Methane finance study group report: using pay-for-performance mechanisms to finance methane abatement

Methane finance
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This report looks at whether and how public funds, utilizing pay-for-performance mechanisms, may be used to incentivize reductions of methane emissions. This report documents the discussions of the Methane finance study group. According to two 2011 studies by the world meteorological organization and the UN environment program, aggressive reduction of methane emissions, together with actions on black carbon, can substantially slow the rate of climate change over the next few decades. Reducing methane can be achieved in a range of sectors, including oil and gas production and natural gas processing, transmission, and distribution; coal mine methane; solid waste and wastewater management, and agriculture. Across these sectors, the study group found that a large and growing number of abatement opportunities have been identified in developing countries, but in many cases these were not implemented due to financial and other barriers. Pay-for-performance mechanisms disburse cash on the delivery of pre-determined and independently verified results. This makes them attractive instruments for governments facing expanding funding needs and scrutiny on achievements. Importantly, pay-for-performance mechanisms can be designed to directly incentivize private investment through allocation methods that maximize public value for money.

Credit: The work is the product of an international group of experts, the Methane Finance Study Group, convened in late 2012 at the request of the G8, and facilitated by The World Bank.