Last updated:
May 24, 2024

Spot Credits

What are Spot Credits?

Spot Credits are immediate, market-based carbon credits that allow organisations and individuals to neutralise their carbon footprint. These credits are available for immediate purchase and use. Generated from projects that either reduce, avoid, or remove emissions from the atmosphere, through activities such as reforestation, biochar, blue carbon, and enhanced weathering, spot credits provide a real-time solution for carbon neutralisation needs and sustainability strategies.

What is the Difference Between Spot Credits, Forwards, and Offtake Agreements?

  • Spot Credits are transacted immediately, with prices reflecting the current market conditions. This immediacy offers flexibility, but comes with the risk of price volatility.
  • Forwards are pre-arranged contracts to purchase credits at a future date at predetermined prices, used as a hedging and speculation tool to potentially profit from future price fluctuations.
  • Offtake agreements are long-term commitments used to finance new projects by guaranteeing a market for their future carbon credits, locking in supply and mitigating the risks of long-term price fluctuations.

Benefits and Downsides of Spot Credits:

  • Benefits:
    • Ability to purchase credits flexibly as needed, adapting quickly to changing neutralisation & compensation requirements and strategies.
    • Take advantage of potentially more competitive prices driven by market dynamics based on current supply and demand.
    • Directly support projects with verified carbon reduction or removal, resulting in immediate impact.
  • Downsides:
    • Market dynamics can lead to price volatility with unpredictable and potentially high costs.
    • The speed of transactions may complicate due diligence efforts due to verification challenges.
    • May not provide adequate long-term financial support needed to finance new projects.

How to Incorporate Spot Credits into Your Sustainability Strategy:

Integrating Spot Credits into a broader sustainability strategy involves:

  • Use spot credits for immediate needs, while maintaining investments in longer-term carbon credit projects such as offtake agreements.
  • Monitor the market to stay informed about trends to identify optimal times for purchasing spot credits.
  • Partner with reputable platforms like Senken to ensure the credits' legitimacy and impact. Learn more about Senken’s due diligence process for selecting high quality carbon credits.
Senken's due diligence process for selecting high quality carbon credits

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