In-kind carbon insurance

An insurance mechanism that will drive confidence in carbon investing by enabling buyers to guarantee a carbon credit outcome


Coenraad Vrolijk

20th Jan 2024



Insurance contracts to de-risk and professionalize carbon markets

Insurance sits at the heart of every mature market. As a society, we pay insurance premiums worth between 5 and 10 percent of global GDP to protect ourselves from a range of potential losses and liabilities – from cancer diagnoses to hurricane damage to oil spills.

Yet participants in the carbon market, where revenues are set to more than quadruple to $1-2 trillion by 2050, have little access to such assurances. Today, if a company commits to net zero (that is, to removing the same amount of carbon dioxide from the atmosphere that its operations produce after reducing its emissions as much as possible) and buys the carbon removal credits necessary to achieve this goal, it has little recourse should those removals fail to materialize.


This leaves companies vulnerable to penalties under new, more stringent regulations, increasingly litigious activists, and a potentially shrinking investor base as pension funds and other institutional investors impose strict sustainability criteria on their holdings.

We bring something new to the carbon market but something which has stood the test of time across geographies and sectors: insurance contracts, offering the economic and social benefits that only regulated, professional insurers can provide. And we pay out in-kind, a key advantage as demand for carbon removal credits outstrips supply.

CarbonPool’s products offer safety to our clients at a time of growing pressure to reduce their environmental impact. Any company already investing in carbon removals will understand the importance of insurance in both re-risking and professionalizing the adolescent carbon market, and in shifting it toward the removals necessary to reach net zero. Insurance will give companies the confidence to invest in removals – an essential tool in the battle to slow global warming.

When your car breaks down, you need a tow truck, not a cash payment.

If a carbon credit investment fails to materialize or is reversed, why not simply buy replacement credits on the market – either absorbing the additional cost or using a cash payout from an insurer? A few carbon insurers offering cash benefits already exist, and while prices have fluctuated significantly in recent years, a removal credit could be purchased in 2022 for between $15 and $30.


The trouble is the scarcity of high-quality credits – that is, those credits likely to represent the actual, verified removal of carbon dioxide from the atmosphere. These are the only credits that a growing list of scientists and regulators consider valid, whether in carbon-offset accounting or otherwise, and they will likely become more expensive as that consensus builds. Traders already have trouble sourcing these credits, and demand is forecast to soar ahead of 2030, when almost half of the world’s top 2,000 companies are aiming to hit net zero. Needless to say, prices will likely climb even more steeply as 2050 looms, the Paris Agreement’s worldwide net zero target date.

That’s why CarbonPool pays in-kind. What’s true for roadside assistance is also true for carbon trading: when your balance sheet comes up short, you need credits, not cash. Without in-kind insurance, those credits are difficult to find, especially under time pressure. We pay our clients in high-quality carbon credits when they need them, in the quantities they need.

At CarbonPool, we have embraced carbon removal as a solution but are looking at its potential flaws head-on, with plans to source the carbon credits for our claims payments only from projects that are additional, measurable, verifiable, and permanent. This means that if our clients come up short on carbon removals, we will make them whole using credits that were of the same quality or better than those they had counted on.

Even the carbon market’s critics admit that carbon offsetting must play a role in our efforts to keep temperature rises below 1.5°C, and even carbon removal sceptics see that there is no path to net zero without removals. Carbon insurance that pays out in carbon removals will shift the market toward well-regulated, high-quality credits that a growing consensus of experts believe can have a meaningful impact on the race toward net zero.

CarbonPool is currently applying to receive an insurance license from Swiss authorities. Once we are licensed, our carbon credit balance sheet will be regularly stress-tested and monitored by an experienced regulator and actuary; we will sign our first contracts once this license is granted, making us the only licensed insurer in the world with a carbon credit balance sheet.