Region: Sub-Saharan Africa (SSA)
Country: Kenya
Topic: Emission Reduction Program
Keywords: PPPs by Topic *, Emission Reduction Program **, Kenya
Document Link(s):
Document Summary:
Carbon forwards allow pre-funding of climate projects that are still in development for a reduced price. It helps organizations to hedge their carbon emissions and manage their exposure to carbon prices.
Document Details:
Carbon forward contracts are a way for investors to pre-fund climate action. They’re bespoke agreements between investors and project developers, where the project developer commits to delivering carbon credits to the buyer at a pre-defined price and time in the future. The funds from the issuance of these forwards then help project developers cover their overhead costs. In return, investors can access future high-quality supply at a discount from the market rates of comparable projects.
Forwards are similar to futures, both allow hedging against future price movements of a financial asset, but with forwards one purchases a future issuance of credits (e.g. 2025 credits), while a future is the purchase of any financial asset, at a predetermined price for delivery at a specified time in the future. The asset could even be an old issuance (e.g. 2017 credit).
Updated:
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