM. According to Carbon Pulse, all emission reductions must be either CERs, or VERs certified by the Verified Carbon Standard (VCS) or Gold Standard. The auction will be open to projects in more than 130 developing countries, but excluding China.

The PAF model is a mechanism developed by the World Bank to allocate public funds, maximizing their impact, while stimulating private sector to invest in cutting methane emissions projects: in particular, it supports projects cutting emissions at landfill, animal waste and wastewater sites.

This model guarantees a floor price for carbon credits assigned by auctioning. The World Bank counts on the PAF to be cost-effective because it is based on a pay-for-performance mechanism: the resources will be allocated only after a verified emissions reduction will take place. The PAF is also expected to be attractive because, in this way, the World Bank will offer a 10 times higher price respect to the market value for carbon credits. The bid starting price has been established to $0.06 per tonne. This is an important and stimulating move to undertake, while investments for carbon cutting projects are slowing.

This World Bank financial model has focused on the methane role. This greenhouse gas has received an unusual attention in the last months, due to the California methane leak , just recently halted. The California leak, gone unrestrained for months, left a huge polluting effect for the next 100 years. The California Air Resources Board said that the gas leak has exceeded all previous estimates, causing a peak of 20% of methane emissions in the Californian state. According to observers, this incident is undermining the efforts to reduce greenhouse gases, putting California in a difficult position to respect its emissions target.


(Image: Methane gas pumping station, US. Photo credit: Gene Spesard/Flickr)