(c) Article IV: Price, Payment, Taxes
Buyer will pay Supplier the Unit Price set forth in Exhibit B for each Delivered Credit, by wire transfer to the account designated by Supplier within [] Business Days of Delivery or receipt of a valid invoice, whichever is later. Late payments will accrue interest at []% per annum. Each Party is responsible for its own taxes in accordance with applicable law. Unless otherwise specified, the Unit Price includes verification, registry, and transaction costs. If a tax or fee is imposed after the Effective Date that materially affects either Party, the Parties will discuss in good faith an equitable adjustment.
Payment mechanics are flexible: linked to delivery, invoicing, or project milestones. Verification and registry costs are allocated explicitly. Taxes are split depending on whether they arise before or after delivery.
OSCAR does not include a "most-favored buyer" price adjustment clause, under which the buyer's price would be reduced if the supplier sold the same CDR credits to another party at a lower rate. When negotiating an Offtake Agreement, a buyer may wish to consider including such price adjustment mechanisms; however, it is important to note that these provisions can adversely affect the bankability of the Offtake Agreement by reducing a lender's ability to predict future project revenues, which are often a project's primary collateral.
Price formation in the VCM and in CDR transactions does not depend solely on the tons of CO₂ removed. Increasingly, co-benefits such as biodiversity protection, water conservation, or community development are recognized as material factors in determining value.
There is a discussion about the quantification of impact, distinguishing between types of co-benefits and examining the methodologies by which they can be credibly measured. Only with transparent, verifiable metrics can co-benefits support pricing and withstand public and regulatory scrutiny.
Comments
Buyers need predictability of cost; suppliers need certainty of revenue. Allocating registry/verification costs prevents hidden surprises.
Pricing in Offtake Agreements is one of the most dynamic and frequently contested areas of negotiation. Unlike mature commodity markets, the CDR sector does not yet benefit from transparent price discovery or standardized benchmarks. Each contract, therefore, functions not only as a commercial arrangement between a buyer and a supplier but also as a market signal that shapes perceptions of value across the broader industry. Striking the right balance is critical: while buyers seek predictability and fairness, suppliers - many of whom are early-stage companies - must avoid being locked into pricing structures that undermine their ability to scale or recover costs.
Common Pricing Models
Several models are emerging in practice, each with distinct advantages and trade-offs:
Fixed price per ton. A fixed price provides predictability for both parties and simplifies financial planning. However, it may fail to capture future cost reductions as technologies scale, leaving buyers potentially overpaying or suppliers underfunded if market conditions shift.
Cost-plus pricing. This approach bases the price on the supplier's actual costs plus a negotiated margin. It is particularly suitable for early-stage projects where unit economics are uncertain and where buyers are effectively helping to underwrite the path to scale. The challenge lies in ensuring transparency of costs without overburdening suppliers with excessive disclosure obligations; this balance may be easier for CDR pathways whose costs are dominated by a limited number of easily-verified inputs like electricity or widely-used feedstocks or materials.
Indexed pricing. Indexed models tie the CDR credit price to external benchmarks, such as compliance market prices, inflation indices, or other reference commodities. This approach provides a mechanism to adjust for changing market conditions but requires careful drafting to ensure the chosen index is relevant and not easily manipulated.
Performance-based pricing. In some cases, prices are adjusted according to quality metrics, such as the demonstrated permanence of storage or the delivery of co-benefits. This aligns incentives with outcomes but introduces additional verification requirements that can be costly and complex for suppliers.
Allocation of Fees and Verification Costs
Offtake Agreements often explicitly address who bears responsibility for verification costs, registry fees, and similar expenses. These costs may be bundled into the CDR credit price itself or charged separately as line items. Both approaches are workable, but the agreement must be clear to avoid disputes. Some contracts also introduce tiered pricing structures, under which CDR credits with longer permanence horizons or higher-quality co-benefits command a premium. While this can reward suppliers for delivering higher-value outcomes, it also increases their contractual exposure if promised attributes later prove difficult to substantiate.
Role of Co-Benefits in Pricing
Co-benefits are increasingly influential in pricing negotiations. Many buyers are willing to pay a premium for CDR credits that deliver measurable biodiversity, social, or local community benefits alongside carbon removal. Suppliers, in turn, highlight these multiple value streams as part of their commercial proposition.
The challenge lies in quantification and verification:
Types of co-benefits. These may include biodiversity outcomes (e.g., species protection, habitat restoration), social impacts (e.g., job creation, gender inclusion), or environmental improvements (e.g., soil health, water quality).
Measurement frameworks. Credibility often depends on recognized standards or custom impact assessments tailored to project circumstances.
Verification requirements. Third-party assessments or independent expert reports are often necessary to substantiate claims. However, requiring extensive verification can impose significant costs on suppliers, particularly start-ups.
From a contractual perspective, if co-benefits are explicitly priced into the Offtake Agreement, suppliers may be asked to warrant their quantification and verification. This creates legal and financial risk if the benefits are later contested, which is why balanced drafting is essential. Offtake Agreements should ensure that suppliers are not overexposed to liabilities for impacts outside their reasonable control, while still giving buyers confidence in the claims that support a price premium.
Pricing Models with Intermediaries
Where brokers or marketplaces are involved, Offtake Agreements must also address intermediary compensation.
Traditional model. Brokers or platforms often take a fixed commission, typically between 5 and 15 percent of the transaction value. This provides clarity but may not align incentives to achieve the highest possible sale price.
Sliding-scale model. More sophisticated structures adjust revenue sharing based on the achieved sale price. For example:
- If the sale price is less than or equal to $100 per ton, the supplier receives 85% of the proceeds and the broker 15%.
- If the sale price is between $101 and $150 per ton, the supplier receives 90% and the broker 10%.
- If the sale price exceeds $150 per ton, the supplier receives 95% and the broker 5%.
This approach incentivizes intermediaries to secure higher sale prices while protecting suppliers from disproportionate margin erosion at the lower end of the market. It also creates greater transparency in multi-party deals, ensuring that suppliers understand how value is distributed.
Drafting Considerations
When using sliding-scale or commission-based models, the Offtake Agreement should define the "Unit Price" with precision. Ambiguities, such as whether the figure is gross or net of fees, how currency conversions are handled, or whether registry and verification charges are included, can create disputes. To further ensure fairness, suppliers should be granted audit rights, allowing them to verify the intermediary's reporting and confirm that revenue splits are accurately applied.