Skip to main content

3. Governance, Standards, and International Alignment

Offtake Agreements do not exist in a vacuum; rather, they form part of a wider ecosystem of standards, regulations, and evolving policy frameworks. For Offtake Agreements to be effective and durable, they must align with these broader governance structures, ensuring that CDR credits remain credible, transferable, and eligible across both voluntary and compliance markets.

International Frameworks​

At the international level, the Paris Agreement's Article 6 sets the foundation for cross-border crediting. It establishes the rules for the international transfer of emission reductions and removals between countries. A key principle is the avoidance of double counting, achieved through "corresponding adjustments" made to national greenhouse gas inventories.

For Offtake Agreements that involve cross-border projects, it is critical to reference Article 6 compliance and to specify how and when corresponding adjustments will be secured. Without these provisions, buyers risk holding CDR credits that may later be deemed ineligible for compliance or international reporting purposes.

Voluntary Market Standards​

On the voluntary side, initiatives such as the Integrity Council for the Voluntary Carbon Market (IC-VCM) and its Core Carbon Principles (CCPs) are establishing benchmarks for what constitutes a "high-quality" CDR credit.

Incorporating CCP-aligned methodologies or standards into Offtake Agreements signals to investors, customers, and regulators that purchased CDR credits meet rigorous thresholds for environmental integrity. This not only enhances buyer confidence but also helps suppliers demonstrate alignment with emerging global best practices.

National and Regional Policies​

National frameworks are also shaping the future of carbon markets:

  • The European Union's Carbon Removal Certification Framework (CRCF) is in the process of establishing certification rules that will define eligibility for CDR credits within the EU.
  • Similar initiatives are underway in Japan and Singapore.

By anticipating such frameworks, Offtake Agreements can be structured to remain valid and transferable even as regulatory landscapes evolve. This approach effectively "future-proofs" the contracts, ensuring that CDR credits purchased today retain their eligibility tomorrow.

Convergence of Markets​

  • Voluntary ↔ Compliance markets. Over time, voluntary and compliance markets are likely to converge, though compliance markets such as the EU Emissions Trading System (ETS) or Japan's GX League may initially accept only a limited set of CDR categories.
  • Interoperability. With the rise of registry linkages and meta-registries—such as the UNFCCC's Paris Agreement Crediting Mechanism or the EU's CRCF—legal agreements will need to recognize and accommodate multiple systems of record. This ensures that CDR credits can move seamlessly across registries without losing their integrity or value.

Future-Proofing Contracts​

Drafting techniques can help contracts remain adaptable in the face of regulatory change without making them overly rigid:

  • Agreements may allow for the substitution of CDR credits if a chosen standard migrates into a compliance regime or ceases to be recognized in the voluntary market.
  • Standards can be defined with reference to the time of delivery, rather than the time of contract signing, to ensure flexibility as frameworks evolve.

Worked Examples​

  • A biochar supplier in the EU may issue CDR credits under the CRCF that are eligible for compliance within the EU but not yet endorsed by the IC-VCM. Buyers must understand this dual status and draft agreements accordingly.
  • A DAC supplier in Japan may issue CDR credits that qualify under the GX League for domestic compliance but are not recognized under U.S. SEC disclosure frameworks. Here, contracts must address the different regulatory treatment across jurisdictions.

Key Lesson​

Contracts should be drafted to accommodate parallel applicability in both compliance and voluntary markets while leaving space for the rapid evolution of market infrastructure. By explicitly anticipating regulatory convergence, interoperability challenges, and shifting recognition standards, Offtake Agreements can provide both buyers and suppliers with certainty today while preserving flexibility for tomorrow.