Targeted support: Unlike PTCs, CCTC’s offtake agreements provide targeted support, channeling resources into impactful projects with high standards. This specificity avoids diluting government funding across less critical projects and ensures support aligns with decarbonization objectives.

Market-driven demand creation: CCTC actively fosters demand for clean commodities, addressing both supply and demand needs in contrast to PTCs, which primarily lower production costs without guaranteeing a buyer. CCTC’s demand-focused model lowers risk for investors by providing assured buyers, facilitating investment in unproven green markets

Flexible, Cost-Effective Approach: PTCs involve fixed incentives, but CCTC’s adjustable support aligns with evolving market conditions. This adaptability prevents under- or oversubsidisation, ensuring taxpayer value while driving long-term market growth in green commodities. As the CCTC will hold and trade the environmental attributes the support taxpayers provide is expected to decline as the market for these attributes grow.

The reverse auction process could be structured to resemble a CFD, but it is neither necessary nor advisable in this context. A support mechanism structured as a CFD would tie the Trading Company to a specific financial framework that limits its flexibility in managing and selling the green pig or sponge iron. A CFD contract would be hard for the Trading company to sell/hedge or manage. It would also be almost impossible to price.

Instead, the Trading Company should negotiate bespoke supply/purchase contracts tailored to each producer, setting clear terms for the supply of the commodity. This is clean and fast. This approach provides the Trading Company with flexibility to market the clean credentials either bundled with the product or separately.

Selling green credentials independently enables the Trading

Company to support the development of a green commodity credit market, which will be critical for the industry as demand for carbon reducing options grows

This question highlights the reason you won’t use a CFD and you should not be thinking that a green iron supply contract is like the supply of “sausages” you can buy through a standard “reverse auction process”. Anyway we can’t wait for the Trading company to find a buyer of “green pig-iron”. It also again fails to understand that when you have a contract for the supply of green pig iron you have a contract for the supply of two assets not one.

Rather than treating pig iron as a single, undifferentiated product, the Trading Company distinguishes between the physical product and its environmental attributes. Pig iron itself is one part of the transaction, while the "clean" status, a represented by green credits, is another.

The Trading Company is unlikely to seek a buyer for the product initially (as it will take three years or more to build the plant and there is not an established market for the environmental attributes) but rather it will engage with creditable producers to acquire at the lowest price possible the green iron product in a way that ensure both the quality of the low emission product and the integrity of its environmental credentials.

This means that selection of the counterparty would not be selected in a traditional reverse auction. The supplier would need be to be qualified, demonstrate its ability to provide the commodity on time etc the negotiations would focus on value beyond price as we are “not just buying sausages”, including production standards and emissions reductions, allowing the Trading Company to secure reliable and verifiable low-emission supplies.

No. The suggested dual-layered auction, incorporating a CFD on the producer side, introduces complexity without adding value.

Instead, the Trading Company’s approach prioritizes negotiated supply/purchase contracts that account for the complexities of green pig iron production, such as the necessary capital investments, production timeframes, and environmental standards. This process allows the Trading Company to ensure stable supply agreements that underpin project development without the delays and administrative burdens associated with multiple auction layers involved in trying to find a buyer now. This method allows the company to focus on building long-term, tailored contracts that meet both production and environmental goals, streamlining the path to financial close of the project that will produce the green pig iron. Any idea that you will start to “run reverse auctions for the sale of the product” would kill any chance of anything getting done.

The Trading Company’s primary role is to establish the market and build a reliable supply base for low-emission pig iron. However, close coordination between buyers and sellers remains essential to ensure the product can be efficiently and economically integrated into existing steelmaking operations.

Acting as a central facilitator, the Trading Company will secure supply contracts for both the physical commodity and its associated green credits. These can be sold together or separately, offering flexibility for steelmakers aiming to reduce embedded emissions. This structure bridges the gap between supply and demand, supports emissions reduction goals, and fosters a transparent and flexible market for green commodities.

Summary of Process

• Rather than running reverse auctions, the Trading Company will negotiate tailored contracts with a select group of qualified producers—more akin to infrastructure procurement (e.g., toll roads or hospitals) than commoditised product tendering. Custom terms ensure alignment with both producer capabilities and buyer needs.

• Once contracts are in place, the Trading Company can determine the optimal timing and method of sale—either as green-certified pig iron or standard pig iron with independently traded green credits.

• By decoupling the green credentials from the physical commodity, the Trading Company creates liquidity in the green credit market, enabling emitters to purchase verified offsets or clean inputs.

• This model avoids the complexity and impracticality of dual-sided reverse auctions or CFDs, and instead focuses on building a functional, scalable, and innovation-ready market for green industrial inputs.