AUTHOR=Chan Kitty Kay , Golub Alexander , Lubowski Ruben 

TITLE=Performance insurance for jurisdictional REDD+: Unlocking finance and increasing ambition in large-scale carbon crediting systems

JOURNAL=Frontiers in Forests and Global Change

VOLUME=Volume 6 - 2023

YEAR=2023

URL=https://www.frontiersin.org/journals/forests-and-global-change/articles/10.3389/ffgc.2023.1062551

DOI=10.3389/ffgc.2023.1062551

ISSN=2624-893X

ABSTRACT=Jurisdictional crediting systems, with nested accounting of smaller-scale project-scale activities, offer the potential to more rapidly scale-up emissions reductions as well as to ensure greater environmental integrity compared to stand-alone small projects. However, the design and implementation of such large-scale nested crediting systems raise numerous practical challenges that are only beginning to be considered.   This paper develops a theoretical and simulation model that demonstrates the role of performance uncertainty in constraining the potential for large-scale mitigation supply when payments are contingent on emissions reductions exceeding a threshold level and when there is a need to break even on payments to domestic actors.  We show that the use of insurance mechanism would allow jurisdictions to deliver large-scale emissions reductions despite performance uncertainty.  In addition, the creation of a performance buffer offers nonlinear potential to unlock supply. Together with private insurers, philanthropic and public donors have a critical role to play in kickstarting and building an insurance market that can de-risk jurisdictional program investments to unlock natural climate solutions and other forms of urgent climate and nature protection at scale.