Are offtake agreements unlocking lower-cost capital for carbon projects?
I ran a survey with 74 nature-based carbon project developers. Respondents said cost of capital was one of the biggest barriers to project development they faced.
In other capital intensive industries, offtake agreements help fix this problem. These agreements provide future demand certainty, giving investors confidence to step in and finance a project that can meet that demand.
So far, the data shows this may be working for carbon projects too – at least when it comes to nature-based projects:
Among survey respondents, project-level debt was rare, with just 13% of projects relying on it as their primary source of funding (this was actually a lot higher than I thought it would be).
But of projects that did have access to project-level debt, 85% had a signed offtake agreement.
The data doesn’t prove causation—that the offtake was the reason the project developer could access project-level debt—but it shows a very strong correlation between the two.
