Contracting

A tripartite contracting structure involving a supplier, developer, and credit manager is emerging as a best-practice model for managing carbon removal and reduction units under frameworks like the EU Carbon Removal Certification Framework (CRCF) and Verified Carbon Standard (VCS). Here's how it works and why it's important:

🧮 Removal vs. Reduction Units

• Removal Units: Represent actual CO₂ taken out of the atmosphere and stored (e.g., in timber, soil, or geological formations)

• Reduction Units: Represent avoided emissions (e.g., switching from concrete to timber)

The contract must:

• Define ownership of each unit type

• Avoid double counting, especially against Whole Life Carbon (WLC) KPIs in buildings

• Clarify reporting boundaries for CSRD and VCS compliance

🛡️ Buffer and Insurance Terms

Under CRCF and VCS, projects must address reversal risk (e.g., fire, decay, land-use change). Contracts should include:

• Buffer pool contributions: A percentage of credits held in reserve

• Insurance mechanisms: Financial or third-party guarantees to cover reversals

• Contingency clauses: Define actions if stored carbon is lost or invalidated

These terms protect the environmental integrity of the credits and ensure long-term accountability.