6 October 2022

Deep diving into buffer pools

12 min

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Risk buffers are designed to mitigate the risk of reversals in carbon projects. However, in our view, they fall short of providing adequate system-wide insurance of the risks posed. We highlight three key factors where more work is required to provide broader insurance products to help scale the market:

  • Project-specific risk assessments vary considerably across registries, meaning buffer pool contributions may not always match the risk profile of the project.

  • How the risk buffer is practically used in the case of reversals varies across registries and is not always clear from public disclosures.

  • Market participants need more sophisticated tools that better model risks and match the payouts to the losses in case of any reversal events.

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Authors include Katelyn Gwin, Amnique Sidhu, Ana Karla Nobre Dias and Dr Kirti Ramesh.

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