Green Purchase
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Offtake Challenges

Challenges
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Offtake agreement
Buyers Alliances
Chain of Custody
Green market makers
Closed Loop Offtake
Insurance

Companies do not normally lock themselves into long-term purchasing commitments of ~10 years when the availability and price of the product remain uncertain.

Offtake agreements set out terms associated with volume. Suppliers need to enter contracts to sell sufficient volumes of the clean technology solution they produce to cover their fixed costs of production and provide a steady revenue stream for bankability.

There are limited reference points on the price of low-carbon products in an illiquid market and the factors influencing the price will change over the duration of the agreement.

Suppliers seek robust termination terms to address the risk of a lack of alternative offtakers. Offtakers often require flexibility to reduce volumes or terminate due to strategic business decisions.

Low-carbon products lack commonly accepted standards and certification schemes. Alignment is needed between the supplier and offtaker on product specification, i.e., what constitutes ‘near/net-zero emissions’ and whether the agreed definition aligns with relevant regulatory/market access definitions.

Legend: How market mechanisms adress the offtake challenges
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The ITA is a global multistakeholder initiative to catalyse decarbonisation across heavy-emitting industry and transport sectors, that represent a third of global emissions. With expansive networks across industry, financial institutions, and governments, the ITA brings together global leaders to unlock investment at scale, for the rapid deployment of decarbonisation solutions.

Within three years, it aims to significantly grow the pipeline of commercial-scale, clean industrial projects to reduce emissions by 2030 and enable delivery of Paris Agreement-aligned ambition for these sectors.

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The World Business Council for Sustainable Development (WBCSD) is a global community of over 225 of the world’s leading businesses driving systems transformation for a better world in which 9+ billion people can live well, within planetary boundaries, by mid-century. Together, we transform the systems we work in to limit the impact of the climate crisis, restore nature and tackle inequality.​


We accelerate value chain transformation across key sectors and reshape the financial system to reward sustainable leadership and action through a lower cost of capital. Through the exchange of best practices, improving performance, accessing education, forming partnerships, and shaping the policy agenda, we drive progress in businesses and sharpen the accountability of their performance.

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Market-based mechanism

Emerging mechanisms

​This toolkit is not intended to be a static document. Innovations in moving from green demand signal to green purchase are ever-present. Promising emerging mechanisms not yet available on a commercial scale are highlighted here for reference. The ITA will explore integrating additional mechanisms as they emerge in the future.

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Emerging mechanism

Scope 3 Market Mechanism®

This mechanism uses a new contractual legal framework called “Sector Transition Acceleration Contracts” (STACs) to aggregate demand around a standardised market template. Coined as ‘insetting’, the S3MM structure is also designed up front to accommodate a blended finance 'investment sidecar‘ for matched funding by governments/multilaterals, adding to its potential to maximise results.

This mechanism uses a new contractual legal framework called “Sector Transition Acceleration Contracts” (STACs) to aggregate demand around a standardised market template. Coined as ‘insetting’, the S3MM structure is also designed up front to accommodate a blended finance 'investment sidecar‘ for matched funding by governments/multilaterals, adding to its potential to maximise results.

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Market-based mechanism

Offtake agreement

​Offtake agreements are negotiated between a supplier and a buyer to establish the agreed terms for purchasing a set amount of the supplier’s future output. These contracts support project bankability and are essential to a development project reaching final investment decisions.

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Best Practice:
01. Intro

How it works:

An offtake agreement, or advance purchase agreement, is critical as it is unique in providing a legal agreement by a customer to buy something that isn’t yet commercially available. Such agreements provide project lenders the security of knowing there is a credible customer for a nascent technology, product and/or service. Offtake agreements set out the terms associated with volume, price, delivery and product specifications over a specific period. For nascent products, lenders typically require a long-term (10+ years) offtake to provide revenue certainty and hedge against nascent market risk.

The following offtake agreement components are essential to a supplier’s ability to reach its final investment decision:

Duration: Long-term offtake commitments are required to support project bankability. Lenders want to see a 5-year minimum, preferably 10+ year, offtake term. Most projects take 1 – 3 years to build out; anything below 5 years is unrealistic in meeting the supplier timeline.

Volume: The agreement regulates the parties’ obligations regarding the volumes of low-emissions products traded. Suppliers need to enter contracts to sell sufficient volumes of the clean technology solution they produce to cover their fixed production costs and provide a steady revenue stream for bankability.

