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2. Electricity Use and Accounting

Many CDR technologies, particularly direct air capture (DAC), are highly electricity-intensive. The true climate value of these projects depends not only on the gross quantity of CO₂ captured but also on the carbon intensity of the electricity used to power the process. If a DAC plant operates primarily on coal-fired power, the net removals achieved may be substantially reduced or, in some cases, entirely negated. For this reason, electricity sourcing has become a central factor in evaluating the credibility and effectiveness of CDR projects.

A Buyer's due diligence should address electricity consumption and associated emissions. Ambitious contractual frameworks may go further by mandating the use of renewable energy sources. This can be achieved through:

  • Direct power purchase agreements (PPAs) with renewable energy providers
  • Renewable energy certificates that are matched in both time and location to the project's operational profile

The emerging frontier in this area is 24/7 carbon-free electricity matching, where a project demonstrates that every hour of operation is powered by carbon-free sources located within the same grid region. Although still nascent and technically challenging, this approach is increasingly recognized as a gold standard for climate credibility.

Buyers may view Offtake Agreements as an opportunity not only to procure high-quality removals but also to drive innovation in electricity sourcing, thereby linking carbon removal procurement with broader systemic decarbonization of the power grid.

Consideration of Other Project Inputs and Externalities​

Electricity is not the only input that matters. Buyers are also beginning to scrutinize other critical resource dependencies and potential externalities:

  • Project inputs. These include energy, biomass sourcing for bio-based projects, and water consumption. Each has implications for environmental sustainability and community acceptance.
  • Externalities. Land use impacts, biodiversity trade-offs, and social effects (such as local community disruption or labor practices) must also be taken into account when evaluating overall project quality.
  • Life Cycle Assessment (LCA). Comprehensive accounting of all inputs and outputs, from resource extraction to end-of-life, ensures that net climate benefits are real and verifiable. Aligning with ISO standards or equivalent frameworks, LCA methodologies may soon become a standard requirement imposed by buyers.

Implications for Drafting​

Given these considerations, Offtake Agreements may need to go beyond merely confirming the issuance of CDR credits. They should include reporting obligations that require suppliers to disclose key inputs, resource dependencies, and externalities, backed by transparent methodologies.

In doing so, Offtake Agreements strike a balance: they provide buyers with the confidence that removals are environmentally robust while ensuring that suppliers are not overburdened with obligations that exceed current technical or financial capacity.