Price floor
A guaranteed minimum price per credit, used to protect project revenue against market downturns.
A price floor sets a lower bound on what a project receives per credit. It can be contractual, agreed with a buyer, or policy-driven, where a government or facility guarantees a minimum.
The instrument addresses a real financing problem: projects need predictable revenue, while voluntary prices are volatile. A floor makes revenue modelling possible and lowers the cost of capital, which in turn allows projects with high upfront costs to proceed.
Its trade-off is that someone absorbs the downside. If the floor is above market, the guarantor pays the difference, and the credibility of the guarantee matters as much as the number itself.
Frequently asked questions
Who typically provides a price floor?
Buyers through contract terms, development finance institutions, or governments within jurisdictional programmes.
Does a floor guarantee project viability?
No. It stabilises price, not delivery volume, cost overruns or verification outcomes.