Price DeterminantsThe price a seller can get for their offset credits will vary according to when they sell, in addition to other factors such as project type, location, securities in the contract and creditworthiness of the seller. Some project types may be more attractive to buyers than others. This could be attributed to the volume of previous offset credits issued for that project type, the attractiveness to buyers or the total number of projects available to purchase from.
Location will be a factor in the value of potential offset credits due to the perception of buyers. For example, a Nova Scotia-based company may prefer Nova Scotia-based offset credits. For the buyer, this scenario would potentially value the Nova Scotia-based offset credits higher than ones from, say, Alberta. Any provincial or international rules, in addition to federal requirements, could also impact value.
The value of the contract will be influenced by the securities provided by both the buyer and the seller. Securities are the guarantees provided in the event of a failure to deliver offset credits. The more security a seller can provide, the higher the value of the contract.
Creditworthiness of the seller is also important. Many LFEs have requirements determining creditworthiness and will not work with sellers that do not meet these requirements. Many sellers do not generally fit these requirements. A seller with the backing to meet such creditworthiness requirements can generally demand a high price in their transaction. These are only a few of the factors that can impact the value of an offset credit. It is important to take into account project cost and transaction costs in addition to these other factors when determining price. |