SOCAR Green: Long-term carbon credit revenue forecasts pose major uncertainty for lenders

Long-term revenue forecasts for carbon credits over periods of 30 to 40 years create significant uncertainty for lenders, Rza Naghiyev, Director of Investments and Project Development at SOCAR Green, said at Baku Climate Action Week 2026 (BCAW 2026), Report informs.

Naghiyev said bankability - the ability of a project to secure bank financing - was a key consideration when developing projects.

He noted that long-term power purchase agreements are taken into account because they allow companies to demonstrate that cash flows will remain predictable over an extended period.

According to Naghiyev, this is easier in electricity sales because long-term power purchase agreements usually provide a fixed price, reducing risk for both lenders and investors.

The situation is different for carbon credits, he said, as carbon markets are still relatively underdeveloped and credits and related instruments vary in quality, creating greater uncertainty over the underlying asset.

Naghiyev added that lenders cannot rely on long-term carbon credit purchase agreements in the same way. While some forward markets exist, he said they are not yet sufficiently reliable and remain highly volatile.

He noted that lenders providing long-term financing expect carbon credits to be monetized over time, but market conditions may change significantly.

"We are still at an early stage in the development of the carbon credit market, and we do not know whether the assumptions we make today will prove correct. This creates even greater uncertainty when we are looking at projections spanning 30 to 40 years," Naghiyev said.