World Bank’s Second Auction Yields 5.7 Million Certified Emission Reductions Guarantees

Last week, the World Bank conducted its second auction in a series of pilots by the Pilot Auction Facility for Methane and Climate Change Mitigation (PAF), an innovative new financing mechanism that aims to attract private sector investment while efficiently reducing emissions.

GMI-PAF-infograph

The PAF incentivizes climate-friendly project developers to capture the methane byproduct by providing a price guarantee for selling carbon credits via a tradeable put option. The purchase of put options enables project developers to hedge the risk of low carbon credit prices that could make the methane capture project unviable. For this pay-for-performance tool, the World Bank will pay project developers only after independent auditors have verified the emission reductions.

Like the World Bank’s first PAF auction held last year, the auction conducted last week targeted eligible landfill, agriculture, and wastewater methane capture projects. Unlike the first auction where participants bid on a carbon credit strike price, the second auction used a ‘forward format’ that fixed the strike price at $3.50/credit while participants bid on the premium price. The premium price paid per carbon credit allows option holders the right to sell credits back to the PAF at $3.50 per credit before 2020. For a more detailed description on how the first and second auctions worked, see these helpful videos.

Twenty-one companies from 12 countries participated in the second auction on $20 million of climate funds. After 10 auction rounds, 9 methane project developers walked away with put options for up to 5.7 million tons of carbon dioxide equivalent (CO2e) emission reductions at a premium price of $1.41 per ton of CO2e. Upon purchasing the put options, auction winners may either sell eligible emission reductions to the PAF, trade the contracts on the secondary market, or let the contracts expire.

GMI is proud to have informed the development of the PAF mechanism, and welcomed its presence on the Global Methane Forum finance panel (see presentation). We look forward to the third auction to take place this Fall.

For more information, see the World Bank press release.

Global Methane Forum Presentations – China Waste Session

Over the coming weeks Methane International will feature presentations from the 2016 Global Methane Forum. First out of the gate is a set of presentations from the plenary session China’s Food Waste and Sludge Management Practices, Challenges, and Lessons Learned held on 29 March 2016. This session provided presentations and a panel discussion about current practices, challenges, and lessons learned for managing organic waste in China.

GMI-DGZhang-LijinZhong-TomF
Panel members at the discussion following the session’s presentations. Left to right: Ms. Lijin Zhong of the World Resources Institute; Mr. Zhang Yue, Director General of the Ministry of Housing and Urban-Rural Development; and Mr. Tom Frankiewicz,  U.S. EPA and chair of GMI’s Municipal Solid Waste Subcommittee.

Mr. Zhang Yue, Director General of the Ministry of Housing and Urban-Rural Development

Director-General Zhang delivered a keynote address highlighting organic waste management challenges and successes in China. His talk introduced the audience to the state of affairs of waste management in China, setting the stage for the sector-specific presentations that followed. DG Zhang closed his remarks with a vision for “greening” Chinese cities through low carbon waste practices. He emphasized the connection between urban municipal solid waste and wastewater treatment and methane emissions and the opportunities for reducing these emissions in China.

 

Sing (Terry) Cho, Senior Water & Sanitation Specialist with the World Bank

GMI-terry-cho
Terry Cho presenting on the World Bank’s recent projects around wastewater management in Chinese urban areas.

Terry presented the results of a recently completed project on urban wastewater sewage sludge management in China, and summarized international best practices in sludge management. Currently, China mostly lacks advanced sludge management treatment but conditions are favorable for the introduction of new technologies and practices, particularly anaerobic digestion, and especially if incorporated into urban management plans. Terry closed by outlining some of the components of the World Bank’s recommended guidelines for developing an effective sludge management master plan for China.

 

 

Lijin Zhong, China Water Lead, and Vijay Jagannathan, Senior Fellow, with the World Resources Institute

GMI-vijay_wri
The World Resources Institute’s Vijay Jagannathan presenting sludge-to-energy case studies.

Lijin and Vijay highlighted the importance of viewing waste as a resource and highlighted successful case studies of organic sludge-to-energy projects in China. Presentation and summary coming soon!

