Action Guide

Finalize, Execute, and Manage Records

Environmental Defense Fund

To achieve the most from your carbon credit program, it is important to build a portfolio of different credit types and execute purchases in a way that meets your company’s operational needs. After a purchase, it is important to monitor your credit inventory on an ongoing basis.

An optimized carbon credit portfolio will be comprised of a mix of different credit types that allow you to meet various environmental, financial, and strategic goals. This could include a mix of reduction and removal credits, and/or credits from a range of geographies. Once you have developed an ideal portfolio, your company can move to entering negotiations and contracting processes, which can be handled internally or by external consultants.  

Once purchases have occurred, maintaining an up-to-date registry of your credits and their retirement information is essential for future assurance, auditing, reporting, and disclosure processes.  

Finalize and Execute 

While this pathway walks through a single carbon credit purchase, building a portfolio through carbon credit purchases over time is important to scaling and improving climate solutions. Portfolio optimization—perfecting the mix of credit types to meet quality, financial, and timing goals, as well as incorporating the carbon credit procurement strategy’s unique objectives and long-term vision—should be a routine practice for your company if you are procuring carbon credits.  

With an ideal portfolio in mind, you will be prepared to enter negotiations and secure credits from projects that align with outlined credit procurement criteria and goals. Dimensions that your company may wish to optimize for across a portfolio purchase include but are not limited to: 

  • Reductions vs. removals credits  
  • Price (e.g., pricing trends in forecasting reports)  
  • Geographic exposure  
  • Activity type (e.g., renewable energy, energy efficiency, nature-based)  
  • Project or program size and future credit availability  
  • Co-benefits (e.g., socioeconomic, biodiversity, community development) 

The negotiation and contracting processes can be executed internally or by an external consultant. If you sourced a project through a Request For Proposal (RFP), sometimes the terms will have already been outlined for the project developers, and the only key negotiations would be on procurement volumes. That is not always the case, and a company’s level of negotiation depends on how the RFP is formatted. For any contract negotiation, you may want to involve internal or external legal counsel, as well as internal procurement partners. 

Offset Guide has guidance on carbon credit purchasing contracts,1 sometimes known as . Examples of ERPAs or pre-purchase agreements for innovative carbon dioxide removal (CDR) credits can be found on Stripe’s Carbon Removal Source Materials GitHub3 and  site.4 

In addition to focusing on carbon strategy and the quality and integrity of credits, it is critical that any purchase agreement also satisfies the operational needs of your business. This may include items such as payment terms, delivery timelines, carbon credit registry operations, presentation of summary data for credits and retirements transferred, and other logistical considerations. 

Manage Inventory and Records  

Once contracts are executed, your company will remain in touch with either developers directly or intermediaries to ensure credits are transferred in accordance with the timelines agreed to in the purchase agreement.  

Companies that purchase directly from developers will likely wish to manage their inventory, requiring the development of one or several registry accounts. Once credits from the project are available, these can be transferred into your company’s registry account. Your company can then elect to retire the credits immediately or hold them for retirement (or transference) at a future date.  

If your company works with brokers and intermediaries, you may never need to create your own registry accounts and  can instead elect to have brokers retire credits on your behalf. In this instance, your company must request that brokers share retirement certificates, showing proof of retirement on behalf of the company. Evidence of retirement is critical to inform any assurance (e.g., GHG accounting), third-party auditing (e.g., ESG reporting, sustainability/green bond reporting), and reporting and disclosure processes. Even after retirement, you will want to maintain some level of ongoing monitoring to manage non-permanence risks. 

Footnotes:

  1. Carbon Offset Guide – Contract Terms 
  2. Emission Reductions Payment Agreements (ERPAs) 
  3. Stripe | Carbon Removal Source Materials GitHub 
  4. Microsoft | CDR program