Carbon removal industries are crucial to achieving the Paris Agreement climate goals but are struggling to raise capital to scale operations.
That’s why today we are delighted to announce the launch of Pre-CORCs, a new digital carbon asset to facilitate carbon removal prepayments. Pre-CORCs are validated projections of future carbon removal activities that can be purchased by corporations to prepay for projected CO2 Removal Certificates, CORCs, providing an early source of revenue to scale projects.
The prepayments are part of the Puro Accelerate program, launched by Puro.earth's Funding Solutions Team to enable carbon removal projects access funds needed to scale. The program notably supports projects in getting long-term offtake agreements for CORCs, prepayments (Pre-CORCs) and investments, aiming to lift impediments for suppliers who require financing, so they can expand operations or start new projects.
Commercial and technical risk assessment
Each Pre-CORC represents one metric ton of future net negative emissions as calculated using one of the Puro Standard carbon crediting methodologies. In order to be issued Pre-CORCs, a project will be subject to a rigorous commercial and technical risk assessment. In addition, Puro.earth has set strict rules to protect buyers. These measures were created to give buyers the confidence needed to secure their future supply of CORCs, possibly at a discounted rate. Pre-CORCs also offer buyers greater flexibility than traditional advance market commitments as they can be traded on Puro.earth or via other marketplaces.
After the carbon removal has been realized and independently verified, Pre-CORCs are converted into CO2 Removal Certificates, CORCs. Only then can they be retired to support net zero claims. To strengthen carbon market data availability, transparency and traceability we will issue the new digital prepayment innovation to the public Puro Registry.
Here are some examples of projects that can use Pre-CORCs:
An early-stage biochar project - The project should have advanced plans with key partnerships in place, including key persons with expertise and experience in biochar/bioenergy, location secured, pyrolysis technology chosen, and reliable and sustainable feedstock source available. However, the project can still have a funding gap needing to raise an additional percentage of capital. The commercial and technical risk assessment is a protection for the buyer, giving confidence that the project has a high likelihood of producing CORCs.
A Direct Air Capture and Storage (DACS) project - Usually these projects only have revenue from CORCs and not from a byproduct (such as biochar). As an example, a buyer could commit to buying 40% of CORCs for ten years through an offtake agreement and also pre-pay the project by purchasing Pre-CORCs for 10% of forecasted CORCs for the first five years.
A project with an existing facility already producing CORCs and wants to expand - The project may raise additional capital by issuing Pre-CORCs for the future CORC production of the existing facility, which could be perceived as lower risk by the buyers than Pre-CORCs from the new facility. However, the prepayments will help finance the expansion.
Non-delivery risk mitigation measures
Buyers of negative emissions are eager to help the carbon removal industries to grow, but they want to be protected against price volatility and delivery uncertainty. We aim to give confidence to buyers by providing five main mitigation measures against non-delivery of CORCs:
1. Buffer: The supplier cannot sell more than 80% of their forecasted CORC issuances. The remaining 20% will be kept in a reserve in case there is a shortfall in production.
2. Equity: The value of the prepayments should not exceed 150% of the value of the supplier’s equity.
3. Distribution of prepayments: The money from the prepayments will only be distributed to the future CORC supplier once they have achieved their fundraising target.
4. Assessment by Puro.earth: The supplier must successfully pass a commercial and technical risk assessment and an assessment report must be made available to the buyers for review.
5. Seniority: In case of a shortfall, buyers who prepay for CORCs have priority over buyers who have committed to purchase CORCs without prepayment.
Additionally, we are working on partnerships to offer CORC non-delivery risk insurance for biochar projects.
Our VP of Funding Solutions, Arnaud Defrance, comments: “Pre-CORCs as digital assets are our response to buyers who want to streamline procurement of their future CORCs from early projects, with full traceability. Buyers will also be able to play a direct role in enabling suppliers’ growth by filling real funding gaps. Pre-CORCs will now be issued in the Puro Registry, a big step forward for the carbon removal industry".
Engineered carbon removal is an innovative space which needs to reach its full potential fast. Initiatives, such as the Oxford Principles for Net Zero Aligned Carbon Offsetting and the Science Based Targets initiative (SBTi), are calling for corporations to gradually increase the share of carbon removals in their offsetting portfolios as they transition to net zero. Bolstered by Nasdaq’s support, Puro Accelerate and the Pre-CORC units are designed to enable corporate buyers align their strategy to these initiatives by securing the future supply of high-quality carbon removals.
If you are a buyer who wants to purchase Pre-CORCs and actively participate in the growth of the carbon removal market take a look at the projects in the Puro Accelerate page.
If you are a supplier who wants to be issued CORCs or Pre-CORCs contact us here.