A recent article from S&P Global reports that interest from financial investors in Indian BiocharBiochar is a carbon-rich material created from biomass decomposition in low-oxygen conditions. It has important applications in environmental remediation, soil improvement, agriculture, carbon sequestration, energy storage, and sustainable materials, promoting efficiency and reducing waste in various contexts while addressing climate change challenges. More carbon credit projects is robust, but the market’s current structure dictates that long-term offtake agreements are essential for securing capital, according to participants at the AltFutures Carbon Dioxide Removals Summit. Investors are reportedly quick to move on from projects, no matter how promising, if guaranteed offtakes are not in place.

This dynamic stems from the market’s lack of maturity and minimal spot liquidity. Carbon credits derived from Biochar, a material produced via the capital-intensive pyrolysisPyrolysis is a thermochemical process that converts waste biomass into bio-char, bio-oil, and pyro-gas. It offers significant advantages in waste valorization, turning low-value materials into economically valuable resources. Its versatility allows for tailored products based on operational conditions, presenting itself as a cost-effective and efficient More process, are part of the Carbon Dioxide Removal (CDR) category. These credits are valued at a premium for their high integrity, long permanence, and low risk of reversal. However, the expense of production makes seed capital crucial for developers.

Offtake agreements create a win-win scenario. They provide developers with the necessary initial funding and financial security. Simultaneously, buyers gain access to high-quality credits at significantly discounted, locked-in rates, often ranging from $80/mtCO2e to $110/mtCO2e. This is a substantial saving compared to the recent Platts Biochar India current-year price assessment of $140/mtCO2e, which has been rangebound due to a lack of spot activity.

Developers are already selling most of their upcoming credits through these forward agreements, leaving minimal quantities for the spot market. While a more active spot market is deemed necessary for the segment’s long-term maturation, the current reliance on offtakes acts as a critical mechanism to ensure project initiation and expansion. Market players anticipate increased supply by 2026, which may influence forward pricing.