Price: Offtake agreements can employ different pricing structures, such as under a ‘fixed’ price or nominated ‘floating’ price models. Here, the contract is priced by referencing a market index or market ‘spot’ price. If applicable, the parties will determine which market index or spot pricing they will adopt. The supply side needs revenue certainty to underpin projects.

Technical definition: Robust standards, accounting methodologies and certification schemes are essential when purchasing low-emissions products. A supplier requires clear, credible, adopted definitions to differentiate its product. A corporate buyer will always seek zero- or low-carbon certification due to regulatory compliance, reputational concerns and trade opportunities.

Delivery: Offtake contracts can be expected to specify the delivery terms, such as the schedule, delivery point and deadline for receiving low-emissions products. Delays may result in liquidated damages or termination rights. In negotiating offtake agreements, project developers and their customers consider which counterparty is the best positioned to store, transport and deliver the clean technology solution and to bear the risks associated with those activities. Suppliers may seek tolerance in supplying a certain level of products that fail to meet zero-/low-carbon definitions, i.e., in the event of outages.

02. Sector - Mechanism Fit

What sectors can leverage this mechanism?

Chemicals
Aviation
Shipping
Steel
Aluminium
Cement
03. Challenge-Market Fit

What challenges does it solve?

Medium
Medium

Duration

Companies do not normally lock themselves into long-term purchasing commitments of ~10 years when the availability and price of the product remain uncertain.

High
High

Volume

There is often misalignment between the buyer’s desire for flexibility to accommodate operational and market cycles and the demand profile certainty suppliers require to design and develop a capital-intensive project. Offtakers are reluctant to commit to long-term ‘take or pay’ clauses that underpin project bankability.  While the ‘send or pay’ clauses address a corporate buyer’s volume certainty, any shortfalls are likely to cause material issues.

Medium
Medium

Price

There are limited reference points on the price of low-carbon products in an illiquid market and the factors influencing the price will change over the duration of the agreement. For buyers, a well-developed power purchase agreement (PPA) hedge strategy can mitigate pricing uncertainty in an illiquid market.

Medium
Medium

Delivery terms

Suppliers seek robust termination terms to address the risk of a lack of alternative offtakers. A corporate buyer will be reluctant to cover lost margins, seeking its own termination rights for material business issues. Offtakers often require flexibility to reduce volumes or terminate due to strategic business decisions.

Medium
Medium

Technical definition

Low-carbon products lack commonly accepted standards and certification schemes. Alignment is needed between the supplier and offtaker on product specification, i.e., what constitutes ‘near/net-zero emissions’ and whether the agreed definition aligns with relevant regulatory/market access definitions.

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Enabling infrastructure

Many of the ‘products’ depend on associated infrastructure – pipelines and storage depots for new fuels, and robust electricity grids sourcing renewable energy. The availability of enabling infrastructure, such as ports, storage and grid networks, can become a bottleneck in project delivery.

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Regulatory uncertainty

Regulatory uncertainty and market fragmentation delay investment decisions. As it is challenging for suppliers and offtakers to navigate the complex policy landscape, this variability poses challenges for contracting parties as they negotiate the terms of offtake, seeking to minimise their exposure to change-in-law risk.

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Trust

Improving trust between negotiating parties is essential to accelerating low-carbon investments, as divergent expectations and assumptions pose challenges to the offtake negotiation. For example, it is important to discuss assumptions early in the negotiation phase to foster trust, for example, the circumstances infrastructure, such as storage, should be used and if there is a mutually beneficial regime that can be agreed upon.

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C-Suite and board buy-in

Driving industrial decarbonisation across the value-chain requires C-suite and board leadership. This involves translating high-level decarbonisation goals into internal policies, practices and incentives that effectively address internal barriers that may be preventing commercial-scale, clean industrial projects. Pre-commercial decarbonisation solutions present complex challenges for senior leadership. For example, a board can assess the quantum of ‘take or pay’ liability as a material financial risk. These strategic investments can also exceed a board member’s tenure.

