Environmental Price Assurance Facility Mobilizing private capital to invest in conservation

The Environmental Price Assurance Facility (EPAF) mobilizes private capital to invest in conservation by auctioning contracts that provide long-term price assurance for environmental markets.

The significant risks associated with the future value for environmental credits diminish the ability of environmental markets to mobilize much needed capital for conservation. The EPAF will auction long-term put option contracts to guarantee minimum prices for future environmental credits—assuring projects, investors, and lenders that environmental markets have real value.

ABOUT | The Climate Trust (The Trust) launched the EPAF in August 2017 with the support of a Conservation Innovation Grant from the U.S. Department of Agriculture. The Trust was founded in 1997 to manage payments from new power plants complying with the Oregon Carbon Dioxide Standard, acting as the only state-recognized non-profit responsible for stewarding funds under the oversight of the Oregon Energy Facility Siting Council. Since then, The Trust has managed additional regulatory mitigation programs in Washington and Montana, and voluntary programs on behalf of natural gas utility NW Natural. Over this 20-year period, The Trust has invested $34 million into greenhouse gas reduction projects.

MECHANICS | The EPAF brings the World Bank’s Pilot Auction Facility model for international offsets to benefit conservation in the U.S. The EPAF will auction long-term, minimum price guarantees to project developers, landowners, and green investors working on projects with the potential to generate environmental credits—including carbon offsets or Low Carbon Fuel Standard Credits. To begin, EPAF price guarantees will be structured as a put option.

Put options are a financial contract that gives the holders the right, but not the obligation, to sell assets (in this case, environmental credits) at an agreed-upon strike price. The strike price will be determined at an auction.

The EPAF anticipates running its first auction in the third quarter of 2018.

Check back at the end of the month for further developments

The Climate Trust, Environmental Price Assurance Facility Contact: Peter Weisberg | pweisberg@climatetrust.org

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