Statistics from AlliedOffsets and Trove Research show that carbon projects deliver only approximately 35-60% of the credits that were projected at the outset of the project. Many of the causes of this huge shortfall can be covered by an insurance policy, which guarantees carbon credit outcomes.
Trees, oceans, and volcanic rock have been removing carbon dioxide from the atmosphere for hundreds of millions of years, but human-engineered carbon removal for the express purpose of reducing global warming – whether through natural mechanisms or technology – is a relatively new phenomenon, and people generally underestimate the range of possible outcomes.
Recent investigations have indicated that as many as nine in ten certified carbon credits do little to offset the carbon dioxide their buyers produce; while most of the credits covered by these probes represent the increasingly controversial area of carbon avoidance, even the yields of high-quality carbon removal projects can come up short of expectations. This might be due to natural variance in tree growth, weather, or natural disasters like flooding – all events that could interrupt a buyer’s path to net zero and leave it exposed to reputational damage, lawsuits, or fines (See “Regulatory & Industry trends”).
We expect premiums for our Carbon Shortfall Insurance to range from 5 percent to 25 percent of the value of insured credits, depending on the risks of a particular project, and to be paid in the form of a single premium for up to five years of coverage. Claims payments are in removal credits that are additional, measurable, verifiable, and permanent.