3.1 Where do the auctions take place?
The auctions take place via a live, online auction platform managed by NERA Economic Consultants. Bidders who do not want to participate in real-time bidding will have the option to confidentially and securely submit their bids ahead of the auction.
3.2 How will the auction work?
For the second auction, the PAF will run a multiple-round forward auction. Under this format, the strike price (or the guaranteed payment per emission reduction at redemption) will be fixed and bidders will bid up the premium (or the amount the bidder must pay for the price guarantee). Bidders will participate in a series of rounds during which they submit bids relaying the quantity demanded for a given premium. At the end of each round, the auction manager will reveal the aggregate demand at that price. The auction manager will then announce a new price for the next round, and this process will continue until demand no longer exceeds supply. For additional information, see the auction videos.
3.3 What is the difference between a reverse auction and a forward auction? Why change the format in the second auction?
In a reverse auction, the PAF fixes the premium and bidders then bid down the strike price. In a forward auction, the PAF fixes the strike price, and bidders then bid up the premium. The PAF ran a reverse auction for its first auction, and will run a forward auction for its second. As a pilot facility, the PAF aims to promote learning, and by running a forward auction, the PAF seeks to understand how this change in format may affect the auction outcome. For additional information on auction format, see the background research notes on auction theory, auction implementation, and environmental auctions.
3.4 What is the minimum and maximum number of put optins that I can bid for? Can a single bidder win all of the put options?
Bidders can bid for put options redeemable for a minimum 200,000 tons of CO2e and a maximum 2.5 million tons of CO2e. With a fixed budget of $20 million and a fixed strike price of $3.50, the supply for the auction will also be fixed at 5.7 million tons of CO2e. Given this fixed supply, the auction guarantees at least three winners.
3.5 What will be the minimum increment size for the put option premium during the auction?
The increment will be set within a fixed bracket announced ahead of the auction. Additional information on the increment size can be found in the Bidder Application Package, which can be obtained by sending an e-mail to PAF_Secretariat@worldbank.org. The email must contain disclaimer language cut and pasted from this webpage.
3.6 How will the PAF prevent speculative bidding?
Winners will be required to purchase the put options by paying a premium. The premium discourages speculation by forcing winners to put their own resources at risk, knowing they will only be able to exercise the put option should they deliver eligible emission reductions.
3.7 Will some training be provided before the auction? Will there be a practice website and a dry run?
A mock auction will be organized prior to the auction date. Information related to the mock auction and training materials will be provided to interested parties that submit an application to participate in the auction.
3.8 Will the online auction be open to view in real time by non-participants?
No, the online auction will not be open for viewing by non-participants. However, the auction winners and the clearing price will be announced upon its conclusion. The PAF will share, as part of its piloting mandate, the lessons learned from the auctions.
3.9 I am unable to participate in the live auction, but would still like to bid for put options. Is there an alternative way to participate?
Yes, a bidder may also elect to use proxy bidding, an option where the software places a bid on behalf of the bidder. Under proxy bidding, a bidder specifies a proxy payment, which is a minimum payment determined by the bidder prior to the first auction round. If the going price for the premium rises above the proxy payment, then the bidder is deemed to have withdrawn all bid units at the proxy payment. If the bidder elects to use proxy bidding, this bidder cannot submit bids using another method throughout the auction.
3.10 I am worried that my internet connection may fail during the auction. What are my options for managing technical difficulties?
It is the bidder’s responsibility to minimize the risk of encountering technical difficulties. Bidders may consider securing access to a secondary Internet Service Provider (ISP) through a wireless card, or coordinating with a team member in a secondary location that does not rely on the same internet access.
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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).
Auction Format - Bidders' Q&A
3.1 Where do the auctions take place?