Contracting for Forest Carbon : Elements of a Model ... - Forest Trends

Introducing the Transaction
and the Parties
Title, Introduction, and Recitals
The forest carbon agreement will have a title,
which should be simple but descriptive but need
not include the names of the parties. The
introduction follows, in the form of a short
paragraph identifying the parties and the date of
the agreement. The principal, legal, or registered
addresses of the parties are generally listed here.
The date of the contract should ideally be the
date of signing for the last party to sign the
agreement.
Next come the recitals, which include any
background information that the parties think is
relevant. Recitals may include a description of
the goals of the agreement along with
background information about the project, the
parties, and any relevant agreements between
the parties or any party and one or more third
parties. The recitals should not contain any
binding obligations.
The introductory part of the agreement ends
with a lead-in sentence indicating that “the
parties agree as follows,” as shown in Box 1.
Box 1. Sample Beginning of an Agreement
FOREST CARBON EMISSION
REDUCTIONS PURCHASE
AGREEMENT
This forest carbon emission reductions purchase
agreement is dated , and is
between Seller Representative Assn., a Brazilian
non-profit association (the “Seller
Representative”), and Investor Corp., a
Delaware corporation (the “Buyer”).
RECITALS
The Seller Representative and participating
members of the Ecosystem Service Provider
Community (“Participating Landholders”) are
party to an agreement dated ,
concerning the authority of the Seller
Representative to represent the Participating
Landholders with respect to forest carbon
transactions on land under the control of the
Participating Landholders.
Participating Landholders wish to undertake
land management activities in order to reduce
emissions from deforestation and degradation
and enhance carbon sequestration in forests
under their control (the “Project”).
The Buyer wishes to pay Participating
Landholders for the right to claim credit for
emission reductions or additional sequestration
generated by the land management activities of
Participating Landholders.
The parties therefore agree as follows:
Parties
In its simplest form, a purchase agreement is
between two parties: a buyer and a seller. A
forest carbon purchase transaction, however,
may involve multiple sellers – perhaps even
whole communities – and multiple buyers.
Generally speaking, the more parties are
involved, the higher the administrative and
transaction costs will be. The additional cost,
and potential risk, can and should be mitigated
by the use of one or more intermediary entities
to: (1) represent the sellers as a collective unit in
negotiating with third parties, including buyers,
(2) oversee project development and
governance, and (3) manage collection and
disbursement of revenues.
Where multiple sellers are involved, sellers
should ideally agree to be represented by a single
Contracting for Forest Carbon | 3