 

Li Yong, International Marketing Manager with Bioland Group

Li offered a private sector perspective on the challenges and opportunities for food waste management in China. She started with a general overview of the food waste market in China: the country currently produces more than 30 million tonnes of food waste per year, of which only about 30% is recycled. Food waste management faces several challenges in China, such as safe collection and sorting practices, frequent disconnect with local authorities, and a lack of new technology and efficient management systems. She highlighted as a case study example the new Bioland Food Waste Treatment Project in Nanning, China. Fully cooperating with municipal authorities to ensure a steady waste stream, the new project utilizes state-of-the-art technology to ensure efficient organic waste sorting, recycling, and anaerobic digestion of more than 200 tonnes of food waste per day, and produces biogas-upgraded compressed natural gas, fertilizer, and clean water.

#GMF2016 Day 1: Importance of Methane Mitigation and Methane Project Financing

Hello from Georgetown University in Washington, D.C., USA, where we have just completed the first morning plenary session of the Global Methane Forum! We had a packed house of methane mitigation enthusiasts ready to discover the importance of mitigating methane as part of a near- and long-term strategy for implementing the COP21 goal of limiting global warming below 2 degrees Celsius.

GMI-Forum-Packed-Room
A packed house before the first Plenary Session of the 2016 Global Methane Forum. Photo credit: Christopher Voell, Director of the U.S. EPA’s AgSTAR program and Co-Chair of GMI’s Agriculture Subcommittee.

The first session kicked off with a talk by GMI Steering Committee Chair & Acting Assistant Administrator of the U.S. Environmental Protection Agency Janet McCabe on methane’s critical role as a short-term climate forcer and the global cooperative efforts on its mitigation, including the Global Methane Initiative. She also detailed U.S. domestic plans for methane mitigation in the oil & gas sector, including the recent announcement with the government of Canada. Her talk was followed by a complementary discussion on the outcomes of COP21 and the implications of future methane work by the U.S. State Department’s Deputy Special Envoy for Climate Change, Karen Florini. Ms. Florini also acts as a key player in the Climate and Clean Air Coalition (CCAC), the co-host of the Forum.

GMI-Forum-Panel-UNECE
In a panel of technical experts on coal mine methane, Scott Foster of the United Nations’ Economic Commission for Europe called for increased international cooperation. Photo credit: GMI project staff.

As the policymakers exited the stage, the scientists entered – CCAC’s Climate Advisory Panel scientists Dr. Johan Kuylenstierna, Deputy Director, Stockholm Environment Institute, University of York, and Dr. Drew Shindell, Nicholas School of the Environment, Duke University. In a ‘tag team’ talk, Dr. Kuylenstierna and Dr. Shindell explained the far-reaching impacts of methane emissions not only as a climate forcer, but on air quality as well – which negatively impacts human health, agricultural crop yields, etc.

The final session of the morning featured a roundtable moderated by Dianne Rudo, during which the speakers detailed varying approaches to methane project financing, including:

GMI-Forum-Steven-Wan
Steven Wan speaking on financing Ventilation Air Methane (VAM) projects after the collapse of the Clean Development Mechanism (CDM). Photo Credit: GMI project staff.
  • Steven Wan, Fortman (Beijing) Clean Technology Co., Ltd., discussed establishing a public-private partnership with SinoSteel to finance coal mine methane projects.
  • Scott Cantor, Carbon Finance Specialist, World Bank described the World Bank’s new innovative, award-winning climate finance mechanism, the Pilot Auction Facility, based on providing a price guarantee for methane projects via auctioning put options.
  • Samuel Tumiwa, Deputy Regional Director, Asian Development Bank, outlined approaches to climate project financing in Asia, including smaller scale, easily replicated loans used to add biogas digesters to existing projects.
  • Laurence Blandford, Center for Clean Air Policy (CCAP), presented on his recently-published CCAP paper on converting COP21 INDCs into action. The major takeaway: publishing a country INDC investment strategy.
  • Bob Ichord, Ichord Ventures, LLC, discussed improving enabling environments for mitigating methane emissions from the oil & gas sector. As he noted, oil and gas production will not cease anytime soon, so we must deal with the emissions.

