The Challenge
Binary frameworks like "permanent" vs "non-permanent" or “nature-based” vs “engineered” are hindering the strategic deployment of diverse removal approaches.
Missed Opportunities
-
Without standardised risk assessment, high-quality projects struggle to demonstrate their value and access appropriate financing, while investors lack tools to identify and reward better performance
-
Despite widespread agreement that portfolio approaches are essential, organisations lack the quantitative tools to effectively combine approaches with different risk profiles and time horizons.
-
Governments and compliance markets rely on crude thresholds rather than nuanced risk assessment, missing opportunities for evidence-based regulation that could accelerate deployment while maintaining environmental integrity.
The CaR Framework
Inspired by Value at Risk in financial markets, Carbon at Risk (CaR) provides a standardised metric to communicate the anticipated performance of carbon removal approaches. It measures expected carbon dioxide losses over specified time horizons, addressing both delivery risk (will carbon be removed as promised) and storage risk (will it stay stored once removed).
For example, a CaR score of 317kg over 200 years at 95% confidence means that in 95% of scenarios, at least 682kg per tonne of carbon promised will be stored outside of the atmosphere 200 years from now.
CaR enables comparison across diverse removal methods - from reforestation to direct air capture - providing the building blocks for improved risk management and portfolio construction. This allows organisations to balance risk tolerances with cost and timing trade-offs. By quantifying measurable, material risks that become increasingly characterised through iterative assessment and "wisdom of crowds" refinement, CaR creates the accountability needed to scale carbon removal to gigatonne levels.
Core Components
01 Delivery Risk Assessment
Will carbon be removed when promised? Accounts for project delays, technical failures, and implementation challenges that affect timing of atmospheric impact.
02 Storage Risk Evaluation
Will removed carbon stay stored? Quantifies risks of carbon returning to atmosphere through reversal events, containment breaches, or degradation over time.
03 Dynamic Risk Profiles
CaR scores across multiple time horizons (1, 10, 100, 1000 years) revealing when and where risks materialise, enabling targeted risk management strategies.
Ecosystem Benefits
CaR creates value for every stakeholder in the carbon removal ecosystem through improved transparency and standardised risk assessment.
-
Proactive risk management: Identify specific risk factors and take targeted steps to improve project design and implementation, reducing CaR scores over time.
Accurate risk pricing: Demonstrate project quality through quantified risk assessment to access appropriate financing and insurance coverage.
Market positioning: Enable fair comparison with other approaches based on actual performance metrics rather than binary classifications
-
Strategic portfolios: Build balanced removal strategies that combine different risk profiles to reduce overall risk.
Cost optimisation: Compare cost-effectiveness across approaches while maintaining desired risk levels and storage durability.
Climate commitment management: Calculate actual impact across time horizons and plan technology transitions as solutions mature.
-
Risk-based products: Develop innovative financing mechanisms and insurance products calibrated to quantified risks.
Pricing accuracy: Price risk appropriately in carbon removal investments and structure long-term offtake agreements based on quantified performance metrics.
Market expansion: Enable institutional investment through sophisticated risk assessment and portfolio diversification strategies.
-
Evidence-based criteria: Set quality standards based on quantified performance rather than binary classifications.
Dynamic buffer pools: Design project-specific requirements based on demonstrated project performance and risk profiles.
Cross-platform compatibility: Enable standardised risk reporting and comparison across different registries and certification systems.
-
Standardised assessment: Streamline underwriting with consistent risk metrics across diverse removal approaches.
Product innovation: Create specialised products for delivery vs storage risks
Portfolio risk management: Enable sophisticated risk pooling across different removal approaches and geographic regions.
-
Strategic planning: Assess how credible net-zero commitments are and guide public investment based on realistic outcomes.
Market design: Create incentive structures that reward both near-term delivery and long-term storage performance.
International coordination: Enable standardised comparison of national contributions and facilitate cross-border carbon removal trading.
Climate accounting: Track progress toward removal targets with realistic expectations rather than best-case scenarios.
Current Progress
Empirical Validation:
Demonstrated CaR scores across ARR, biochar, ERW, BECCS, and DACCS developed using publicly available data and in collaboration with academics. Academic paper & CaR calculator coming soon.
Collaborative Development:
>20 supporters & contributors from organisations including leading financial institutions (Bloomberg, Standard Chartered, Federated Hermes), insurance and risk specialists (Howden, Swiss Re), standards bodies (ICVCM, Gold Standard), carbon market participants (Sylvera, Kita, OneShotEarth, Artio, Cur8, CarbonPool, CounterAct, Exponential Roadmap Initiative, Carbon Finance Labs), research institutes (Grantham Research Institute, London School of Economics, University of Exeter, RMI), and climate nonprofits (American Forest Foundation, Rethinking Removals)
Policy Integration (Next Step):
Engaging with policymakers to explore how CaR principles could inform regulatory frameworks, creating potential pathways from voluntary to compliance markets through evidence-based criteria.
