(m) Article XVI: Insurance and Project Operations

Suppliers must maintain insurance (as per the schedules) and operate the project in line with industry best practice.

Comments

Insurance requirements create a financial backstop. Operational covenants give buyers comfort that the project is responsibly managed — particularly important for novel carbon removal technologies.

Risk Allocation

Risk allocation is at the heart of Offtake Agreements. Because CDR credits are intangible and depend on future performance, both parties must carefully assess who bears which risks and under what circumstances.

Risks span technical performance, counterparty default, regulatory change, and social license. Offtake Agreements distribute these risks through conditions precedent, warranties, remedies, and insurance. The insurance market for CDR is still nascent, but products are emerging that cover reversal risk, warranty breaches, or delivery default.

Buyers and financiers increasingly conduct rigorous due diligence, evaluating technology readiness, business models, and supplier creditworthiness. Offtake Agreements provide the framework within which these assessments are translated into binding commitments.