In this white paper, we discuss two potential financial mechanisms—contracts‐for‐difference and put options—which can be used to support dairy projects, and potentially other fuel technologies, by leveraging revenues from existing credit trading programs to build these projects. Such financial mechanisms could represent another leading effort by the State to address climate change and promote green/low-carbon finance in California. One key advantage of these types of financial mechanisms is that they are “pay for performance” programs—projects are only provided money in proportion to their actual production and associated reduction in GHG emissions. This staff analysis details how the use of a financial mechanism can be a more effective way to use State funds relative to just relying on grant programs.
