# What is a carbon credit offtake or forward purchase agreement, and what should I watch for before signing?

Canonical: https://senseible.earth/answers/carbon-credit-offtake-agreement

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.

- [Marketplace listings](https://senseible.earth/marketplace)
- [Who owns credits from equipment?](https://senseible.earth/answers/who-owns-carbon-credits-from-equipment)
- [What is a corresponding adjustment?](https://senseible.earth/answers/what-is-a-corresponding-adjustment)
- [Sell or retire your credits?](https://senseible.earth/answers/should-i-sell-or-retire-my-carbon-credits)

Sources: [Verra registry rules on transfer and retirement of VCUs](https://verra.org), [ICVCM Core Carbon Principles (credit quality specification)](https://icvcm.org)

Last reviewed 2026-10-15. Legal content: confirm the current IETA ERPA template version and Indian rules on credit authorisation before relying on it.