4.1 What is the budget for the second auction?
The second auction has a $20 million budget. This budget will support put options redeemable for 5.7 million tons of emission reductions ($20 million divided by the fixed strike price of $3.50/ton).
4.2 What is the strike price, and how will it be determined in the second auction?
The strike price, also known as the guaranteed price at which the PAF will purchase emission reductions or the floor price, will be fixed at $3.50/ton in the second auction. The strike price was determined by consultations with interested parties and by analyzing publically available data on historic carbon credit prices.
4.3 What is the premium, and how will it be determined in the second auction?
The premium, or the cost of purchase the put option, will be determined by the second auction. Bidding for the premium will begin at $0.06/ton and this price will increase until demand for put options no longer exceeds supply. The premium will be paid immediately following the auction.
4.4 In the end, the guaranteed price of each emission reduction will be determined by the strike price minus the premium price. Is this correct?
Yes. The net value per emission reduction will be the strike price (paid by the World Bank upon successful redemption of put options) minus the premium price (paid by the auction winner immediately following the auction).
4.5 Will the premium be refunded if I do not exercise the put options?
The premium is not refundable should the options not be exercised. However, the options are tradable.
4.6 What is the size of the bid deposit?
The bid deposit will be $0.06 per ton of emission reduction, and will correspond to the volume of put options the bidder seeks to purchase in the first round of bidding. For example, if a bidder wishes to bid for 200,000 ERs in the first round, the bidder will pay a $12,000 bid deposit.
4.7 Do I get the deposit back if I do not win?
Yes, the deposit will be refunded to those who do not win the auction.
4.8 Does a bidder lose his deposit if he fails to pay the premium?
Where a bidder defaults, the IBRD shall be entitled to take actions such as retaining a share of the bid deposit, as a compensation to the IBRD for its administrative costs, losses and/or expenses incurred in respect of the failed or partially failed PAF Auction.
4.9 Will the PAF accept only cash deposits?
Yes, the PAF will only accept cash for the bid deposit.
If your question is not answered on these pages, please send an email to paf_secretariat@worldbank.org.
This page is for information only. Please see the disclaimer:
THE FOLLOWING IS A SUMMARY OF THE WORLD BANK’S PROPOSED PLAN TO ISSUE PILOT AUCTION FACILITY EMISSION REDUCTIONS NOTES (“PAFERNS”). IT IS NOT AN OFFER TO SELL PAFERNS OR AN INVITATION TO OFFER TO BUY PAFERNS. THIS SUMMARY IS SEPARATE FROM, AND SHOULD NOT BE READ IN COMBINATION WITH, ANY FUTURE OFFER OR SALE OF PAFERNS, WHICH WILL BE MADE IN COMPLIANCE WITH APPLICABLE LAWS AND UNDER ENTIRELY SEPARATE LEGAL DOCUMENTATION AND OFFERING MATERIALS. THIS SUMMARY IS VERY HIGH LEVEL FOR SIMPLICITY AND LEAVES OUT MATERIAL INFORMATION AND THE LEGAL DOCUMENTATION THAT IS EXPECTED TO GOVERN THE PAFERNS. FURTHER, IT IS CURRENT ONLY AS OF THE DATE OF POSTING TO THIS WEBSITE AND IS LIKELY TO BECOME OUTDATED AS THE PAFERNS LEGAL DOCUMENTATION IS DEVELOPED. THE STRUCTURE, TIMING AND MECHANICS OF THE ACTUAL PAFERNS, IF AND WHEN THEY ARE ISSUED, ARE SUBJECT TO CHANGE. POTENTIAL INVESTORS MUST OBTAIN A COPY OF THE COMPLETE LEGAL DOCUMENTATION PURSUANT TO WHICH THE PAFERNS WILL BE ISSUED, INCLUDING THE WORLD BANK’S MAY 2008 PROSPECTUS RELATING TO ITS GLOBAL DEBT ISSUANCE FACILITY AND THE FINAL TERMS FOR ANY ISSUANCE OF PAFERNS. POTENTIAL INVESTORS SHOULD NOT RELY ON THIS SUMMARY. BEFORE MAKING ANY INVESTMENT DECISION, POTENTIAL INVESTORS MUST REVIEW THE COMPLETE LEGAL DOCUMENTATION (ONCE AVAILABLE).
