@article {1097031, title = {Underwriting 1.5{\textdegree}C: competitive approaches to financing accelerated climate change mitigation}, journal = {Climate Policy}, year = {2017}, abstract = {

Delivering emission reductions consistent with a 1.5{\textdegree}C trajectory will require innovative public financial instruments designed to mobilize trillions of dollars of low-carbon private investment. Traditional public subsidy instruments such as grants and concessional loans, while critical to supporting nascent technologies or high-capital-cost projects, do not provide the price signals required to shift private investments towards low-carbon alternatives at a scale. Programmes that underwrite the value of emission reductions using auctioned price floors provide price certainty over long time horizons, thus improving the cost-effectiveness of limited public funds while also catalysing private investment.

Taking lessons from the World Bank{\textquoteright}s Pilot Auction Facility, which supports methane and nitrous oxide mitigation projects, and the United Kingdom{\textquoteright}s Contracts for Difference programme, which supports renewable energy deployment, we show that auctioned price floors can be applied to a variety of sectors with greater efficiency and scalability than traditional subsidy instruments. We explore how this new class of instrument can enhance the cost-effectiveness of carbon pricing and complementary policies needed to achieve a 1.5{\textdegree}C outcome, including through large-scale adoption by the Green Climate Fund and other international and domestic climate finance vehicles.

Key policy insights

}, url = {http://www.tandfonline.com/doi/full/10.1080/14693062.2017.1389687}, author = {Paul Bodnar and Caroline Ott and Rupert Edwards and Stephan Hoch and Emily F. McGlynn and Gernot Wagner} }