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Procurement capability

A predominant focus on the short-term still guides most procurement decision-making. Purchasing functions are by nature designed to be risk-adverse and they are used to employ a relatively short-term framework when procuring key commodities. Currently, many baseline assumptions are predicated on continued fossil fuel use; this means that low-carbon solutions must achieve price parity with incumbent fuel sources. It is crucial to provide a benefit weighting for low-carbon production so that purchasing decisions uphold decarbonisation targets.

04. Challenges

Mechanism challenges

Despite widespread recognition that long-duration offtake agreements are needed to rapidly scale global investment in low-carbon technologies and drive industrial decarbonisation, the scale and speed of signed agreements remains woefully low. For example, Bloomberg NEF research shows that only 10% of the clean hydrogen capacity planned by 2030 has identified a buyer. And only 13% of the contracted volume (or 1 million metric tonnes/year) is legally binding.1 While private sector demand for clean technologies is continuously growing, there are several challenges that undermine corporate buyers’ efforts to develop and secure long-duration offtake agreements.

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Market-based mechanism

Buyers Alliances

A buyers alliance aggregates demand signals and supports companies in identifying cost-competitive, certifiable decarbonisation solutions.

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Best Practice: SABA
01. Intro

How it works:

A buyers alliance is a contractual arrangement where a group of buyers (often known as a buyers consortium, club or alliance) agrees to purchase a specified quantity of goods or services from a supplier or suppliers. These agreements are common in sectors such as energy, commodities and manufacturing, where long-term, large-scale purchasing agreements can be essential to the success of both buyers and suppliers. While buyers alliances currently focus on scope 3 emissions reductions, they can address scope 1 emissions as well.

There is strength in numbers. Collaborative procurement is one mechanism to catalyse the investment needed for nascent clean energy technologies and infrastructure deployment in heavy-emitting sectors, such as steel, aviation, road freight and maritime. In this sense, this market mechanism meets the core principles of an offtake agreement by providing a long-term demand commitment and revenue certainty for suppliers through bilaterally signed contracts. The buyers alliance aggregates demand signals and supports companies in identifying cost-competitive, certifiable decarbonisation solutions. A buyers alliance brings collective purchasing power, decreases risk from external shocks and provides overall improved bargaining power for buyers.

The public sector has used collaborative procurements with great success, notably the US government’s use of Government-wide Acquisition Contracts (GWAC) that allow the U.S. General Services Administration (GSA), the federal purchasing agency of the US government, to aggregate the purchasing demand of different US agencies to ensure they buy products at the lowest cost.

To allow for the sharing of confidential business information and protect against the concerns of pricing/volume monopolistic behaviour, buyers alliances can benefit from an intermediary, normally in the form of a non-profit institution or public procurement entity. Because buyer alliances can bring together potential competing buyers, companies consult with internal counsel on antitrust concerns before participating in any alliance.

Buyers alliances aggregate companies with decarbonisation ambition and a willingness to direct low-carbon investment deep in their value chain. These initiatives provide suppliers of zero- and low-carbon products with greater certainty about their revenue stream, as aggregated demand signals turn into bankable agreements.

Companies can address their scope 3 emissions while benefiting from the economies of scale achieved through such an alliance. These initiatives vary in what they offer to businesses – some allow businesses to buy the physical decarbonised product or offer environmental attribute certificates (EACs), others provide the option to buy one or the other.

Buyers alliances, as described in this toolkit, are those that specifically facilitate the joint procurement of products or services. These exist within a wider group of initiatives designed to create strong demand signals for low-emissions technologies. These demand signal programmes empower members toachieve green procurement commitments. This encourages corporate leaders to foster a culture of innovation and the deep integration of sustainability into the company’s overall purchasing decisions. Buyers alliances and other mechanisms outlined in the Toolkit can then build on this momentum to translate demand signals into bankable offtake agreements. Examples of these signals include:

• The First Movers Coalition translates member commitments from over 100 global corporations into the world’s leading, credible demand signal to accelerate the adoption of emerging climate technologies to decarbonise heavy-emitting sectors.

• SteelZero, hosted by the Climate Group in partnership with ResponsibleSteel, is a global initiative bringing together companies to accelerate the transition to a net-zero emissions steel industry. Its members make a public commitment to procure 50% of their steel by 2030 from producers on the pathway to net-zero emissions and to procure 100% net-zero steel by 2050.

• ConcreteZero is an initiative led by Climate Group in partnership with World GBC. Its members aim to send a strong demand signal to support investment and policy transition towards the sustainable production and purchase of concrete.

