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CLIMATE FINANCE AUCTIONS

Maximizing the impact of climate finance dollars by using auctions to allocate finance.

What Are Climate Finance Auctions?

Climate finance auctions offer an alternative to traditional approaches of allocating public climate finance (e.g., grants and loans). Climate finance auctions establish a price floor for emission reductions, which give auction winners the option of selling emission reductions to a public funder at a fixed price or to the market.

Why Climate Finance Auctions?

Climate finance auctions offer several advantages over more traditional forms of finance: 1) auctions use the market to set appropriate subsidy levels, allocating finance to projects that can reduce emissions at the lowest cost; 2) auctions ensure that taxpayers only pay for results; 3) auctions offer the private sector a guaranteed price for emission reductions, and the private sector entities can then use this contract to raise commercial finance; and 4) climate finance auctions are simple, transparent, and replicable.

Why it Matters

Traditional public finance instruments such as grants and loans require taxpayers to take project risk, offer no systematic way to ensure public funds are being allocated efficiently, and usually come with high overhead costs. For recipients, chasing grants is time consuming and decision making is opaque. Climate finance auctions offer a promising potential solution to these challenges.

What We're Doing

RMI is working to promote the uptake of auctions at public finance institutions responsible for allocating climate finance. RMI is engaged both in analytical work on this topic, as well as efforts to convene and facilitate discussion among relevant stakeholders.

Resources

Blog

Auctioned Price Floors: Changing How We Invest in Climate—2017

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Article

Underwriting 1.5°C: Competitive Approaches to Financing Accelerated Climate Change Mitigation—2017

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