A risk measure to compare forests with underground storage
· BehindLines newsroom
How can the risk of a forest project be compared with that of geological CO2 storage? Researchers propose a single measure, called Carbon at Risk. According to a University of Exeter release carried by Phys.org on November 6, the paper on this measure is published in the journal Nature Climate Change. An undated university poster lists the same work as forthcoming in that journal; we could not check the publication status directly on the journal's site.
A problem of labels
According to Phys.org, the risks of carbon removal projects are mostly described with qualitative labels: permanent or not, nature-based or engineered. Buyers and insurers therefore lack a common quantitative basis for comparison. The poster adds that markets rely on these labels and on flat buffer rules, which state neither the probability, the size nor the timing of a delivery shortfall.
How the measure works
The measure estimates the risk that a project delivers less carbon than contracted, whatever the technology. It is modeled on value at risk, a finance tool from the 1980s. The poster defines it as the extra removal that must be bought to make a delivery obligation safe, for a given confidence level and time horizon. It also rests on diversification: projects exposed to different risks, for example forests facing independent wildfire risks, are less likely to fail together.
Per the release, the tool could be used to compare projects on a risk-adjusted basis, to size buffer reserves, to test how combinations of projects cut portfolio risk and to give actuaries a basis for reversal-risk insurance. It was developed through workshops with academics and industry stakeholders, then tested as a proof of concept on forest carbon and geological storage cases. The authors named include Ben Groom of Exeter Business School and Bali Lee of Climate Resilient Solutions.
Limits
The Phys.org text publishes no numerical values for the measure. It notes that buyers may still pick a technology for reasons other than risk or cost; the measure simply makes the trade-offs visible. Forests have room to expand but compete with other land uses, and novel methods are only starting out: balancing these needs calls for government action and international coordination.