02. Sector - Mechanism Fit

What sectors can leverage this mechanism?

Chemicals
Emerging

Green Market Activation (GMA) Chemicals will build market-based tools to remove financial and structural barriers to decarbonisation and will facilitate demand aggregation and collective procurement for low-emission chemical products. For more information, visit Chemicals – Center for Green Market Activation (gmacenter.org).

Aviation
Existing

Sustainable Aviation Buyers Alliance (SABA) continues to drive investment into high-quality sustainable aviation fuels (SAF) through collective procurement and the creation and maintenance of a credible, transparent and standardised sustainability framework, accounting guidance and registry. For more information, visit Sustainable Aviation Buyers Alliance (SABA) (flysaba.org).

Shipping
Existing

Smart Freight Centre, specifically the Smart Freight Shippers Alliance, and ZEMBA aim to accelerate the commercial deployment of zero-emissions shipping services. For more information, visit Smart Freight Centre & Zero Emission Maritime Buyers Alliance (ZEMBA) Announces Successful Completion of Inaugural Collective Tender - The Aspen Institute - The Aspen Institute.

Steel
Existing

The Sustainable Steel Buyers Platform accelerates steel decarbonisation through collaborative procurement. The Platform launched its first request for proposals on behalf of the buyers group. This process is open to all iron or steel producers and their supply chain partners capable of delivering near-zero emissions steel to North America. For more information, visit Sustainable Steel Buyers Platform - RMI.

Aluminium
Not developed yet
Cement
Emerging

GMA is helping establish a working group of companies to design a book and claim framework for concrete. For more information, visit Cement & Concrete – Center for Green Market Activation (gmacenter.org).

03. Challenge-Market Fit

What challenges does it solve?

Medium
Medium

Duration

For suppliers, it offers a stable, long-term customer base that justifies production investments. Buyers gain greater assurance of supply over a longer time horizon, which helps manage long-term needs. 

High
High

Volume

Multiple buyers in the alliance can pool their purchasing volumes to commit to larger quantities. This benefits suppliers by ensuring consistent, large orders and allows buyers to meet demand without overcommitting individually. The collective volume secures better terms for buyers. 

High
High

Price

By facilitating joint procurement, a buyers alliance can help identify a reference price for low- and zero-emissions products not yet widely available. For example, the sale and purchase of environmental attribute certificates helps create a reference price point for sustainable aviation fuel, in comparison to traditional jet fuel. Buyers alliances can use a neutral, non-competitive third party to negotiate flexible pricing mechanisms, such as price floors, ceilings or indexes tied to market conditions. These mechanisms allow both buyers and sellers to protect themselves from market volatility. The alliance's collective buying power enables stronger negotiations on price, ensuring that it is fair and often lower than individual buyers would get. 

Medium
Medium

Delivery terms

A buyers alliance can negotiate better logistics and delivery terms by pooling demand. It can accomplish this by staggering delivery schedules, negotiating centralised delivery infrastructure or ensuring priority access. The collective nature of the alliance also makes it easier to work out contingency plans for delivery disruptions.  

High
High

Technical definition

The establishment of standards, regulations and certification systems is paramount. These alliances can support the development of definitions and standards for high-integrity value chain interventions by working together to bring standardised specifications established at the outset of tenders. This is challenging if a sector experiences a fracturing of different programmes with varying objectives.

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Not Relevant

Enabling infrastructure

Collective demand and procurement could lead project developers to feel more confident investing in new infrastructure or improvements in existing infrastructure. The delivery of enabling infrastructure is still critical to the effectiveness of buyers alliances.

Medium
Medium

Regulatory uncertainty

Certain kinds of buyers alliances are typically prevented from any direct advocacy but can provide regulators with policy-related guidance and support education and alignment across members.

Medium
Medium

Trust

A buyers alliance fosters greater trust because it's built on shared goals and distributed risks. Alliances often formalise governance structures, communication protocols and mechanisms to resolve disputes, which helps foster transparency. The collective oversight of contract terms and delivery performance can reinforce trust, creating an environment where both buyers and sellers feel more secure. 

