Performance insurance for jurisdictional REDD+: Unlocking finance and increasing ambition in large-scale carbon crediting systems

Frontiers in Forests and Global Change

Forests and Global Change

Kitty Kay Chan¹  Ruben Lubowski²  Alexander Golub³ 

[1] Applied Analytics, Columbia University, New York, NY, United States;Climate and Environmental Solutions, Lombard Odier Investment Managers, New York, NY, United States;Department of Environmental Science, American University, Washington, DC, United States;

关键词: carbon market;    credits;    emissions;    deforestation;    insurance;    jurisdictional;    performance risk;    REDD+;   

DOI  :  10.3389/ffgc.2023.1062551

 received in 2022-10-06, accepted in 2023-01-25,  发布年份 2023

来源: Frontiers

【 摘 要 】

IntroductionJurisdictional pay-for-performance systems, with nested accounting of smaller project activities, offer potential to more rapidly scale up carbon finance for reducing deforestation as well as to ensure greater environmental integrity compared to stand-alone projects. However, the design and implementation of such programs raise numerous challenges, including for mobilizing upfront investment when there is a risk of non-performance at the jurisdictional level. This paper provides the first analysis to examine the use of insurance mechanisms to mitigate this jurisdictional delivery risk.MethodsA conceptual model based on the theory of individual choice under uncertainty is developed to examine the impact of performance uncertainty on large-scale reductions in emissions from deforestation and forest degradation (REDD+). We calibrate the model to perform simulations of how reductions could change with and without the availability of revenue insurance as well as of a carbon buffer to manage performance risks.ResultsPerformance uncertainty constrains the potential for large-scale mitigation supply when payments are contingent on emissions falling below a threshold level and when it is important to break even on payments to domestic actors. We show that insurance would allow jurisdictions to increase emissions reductions despite this uncertainty and that building a performance buffer offers nonlinear potential to unlock supply in a complementary manner.DiscussionPrivate insurers, together with philanthropic and public funders, have a critical role to play in establishing an insurance market that can de-risk jurisdictional program investments and unlock forest conservation and other climate and nature protection efforts at scale.

【 授权许可】

Unknown   
Copyright © 2023 Chan, Golub and Lubowski.