In a recently released report, carbon removal marketplace Supercritical outlined guidelines and recommendations on structuring strong and reliable biochar offtake agreements.
As pointed out in the report, offtake agreements are important for scaling biochar carbon removal efforts, as these deals provide financial security to project developers while granting access to large volumes of cost-effective carbon removal credits for buyers.
Offtake agreements are also a way for net-zero ambitious companies to lock in long-term carbon credit deliveries in a market that is projected to experience a surge in demand that will surpass the volumes offered on the spot by suppliers.
Taking into consideration the main factors causing insecurities in buyers with regard to biochar offtake agreements, like concerns about delivery risk, pricing uncertainty, and supplier credibility, Supercritical put together a guide that offers a step-by-step process for designing reliable biochar offtake contracts.
The guide focuses on three main pillars—contracts, commercials, and continuity—pointing out that buyers need to consider the trade-offs associated with each pillar variation when putting together a solid biochar offtake agreement.
When it comes to contracts, the Supercritical guide points out that buyers need to pay attention to factors like the volume of the commitment, the timeframe for contract delivery, and the special clauses that form part of the agreement, such as clauses on force majeure, termination, and most favored nation (MFN).
In regard to commercials, Supercritical highlights that buyers should be aware of different available payment structures, like prepaying or paying upon delivery, and draft the contract according to their best interest.
Relevant: Supercritical: Companies Face 2030 Shortfall As Biochar Carbon Removal Supply Tightens
Additionally, when choosing a supplier, buyers should look for strong MRV systems and proven delivery records if they want to stick to the low-risk side of things, while buyers prone to invest in newer, higher-risk technologies can secure better credit pricing but need to perform stronger due diligence.
Lastly, the continuity factor refers to establishing post-purchase monitoring strategies, where suppliers with transparent MRV systems or trusted marketplaces like Supercritical help reduce the delivery risk for buyers.