Medium
Medium

C-Suite and board buy-in

An alliance can make a more compelling case to the C-suite and the board by showcasing the collective strength, reduced risk and negotiated benefits (such as lower prices and secured supply). The alliance's stability and long-term strategic benefits are easier to justify at the executive level than smaller isolated contracts. In addition, risk-sharing across the alliance and potentially lower capital outlay for infrastructure or upfront costs can appeal to executives seeking to minimise risk and maximise value. 

High
High

Procurement capability

Buyers can leverage the procurement capabilities and expertise of other, potentially larger, more experienced members. The collective power of the alliance allows it to bring negotiators, lawyers and industry experts to structure the best possible agreements. This professional support ensures that smaller or less experienced buyers receive favourable terms and minimise other procurement risks. 

04. Challenges

Mechanism challenges

Buyers alliances require a high level of consensus building and cooperation among parties. Reaching alignment between multiple stakeholders, balancing potential competing priorities and diverse commitment objectives may present hurdles to forming an effective alliance.  For example, aligning buyers with agreed standards or specifications can be a time-consuming process. A key issue is the perception that buyers alliances give rise to collusion and anti-competitive behaviour. There are ways to meaningfully engage with these alliances while adhering to antitrust laws.

05. Industry Example

Case Studies: SABA

The Sustainable Aviation Buyers Alliance (SABA), developed by RMI, EDF, and Neoteric Energy and Climate, demonstrates how joint procurement processes can send a larger demand signal for sustainable aviation fuels (SAF) to accelerate the investment and adoption of this pre-commercial product. SABA provides a credible, transparent, and standardised system for aviation customers to support SAF, including a public-facing registry. The Center for Green Market Activation (GMA) serves as the secretariat of SABA.

Since its founding, SABA has driven $200M towards SAF certificates over 5 years; and the initiative now boasts over 30 corporate air transport members. SABA drives the uptake of SAF through collective action that supports demonstration and early development SAF suppliers. These often represent scale-ups with technical readiness levels (TLR) between 4 to –7 with system prototype demonstration in an operational environment, but not yet a complete and qualified system. Such projects benefit greatly from guaranteed offtake.

The alliance pools demand from companies committed to decarbonizing their aviation activities, allowing them to negotiate SAF purchases and ensure long-term supply contracts with fuel producers.  ​

Key players in SABA include United Airlines, JetBlue, and Boeing, as well as large companies with significant air travel needs, including Microsoft, Meta, AstraZeneca, BCG, Autodesk, Amazon, Deloitte, and JPMorgan Chase. Fuel producers that have benefitted from SABA and that form the supply side of the alliance include Neste, World Energy, and Fulcrum BioEnergy. The initiative is also supported by government regulators and environmental NGOs that ensure transparency, standard-setting, and verification of emissions reductions. 

​As with any buyer’s alliance, the objective is to aggregate demand – in SABA’s case by bringing together airlines and large corporate buyers. As a result, SABA creates a large, stable market demand for SAF, making it easier for fuel producers to justify investment in production capacity. Currently, SAF makes up less than 0.5% of global jet fuel supplies and is sold at a premium. i ​SABA enables long-term offtake agreements, with alliance members negotiating contracts with SAF producers for 5-10 years. This provides price certainty and volume guarantees for both the producers and buyers. This model also provides greater price stabilisation by locking in large volumes through long-term offtake agreements. This is meant to reduce the price differential over time by creating economies of scale.  ​

Additionally, agreements reached through SABA assist with supply chain development. The guaranteed demand created by the alliance incentivises producers to invest in SAF production facilities, which are capital-intensive. This helps scale up SAF production, making it more widely available and affordable in the long run.  ​

The collective demand pooling that is brought about from SABA members helps guarantee supply, mitigates risk, and allows for buyers to negotiate favourable terms. By creating collective demand, SABA is sending signals to the market that SAF is a viable and scalable alternative to fossil-based aviation fuel, encouraging further innovation and investment in the space. This has led to the purchase of SAF certificates for nearly 50 million gallons of SAF – representing roughly 500,000 tons of CO2 (’3,000 fully loaded flights from New York to London’, according to SABA).ii  ​Despite its early stage, SABA provides an example of how a buyers alliance can work in the broader low-carbon commodities space. By pooling demand and negotiating long-term offtake agreements, the alliance helps reduce the cost premium of SAF, supports the development of supply chains, and contributes to reductions in aviation emissions. This collaborative approach is crucial to advancing the decarbonisation of other hard-to-abate sectors.