Carbon credits are the mechanism designed to encourage organisations and individuals to reduce their greenhouse gas emissions.
The idea behind carbon credits is that businesses or individuals who produce less pollution can sell their unused pollution allowances to others who are producing more pollution than they are allowed. This financial incentive encourages businesses to reduce their emissions and earn money by selling their excess allowances. Selling excess allowances creates a financial incentive for businesses to reduce their emissions.
Carbon credits help to reduce greenhouse gas emissions, which are a major contributor to climate change. By incentivizing businesses and individuals to reduce their emissions, carbon credits can help slow the rate of climate change and its associated negative impacts, such as rising sea levels, more frequent and severe weather events, and loss of biodiversity. Carbon credits help slow the rate of climate change and its associated negative impacts.
Innovators and technologists are working together to create new processes for the extraction of carbon and the generation of carbon credits. Here are some examples of the types of processes being used for carbon credit creation:
DAC process involves capturing carbon dioxide directly from the air using chemical processes and then storing it underground or using it to create products like concrete or fuel.
This refers to carbon that is stored in coastal and marine ecosystems, such as mangroves, seagrasses and salt marshes. These ecosystems have the potential to sequester large amounts of carbon dioxide from the atmosphere. Organisations are working to quantify and monetise these carbon credits.
This process is called biosequestration. Biochar is a form of charcoal produced from biomass that can be used to sequester carbon in soils. But it can also be used as a soil amendment to improve crop yields and reduce greenhouse gas emissions from agricultural practices.
Carbon mineralization involves capturing carbon dioxide and reacting it with minerals to form stable carbonates. This process can be used to permanently store carbon dioxide underground or in building materials like concrete.
These practices include conservation tillage, cover cropping and rotational grazing. Carbon farming involves implementing agricultural practices that sequester carbon in soils and vegetation.
Learn more about how our commercial insurance advisory services can help you protect your carbon capture investments. Please fill out the form below and one of our representatives will be in touch with you shortly
We at Sustain Insurance Brokers recognise the importance that the success of carbon credit has on the future of our planet.
We have therefore developed a detailed understanding of the sector to be able to advise clients who are entering this sector mitigate their risks using properly structured insurance programs. But also helping those business which are already established in the creation of carbon credits to optimise their risk transfer arrangements.
The types of insurable exposures that exist in the manufacture of carbon credits will differ depending up on the processes that are being used however, typically, the following risks ought to be considered and protected against:
Manufacturing carbon credits may require specialised equipment and machinery. Any damage to such equipment due to natural perils or accidents can result in significant repair or replacement costs.
Any disruption in the manufacturing process, such as equipment breakdown, power outages, or supply chain disruptions, can result in a loss of revenue and a delay in the delivery of carbon credits. The specialist nature of some of the technology used in these processes can mean that, if it were to be damage, the period of interruption to the business could be extensive.
Manufacturing carbon credits involves the generation and verification of greenhouse gas emissions reduction, which can be subject to errors and omissions. Any inaccuracies or misrepresentations in carbon credits can lead to legal liabilities. Liability insurance can provide coverage against claims made by third parties for property damage, bodily injury, or other losses. Where the processes involve the application of heat or extraction of other gases such as methane, the risk of fire or explosion my be prevalent.
Carbon credit manufacturing involves the use of computer systems and data analytics, which can make the process vulnerable to cyber attacks. Cyber insurance can provide protection against losses resulting from data breaches, hacking, or other cyber incidents
Carbon credit production businesses operate in a highly regulated environment, and any breach of regulations can result in significant legal and financial consequences. D&O insurance can provide protection against regulatory actions, including fines and penalties
To learn more about how our commercial insurance advisory services can help you protect your carbon capture investments, please fill out the form below and one of our representatives will be in touch with you shortly
We use insurance products and capacity to protect pro-ESG organisations and help to facilitate their growth.
Sustain Insurance Brokers is a trading name of Sustain Brokers Limited which is registered in England and Wales under company registration number 14309360. Sustain Brokers Limited is also an appointed representative of TEn Insurance Services Ltd, trading as Eleven, which is authorised and regulated by the Finance Conduct Authority (FRN 314593).
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