What is a Carbon Purchase Agreement?

As compulsory offsetting regulations come into force, and companies continue to strengthen their voluntary decarbonisation commitments, high-quality carbon removal credits may well be in short supply. Ensuring future access through a CPA is a strategic choice that can mitigate future reputational risk and accelerate your progress to Net Zero.

Mads Emil Dalsgaard

Co-founder at Klimate

Your Net Zero commitment, guaranteed

A Carbon Purchase Agreement (CPA) is a contract entered between a carbon removal supplier or broker (in this case Klimate) and a client, that guarantees future access to Carbon Dioxide Removal (CDR) credits.

The purpose is to guarantee that the Purchaser has access to carbon removal in the future - at a given price, volume and type - while ensuring the quality, credibility and additionality of the CDR credits.

How a Carbon Purchase Agreement works

Planning

Ambitious companies with Net Zero commitments sign on to CPAs to aggregate demand. By signing CPAs, companies secure their access to high-quality CDR projects that will not be available in the future. By grouping together projects, companies can create sufficient demand to ensure development at a cost-efficient scale and guarantee additionality.

Execution

Project suppliers use the CPA to build new CDR facilities. With demand secured, Klimate collaborates with suppliers to secure working capital and deploy CDR facilities. We use our robust and proprietary analytical framework to ensure that only the highest quality projects are supported.

Delivery

CDR credits with true additionality. As the CDR projects begin delivery, purchasers pay for credits, registered on the public records of Klimate. The cost is fixed, as opposed to the market price, expected to increase significantly in the coming years due to supply shortages.

Why CPAs are critical to delivering Net Zero commitments

The science is clear—all viable climate models show that carbon removal will be necessary to achieve the targets set by the Paris Agreement and reach global Net Zero by 2050. Companies need to reduce their emissions as much as possible, but unavoidable emissions must still be addressed through CDR. A Carbon Purchase Agreement can help your business meet future decarbonisation targets

Securing access, affordability and additionality through CPAs

• There is already a significant shortage of supply for high-quality carbon removal. The cost of CDR is also expected to accelerate as demand rapidly outpaces supply. By committing early, you fix the future cost, while paying the full amount only at the successful delivery of the CDR credits.
• Additionality is the holy grail of offsetting emissions. By co-initiating new carbon removal projects, CPAs become unquestionably additional.
• CPAs also help accelerate the overall development of the carbon removal market, by sending a market signal that prompts other companies to invest as well. In the long run
• Leading companies like Meta, Google, Stripe and McKinsey are already pre-committing to purchase CDR towards 2030.

Key terms

1. Method - There are many ways to remove CO₂, each CPA specifies which method will be used.
2. Volume CO₂ / Year - Each CPA holds a certain amount of CO₂ that can be produced per year.
3. Cost / Ton - The cost for each CDR credit, typically 1 ton CO₂.
4. Delivery schedule - The time period and volumes in which the CDR credits will be delivered. For example 2025 to 2030.
5. Pre-commitment - The share of the total amount which needs to be committed at the start of the contract.

A Carbon Purchase Agreement for your company

Curious about how a Carbon Purchase Agreement might fit into your overall sustainability strategy? Speak to a carbon removal strategist to learn more about how you can achieve climate impact while making sound business decisions.