Developers today face difficulty attracting investment into their projects, as buyers are cautious about investing in projects whose outcome – delivery of carbon credits – is not guaranteed. Developers who can say that an insurance company has evaluated and will insure their projects gain instant credibility, making it easier to attract both project investors and credit buyers.
Further, there is increasing pressure from buyers of carbon credits on carbon developers to guarantee credits. Bad weather, natural variability in nature-based projects, and technical failures are real threats to the project delivery and permanence and there is no clarity on who bears the cost of that risk. Today, many developers create their own buffer pools – keeping aside credits that they could otherwise sell to increase their economic returns. An insurance contract could provide the same protection as a buffer pool for likely a far more attractive cost depending on the risk of the project.