All in all, a successful morning. Stay tuned to our Twitter page for live updates, and please check our website in a few weeks for presentation materials from this morning.

New U.S.-Canada O&G Regulations and GMI O&G Video

BIG news today for reducing methane! In his first official visit to Washington, D.C., Canadian Prime Minister Justin Trudeau, alongside U.S. President Barack Obama, announced coordinated action on methane emissions in the oil and gas sector. Specifically, the leaders commit to reduce methane emissions by 40-45% below 2012 levels by 2025 from the oil and gas sector, and explore new opportunities for additional methane reductions.

To achieve this target, both countries have committed to regulating existing sources of methane emissions in the oil and gas sector:

  • The U.S. Environmental Protection Agency (EPA) will begin developing regulations for methane emissions from existing oil and gas sources immediately and will move as expeditiously as possible to complete this process. In April, EPA will start a formal process to require companies operating existing methane emission sources to provide information to assist in development of comprehensive standards to decrease methane emissions.
  • Environment and Climate Change Canada will also regulate methane emissions from new and existing oil and gas sources. Environment and Climate Change Canada will move, as expeditiously as possible, to put in place national regulations in collaboration with provinces/territories, Indigenous Peoples and stakeholders. Environment and Climate Change Canada intends to publish an initial phase of proposed regulations by early 2017.

The agreed-upon framework also includes several key objectives:

  • Work collaboratively on federal measures to reduce methane emissions: Building on the Canada-United States Air Quality Agreement, both countries will work collaboratively on programs, policies, and strategies, and share experiences on reducing oil and gas methane emissions as they implement their respective federal regulations, beginning this year.
  • Improve data collection, transparency, and R&D and share knowledge of cost-effective methane reduction technologies and practices: To ensure their actions are based on the best available data and technology, Canada and the United States will work together to improve methane data collection and emissions quantification and transparency of emissions reporting in North America, and share knowledge of cost-effective methane reduction technologies and practices.
  • Jointly endorse the World Bank’s Zero Routine Flaring by 2030 Initiative: Reflecting their increasing concern about the climate, environment, and energy security impacts of oil and gas flaring, particularly in sensitive regions such as the Arctic, Canada and the United States commit to jointly endorse the World Bank’s Zero Routine Flaring by 2030 Initiative, and report annually on progress.

GMI has been working in the oil and gas sector around the world since 2004. We recently created a video on oil & gas methane emission sources and mitigation methods. Check it out!

World Bank PAF Second Auction and Consultation Series

The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) is pleased to announce the date and parameters of its second auction, as well as the release of the Bidder Application Package. In addition, PAF will host a series of informational consultations and webinars in the coming weeks to provide an update on its upcoming second auction.

The second auction is scheduled for 12 May 2016 and will have a budget of $20 million. It will be a forward auction, where the price guarantee for emission reductions is fixed at $3.50 per ton and the premium cost to purchase the price guarantee will be bid up, starting at $0.06 per ton. The full list of parameters can be found on the PAF website.

Parties wishing to receive the Bidder Application Package can do so by sending an email to paf_secretariat@worldbank.org. PAF will offer price guarantees to projects that reduce greenhouse gas emissions in the solid waste, wastewater or agricultural waste sectors. Interested colleagues are invited to review the second auction eligibility criteria, frequently asked questions and explanatory videos on the PAF website.

The series of informational consultations and webinars includes two webinars and six in-person meetings, the last of which will take place at GMI’s Global Methane Forum on 28 March 2016. These events will provide an overview of the auction’s eligibility criteria, parameters, and timeline, as well as the steps required to participate in the auction. Attendees will also have the opportunity to receive direct answers to their questions regarding the second auction. You will find below the complete list of events with corresponding registration links. For more information, see the events page on the PAF website.

