Climate Auctions – A Market-Based Approach to National Climate Action

White Papers > Microgrid Financing > Climate Auctions – A Market-Based Approach to National Climate Action

This policy brief has sought to provide information for countries wishing to take advantage of this efficient policy tool by explaining the mechanics of climate auctions, the general conditions under which they work best, and the kinds of mitigation activities for which they are particularly well-suited.

Climate auctions represent an innovative tool to spur private investment in low-carbon activities in the near term, while laying the groundwork to mobilize finance at the scale and pace needed to meet longerterm climate and development goals. In particular, climate auctions transparently allocate public finance to the most cost-competitive mitigation projects, thereby ensuring greater climate impact of scarce public funds. At the same time, climate auctions help strengthen carbon market readiness—including through the development of MRV frameworks, by stabilizing carbon prices in nascent markets, or by building capacity of project developers to undertake mitigation activities. In doing so, climate auctions can act as a transition tool to establishing the regulatory frameworks that can enable achievement of more ambitious, self-sustaining climate outcomes over time.

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