What is a carbon credit offtake or forward purchase agreement, and what should I watch for before signing?
An offtake or forward purchase agreement is a contract to sell carbon credits that do not exist yet, at an agreed price or formula, when they are issued. It can give a project early cash or a sure buyer. Before signing, check delivery obligations, shortfall penalties, credit specification, price terms and who bears registry and rule-change risk.
Spot, forward and prepaid deals
The International Emissions Trading Association (IETA) publishes model emission reduction purchase agreements (ERPAs) that many buyers start from.
- Spot sale: credits already issued are transferred now for payment now.
- Forward sale: you promise future credits at a price fixed today, or a floor with upside sharing, paid on delivery.
- Prepaid forward: the buyer pays part upfront to fund the project, and you repay in credits or cash.
Clauses to read closely
- Delivery: firm volume or best efforts. A firm promise makes you liable if the project under-delivers.
- Shortfall remedies: replacement credits, refund of prepayment, or damages based on market replacement cost.
- Credit specification: registry, methodology, vintage, any quality label, and whether a corresponding adjustment is needed.
- Price: fixed, floor, or index linked, and in which currency.
- Costs: who pays verification and issuance levies.
- Change in law: what happens if Indian rules on credit export or authorisation change.
- Exclusivity and term: whether you can sell surplus credits to others, and how either side can exit.
A decision rule
Sign a firm forward only for volumes you are confident of, after at least one verified monitoring period if possible. Offer the rest on a best-efforts or right-of-first-refusal basis. If you take a prepayment, make sure the repayment terms do not threaten the business if the project fails.
Get advice before you sign
These contracts move risk between buyer and seller in ways that are not obvious. Ask a lawyer who has handled carbon contracts to review title, tax and governing law, and check that you actually own the right to claim the reductions.
Illustration: what a shortfall clause can cost
- Firm forward: 3,000 credits a year at USD 8 (illustrative price)
- Prepayment: 20 percent of 3,000 x 8 = USD 4,800
- Credits issued this year: 2,100, so the shortfall is 900
- Replacement cost clause, market price USD 11: 900 x (11 minus 8) = USD 2,700 owed to the buyer
Prices are illustrative, not market data.
What Senseible does here
Senseible keeps monitoring records traceable, which helps you judge how many credits you can safely promise. Senseible is not a counterparty, broker or legal adviser, and its marketplace listings are not offtake contracts.
Sources: Verra registry rules on transfer and retirement of VCUs, ICVCM Core Carbon Principles (credit quality specification)
Last reviewed 2026-10-15. Legal content: confirm the current IETA ERPA template version and Indian rules on credit authorisation before relying on it.