The risk of relying on uncertain carbon removal projects can now be quantified using a new standardised metric that can be applied across all such schemes, irrespective of the technology used.
Researchers say Carbon at Risk (CaR), which measures the risk that carbon removal falls short of what was initially contracted, could help regulators, buyers, insurers and investors build diversified portfolios and unlock the massive investment needed to limit global warming to 1.5°C.
Carbon removal projects, ranging from nature-based approaches such as afforestation to more engineered carbon capture technologies, aim to take CO₂ out of the atmosphere and store it for a meaningful period of time.
All approaches come with varying degrees of risk that the carbon removal doesn't materialise, whether through environmental, technological or political factors.
But until now these risks have been described through qualitative labels such as permanent vs non-permanent or nature-based vs engineered.
This creates an uncertain investment environment, as buyers need to understand the likely carbon removals they obtain per dollar spent, and insurers require a quantitative basis for underwriting the risk of reversal.
CaR was developed through a series of workshops between academics and industry stakeholders, and in case studies where it was used in forest carbon and geological storage scenarios to establish proof of concept.
It takes as its precedent Value at Risk (VaR), which emerged in the finance sector in the 1980s when institutions needed a way to compare risk exposure across a range of different assets.
The underlying approach recognises that a portfolio of projects exposed to different risks is less vulnerable to a single event or set of circumstances than one in which all projects are likely to underperform for the same reasons.
So, for example, forestry projects facing independent wildfire risks can help diversify a portfolio, as can combining technologies that respond differently to changes in global temperatures or political conditions.
By providing a common quantitative measure, CaR allows buyers to compare different carbon removal projects that use varying technologies on a risk-adjusted basis and to assess how different combinations of projects could reduce the overall portfolio risk.
Professor Ben Groom, Dragon Capital Chair in Biodiversity Economics at the University of Exeter Business School said: "CaR aims to transform carbon removal procurement from a qualitative, technology-by-technology assessment into a transparent portfolio design problem.
"By expressing the permanence risks of removal pathways on a common scale, CaR enables buyers to compare technologies on a risk-adjusted basis and to size buffer reserves to actual risk. CaR can also provide actuaries with a basis for underwriting reversal risk, opening the possibility of the development of insurance products that are currently absent from carbon removal markets.
"Buyers that wish to do so can still choose to invest in technologies on grounds other than risk or cost, but CaR quantification makes the risk and cost consequences of those choices transparent."
Bali Lee, Founder and Director of Climate Resilient Solutions and co-lead author of the study, added: "Carbon at Risk shows how buyers can protect against losses, but working out what is possible globally also means knowing how far each method can grow. There is still a lot of room to expand forests, though they ultimately compete with other uses for land, while novel removals are only just getting started. Getting that balance right is not a question for voluntary buyers alone. It will take governments and international coordination, as removals move into national climate plans and compliance markets such as the UK and EU emissions trading schemes."
The Carbon at Risk measure to manage carbon removal risk and guide portfolio construction is published in Nature Climate Change. Once published it will be available here: https://www.nature.com/articles/s41558-026-02785-9
