This is the second in a series of articles discussing significant issues arising under emission reduction purchase agreements (ERPAs). For background information, please see the previous article in this series.

One of the critical issues in drafting an ERPA is defining the concept of delivery of the emission reduction unit. The delivery terms will vary based on the type of credit being traded. For Certified Emission Reduction (CER) credits sold within a compliance regime, the program regulations will generally dictate how to effect delivery. However, for Voluntary Emission Reductions (VERs), which are contractually created as part of a voluntary scheme, the parties will need to negotiate the mechanism by which the credits will be transferred from seller to buyer, bearing in mind the risks associated with transfer of title and any shortfall or delivery failure.

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For further information about this topic, please contact Akin Gump.

Emissions trading is a mechanism that provides countries, companies, and environmentally-conscious individuals with flexible cost-efficient means to meet greenhouse gas emission reduction goals. Emissions trading operates similarly to commodities markets, with purchase and sale contracts defining the rights and obligations of the parties and allocating risk. In a series of articles, ClimateIntel will discuss significant issues arising under these emission reduction purchase agreements.

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For further information about this topic, please contact Akin Gump.