The Carbon at Risk measure to manage carbon removal risk and guide effective portfolio construction

The Carbon at Risk measure to manage carbon removal risk and guide effective portfolio construction | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article The Carbon at Risk measure to manage carbon removal risk and guide effective portfolio construction Ben Groom, Bali Lee, Nick Gogerty, Tom Bearpark, Oleksandr Kit, and 5 more This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7714530/v2 This work is licensed under a CC BY 4.0 License Status: Under Review Version 2 posted You are reading this latest preprint version Show more versions Abstract Meeting net-zero targets requires scaling carbon dioxide removal from ∼2 GtCO2/yr today to 7–9 GtCO2/yr by 2050. Since different carbon removal technologies face binding upper limits on deployable scale, this will require trillions of dollars of investment to be allocated across technologies with fundamentally different risk and cost profiles. Yet carbon removal markets lack a standardised, quantitative measure of permanence risk. Inspired by Value at Risk in financial markets, we propose Carbon at Risk (CaR): a probabilistic measure of the shortfall between contracted removals and realised storage at a given confidence level and time horizon. We calibrate CaR in two proof-of-concept applications: forest carbon, where Monte Carlo simulations driven by satellite fire data yield a single-project 95% CaR of more than 70% over 200 years for California, and geological storage (DACCS), where 95% CaR ranges from 0.15% (well-regulated offshore) to 17% (poorly regulated onshore). This variation implies that current permanence mechanisms, typically flat-rate deductions applied once at credit issuance, systematically over-buffer low-risk projects while under-buffering high-risk ones, and could be structurally ill-suited to risks that compound and shift over decades. We show that combining technologies in a portfolio creates a trade-off between cost and risk, and that the minimum cost of meeting a permanence target depends on the correlation structure of key risk factors. CaR provides a basis for risk-calibrated protection mechanisms, from buffer design and insurance pricing to fund-based instruments sized to cover reversal risk, across policy-relevant time horizon. It also provides the basis for technology-agnostic project comparison, reserve construction, and for the international accounting frameworks needed to steward global carbon stocks and sinks as a common resource. Earth and environmental sciences/Environmental social sciences/Climate-change policy Earth and environmental sciences/Environmental social sciences/Climate-change mitigation Full Text Additional Declarations There is NO Competing Interest. The paper has been developed with people in the business, but there is not financial implication. The code is public and the paper will be public. The paper has only benefitted from the co-production with people in the carbon removal and related industry. I do not think that there are competing interests. Supplementary Files CarbonatRiskNCC2026SI.pdf The Carbon at Risk measure to manage carbon removal risk and guide effective portfolio construction Cite Share Download PDF Status: Under Review Version 2 posted You are reading this latest preprint version Show more versions Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7714530","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[{"code":1,"date":"2025-09-26 13:35:35","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research 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Since different carbon removal technologies face binding upper limits on deployable scale, this will require trillions of dollars of investment to be allocated across technologies with fundamentally different risk and cost profiles. Yet carbon removal markets\r\nlack a standardised, quantitative measure of permanence risk. Inspired by Value at Risk in financial markets, we propose Carbon at Risk (CaR): a probabilistic measure of the shortfall between contracted removals and realised storage at a given confidence level and time horizon. We calibrate CaR in two proof-of-concept applications: forest carbon, where Monte Carlo simulations driven by satellite fire data yield a single-project 95% CaR of more than 70% over 200 years for California, and geological storage (DACCS), where 95% CaR ranges from 0.15% (well-regulated offshore) to 17% (poorly regulated onshore). This variation implies that current permanence mechanisms, typically flat-rate deductions applied once at credit issuance, systematically over-buffer low-risk projects while under-buffering high-risk ones, and could be structurally ill-suited to risks that compound and shift over decades. We show that combining technologies in a portfolio creates a trade-off between cost and risk, and that the minimum cost of meeting a permanence target depends on the correlation structure of key risk factors. CaR provides a basis for risk-calibrated protection mechanisms, from buffer design and insurance pricing to fund-based instruments sized to cover reversal risk, across policy-relevant time horizon. 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