The carbon at risk measure for managing carbon removal risk and guiding portfolio construction

Abstract Carbon removal markets lack a standardized, 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 realized 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, where simulations using the Storage Security Calculator show that the 95% CaR ranges from 0.15% (well-regulated offshore) to 17% (poorly regulated onshore). Combining technologies in a portfolio can help manage tail risk cost-effectively. The minimum cost of meeting a permanence target depends on the magnitude and correlation structure of key risk factors. CaR provides a technology-agnostic basis for risk-calibrated buffer sizing, insurance pricing and reserve-fund design, over both policy- and climate-relevant horizons.