Location Date Time* Venue Address Registration
London Monday, 7 March 2016 10:00 – 12:00 The Millennium Gloucester Hotel 4-18 Harrington Gardens, London, GB SW7 4LH, United Kingdom Register
Zurich Wednesday, 9 March 2016 16:30 – 18:00 The Sheraton Zurich Hotel Pfingstweidstrasse 100, 8005 Zürich, Switzerland Register
New Delhi Wednesday, 16 March 2016 08:30 – 10:30 The Silver Oak, India Habitat Centre Lodhi Road, New Delhi, Delhi 110003, India Register
Bogotá Friday, 18 March 2016 10:00 – 12:00 Bogotá World Bank Office Cr 7 # 71 – 21, Torre A, piso 16, Bogotá, Colombia Register
São Paulo Monday, 21 March 2016 09:30 – 12:00 São Paulo, IFC Office R. James Joule, 65, São Paulo – SP, 04576-080, Brazil Register
Webinar 1 Wednesday, 23 March 2016 09:00 – 11:00 Webex Online Register
Webinar 2 Wednesday, 23 March 2016 20:00 – 22:00 Webex Online Register
Washington, DC Monday, 28 March 2016 14:00 – 16:00 Georgetown University Hotel and Conference Center 3800 Reservoir Rd NW, Washington, DC 20007 Register

*all times in local time, in the time zone of the location of the event

Should you have any questions, please email paf_secretariat@worldbank.org. If you would like to receive emailed updates directly from the PAF, please subscribe using this form.

Global Methane Forum – Speaker Highlights

GMI and our partners at the Climate and Clean Air Coalition (CCAC) have many interesting and exciting speakers lined up for the Global Methane Forum. Here is a little information about two of them.

 

Terry Cho, World BankMicrosoft Word - Copy _2_ of Interview 1 - Marx LiPi Records_lia
Terry Cho is a specialist working in urban water and sanitation issues as part of the World Bank’s China and Mongolia Sustainable Development project. His presentation on 29 March, in the 14:00 China session, will highlight tremendous opportunities for improving sludge treatment practices while reducing greenhouse gas emissions. The presentation will focus on a new World Bank report on sludge management strategy in China that analyzes current sludge management practices and recommends improved best management practices from projects across the globe. Mr. Cho holds an M.S. in Chemical Engineering from the Hong Kong University of Science and Technology.

 

Jose Penido, COMLURBjose-penido-2

Jose Henrique Penido Monteiro is a Senior Advisor to the Rio de Janeiro City Solid Waste Company (COMLURB). Mr. Penido has coordinated efforts among GMI, the CCAC, and the C-40 Cities Climate Leadership Group to reduce greenhouse gas emissions from the waste sector. At the Forum, he will be presenting a case study of Rio de Janeiro’s transformation of its waste management practices to become a greener and cleaner city ahead of the 2016 Summer Olympics.

 

Stay tuned for more news and highlights about the fantastic slate of speakers lined up for the Forum! For a draft agenda and other information about the Forum, visit globalmethane.org/forum or our FAQ post.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PAF: Lessons Learned and Announcement!

PAF logo FINAL_0

The World Bank’s Pilot Auction Facility for Methane and Climate Change Mitigation held a side event on the margins of COP21 this past weekend to announce its second auction, and to discuss lessons learned from the first pilot auction held last July.

First things first: the PAF announced its second auction, to be held in the second quarter of 2016 and open to the voluntary market. Like the first auction, the second auction will target methane emissions from landfills, agriculture and wastewater sites – but will change its format to be a forward auction. That means the strike price will be fixed prior to the auction, and the premium will be bid on by auction participants. Please see PAF’s eligibility criteria page. The auction budget, application package, registration deadline, deposit information, and auction date will be announced on the PAF website early next year.  Please register for PAF’s 17 December webinar (09:00 EST / 14:00 GMT) if you are interested in participating in the second auction.

In addition to announcing the second auction, the World Bank shared its lessons learned from the first auction that was held in July. These lessons were categorized into the following five broad categories:

  • Auction design
  • Project eligibility
  • Marketing is critical
  • Focus on risk management
  • Bonds offer an inexpensive and accessible put option delivery mechanism

The entire lessons learned report is available here. Winners of the first auction took ownership of the put options on 7 October.

In related news, the World Bank is also considering whether to extend the PAF to other sectors and greenhouse gas types – in particular, the oil and gas sector (see study here).

GMI continues to support the PAF process – stay tuned here for updates!