Long-term offtakes: A buyer's guide journey to smarter, more strategic carbon procurement

Summary

This webinar, hosted by Dina Martin from Caesar, explores the strategic value of Long-Term Offtakes (LTOs) in carbon credit procurement. It highlights how companies like N26 use LTOs to secure pricing, manage supply risks, and ensure long-term climate impact. Foster Glenn from N26 shares insights into their carbon procurement strategy, emphasizing the importance of budget clarity, internal alignment, and building lasting partnerships with carbon credit projects. The session offers valuable recommendations for first-time LTO buyers, showing how LTOs align with broader sustainability goals while providing operational efficiency and predictable costs.

Takeaways

• 🌱 Long-term offtakes (LTOs) are multi-year agreements to procure carbon credits, providing stability and predictability compared to annual spot purchases.
• 💡 LTOs help companies align carbon procurement with long-term net zero targets, ensuring supply security and cost certainty.
• 📈 High-quality carbon projects are increasingly limited and expensive, making LTOs a strategic tool to secure desired volumes over multiple years.
• 🤝 LTOs foster strong, lasting partnerships between buyers and project developers, enhancing trust and collaboration in the voluntary carbon market.
• 💰 Multi-year agreements can offer significant cost savings, sometimes up to 30%, by mitigating price volatility in the carbon market.
• ⚙️ LTOs improve operational efficiency by reducing the need for annual procurement cycles, allowing teams to focus on strategic climate initiatives.
• 🔍 Risk assessment is crucial for LTOs, including evaluating project quality, delivery assurance, and ongoing monitoring over multiple years.
• 🏦 Aligning LTOs with internal budgeting, such as through internal carbon pricing, ensures predictable spending and easier internal approval.
• 🎯 First-time LTO buyers should treat agreements as strategic tools, define long-term climate goals, clarify budget frameworks, and build internal understanding early.
• 🌍 LTOs support impactful and durable climate action by securing a balanced mix of near-term emission avoidance and long-term carbon removals.
• 📊 Compared to spot purchases, LTOs provide certainty in cost, quantity, and quality, allowing companies to plan confidently and communicate transparently internally and externally.
• 🛠️ Working with experienced partners like Caesar can simplify LTO processes, providing project vetting, monitoring, and ongoing support.

Q & A

What is a long-term offtake (LTO) in the voluntary carbon market?

A long-term offtake (LTO) is an agreement between a buyer and a carbon project developer to purchase carbon credits over an extended period, typically beyond a single year. LTOs generally span 2–5 years, though some may extend up to 10 years, and are designed to provide price and supply stability while supporting long-term climate projects.

Why are LTOs particularly relevant in the current carbon market?

LTOs are relevant due to increasing demand for high-quality carbon credits and limited supply, which drives up prices. They help buyers secure both volume and price stability over multiple years, reducing exposure to market volatility and ensuring availability of credits to meet future net zero commitments.

What benefits do LTOs provide to organizations like N26?

LTOs offer multiple benefits: price and supply certainty, operational efficiency by reducing annual procurement tasks, ability to form long-term partnerships with projects, reputational benefits, strategic alignment with internal carbon budgets, potential cost savings of up to 30%, and measurable impact through consistent support of high-quality projects.

How did N26 initially approach carbon credit procurement, and why did they shift to LTOs?

N26 initially used spot purchases for annual procurement but shifted to LTOs due to challenges like price volatility, limited supply, repeated internal review cycles, and the desire to form long-term partnerships. LTOs offered predictability, strategic alignment with their internal carbon tax framework, and the ability to secure high-quality credits over multiple years.

How do LTOs integrate into internal budgeting and approval processes?

LTOs are structured to align with annual budgets without requiring full upfront payment. They provide predictable, multi-year costs, simplifying internal approval and budget planning. This flexibility demonstrates long-term strategic commitment and ensures internal stakeholders understand the value and impact of the investment.

What operational efficiencies are gained by using LTOs instead of spot purchases?

Operational efficiencies include reduced effort in annual procurement cycles, predictable delivery schedules, streamlined project monitoring, and the ability to focus internal resources on strategic climate actions rather than repetitive transactional tasks. Multi-year agreements reduce administrative burden and increase planning certainty.

How are carbon projects evaluated and selected for LTO agreements?

Carbon projects are assessed through comprehensive risk evaluations, including up to 400 data points covering project quality, standards, and media monitoring. Buyers prioritize projects based on portfolio goals, such as balancing near-term avoidance with long-term removal, and conduct due diligence alongside the risk assessments provided by partners like Caesar.

How can organizations manage uncertainty regarding future emissions volumes with LTOs?

Organizations can secure a minimum threshold of credits through LTOs and leave a portion of emissions coverage flexible for future top-ups. This approach ensures sufficient coverage for uncertain emissions while allowing the portfolio to dynamically include new, high-priority projects as they become available.

What advice is given for first-time LTO buyers to make the process smooth and effective?

First-time LTO buyers should: 1) Treat LTOs as a strategic tool rather than a simple procurement contract, 2) Define long-term climate goals and project priorities, 3) Clarify internal budget frameworks, 4) Build early internal understanding of how LTOs reduce volatility and improve project quality, and 5) Partner with experienced providers for operational support and risk assessment.

How does engaging in an LTO benefit both buyers and carbon project developers?

For buyers, LTOs provide price and supply certainty, operational efficiency, and strategic impact. For carbon project developers, LTOs offer planning security, predictable funding, and the ability to scale projects with confidence. This mutual benefit strengthens long-term relationships and ensures high-quality, sustainable outcomes.