What is involved in an auction?
At the beginning of the trading year the Climate Club may decide to allocate permits to the group using an auction. Groups will bid for the number of permits they wish to purchase for their yearly carbon budget. They should base their bid on the previous year’s baseline, any carbon reduction projects they may be planning and the price of carbon.
The Climate Club will provide a range of set prices on the auction bid form. Groups complete this form online, setting out how many carbon permits they would want at each price.
To allocate the permits to the groups the organisation will need to find the ‘market clearing price’. That is the price at which the demand for permits of all the participants meets the number of permits available (set by the cap on the market). All participants will therefore pay the same price and receive the number of permit they bid for at that price.
Once groups have received their permits, they will seek to use as few as possible by reducing the amount of carbon they generate. This will allow them to sell any surplus permits.
Contact your Climate Club for more information.