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1. Practical Steps for Negotiation

Negotiating an Offtake Agreement is not only a legal exercise but also a process of translating scientific uncertainty into commercial terms. Parties often approach the table with different priorities: buyers want credibility and risk protection, while suppliers want flexibility and financing certainty. A structured approach to negotiation helps bridge this gap.

Align on Objectives​

First, the parties must align on objectives. Is the buyer aiming to secure removals for annual corporate sustainability reporting, to pilot a novel technology, or to lock in supply ahead of anticipated regulation? Is the supplier seeking early-stage support, project-finance bankability, or long-term market positioning? Clarity here determines the overall shape of the Offtake Agreement.

Define the Scope​

Second, the parties should define the scope of the Offtake Agreement. This includes:

  • The type of CDR credits covered
  • The project boundaries
  • The protocol to be applied
  • The registry where CDR credits will be issued

The scope section should also clarify whether substitutions from other projects are permitted, and if so, under what conditions.

Financial Mechanics​

Third, the negotiation should cover financial mechanics. Pricing structures must balance certainty with flexibility. For example, a fixed-price agreement may be straightforward but could overcompensate suppliers if costs decline or undercompensate if they rise. Indexed or tiered models can align incentives but add complexity.

Risk Allocation​

Fourth, parties should agree on risk allocation. This includes:

  • Remedies for under-delivery
  • Cure periods
  • Termination rights
  • Insurance requirements

An effective risk allocation framework protects the buyer against non-performance without imposing unmanageable burdens on the supplier.

Governance and Change Management​

Finally, negotiations should address governance and change management. Because methodologies and standards are evolving rapidly, Offtake Agreements should include provisions for:

  • Updating protocols
  • Adapting to new registry requirements
  • Resolving disputes about interpretation

Without such clauses, Offtake Agreements risk becoming obsolete within a few years.