In 2030, almost half of the world’s top 2,000 companies are aiming to hit net zero. By 2050, the world is targeting to reach this goal as a whole thanks to the Paris Agreement.
Despite best efforts, emissions will never fall to zero – there are too many processes on which the world relies (e.g. food, steel and cement production) to feed and house its people – that cannot reduce emissions to zero with current technologies. There will always be a need for carbon dioxide removals in order to offset the emissions that are made.
The carbon market is set to quadruple by 2050, reaching $1-2 trillion. And massive investments in projects to remove or avoid carbon dioxide are needed to ensure the generation of enough removals to get to net zero. However, given the uncertainty and risks involved in investing in projects that remove carbon dioxide from the atmosphere or avoid further emissions, many buyers are hesitant to invest in carbon credits up front or at all. The key mechanism that regulates all other mature markets against risky investments has been missing from the carbon credit market, namely: insurance. Insurance can help to stabilize the carbon credit markets by encouraging investment, aiding in risk selection, and protecting carbon outcomes.