How much would it cost to participate in a permanence trust?
Any risk management tool in the carbon market requires some form of payment to ensure the project’s claimed impact even if something goes wrong. Buffer pools set aside a percentage of credits up front, while insurance typically comes with annual premiums. Everyone’s paying something to someone, but is the return worth it?
Buffer pool contributions often underestimate what’s needed to ward off the increasingly extreme weather resulting from climate change, but even if they increased, that’s more credits locked away from buyers. Insurance is more flexible but, like buffer pools, only covers the initial crediting period, not the next 100+ years projects need to stand to actually benefit the planet.
The Permanence Trust concept offers an alternative: pay a one-time warranty fee per credit now, and a project is guaranteed permanence for those credits for the threshold needed to align with relevant policy frameworks.
When a permanence trust issues a warranty, it confirms it has taken on the non-permanence liability of a carbon credit, providing a legally binding, financially backed guarantee for long-term carbon storage. The warranty is the cornerstone of the Permanence Trust concept.
WARRANTY PRICING
To obtain the warranty, some entity must pay a warranty fee into the Trust. In the context of the voluntary carbon market, the most likely purchasers are either project developers at the time of carbon credit issuance, or carbon credit buyers at the time of credit delivery. The fee would include a static component related to Trust operations and a variable component related to the non-permanence risk profile of the carbon project in question.
In practice, a permanence trust’s warranty would use a portfolio-based liability management approach, drawing on actuarial risk modelling, catastrophe modelling, remote monitoring, risk management methodologies, and financial governance principles. The warranty fee consists of:
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A base price that applies across warranties and helps ensure the trust can cover its operating costs, maintain sufficient reserves, invest for long-term growth, and remain financially viable over time; and
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A risk-based price adjustment that reflects the specific non-permanence risk of the carbon credits being covered.
Importantly, warranty pricing would not be solely based on the risk of one individual project. Instead, a trust would also look at how that project fits within the full group of projects it already covers. This matters because some risks can affect many projects at the same time, such as wildfire, drought, political instability, climate change, or projects being concentrated in the same region or using the same methodology.
For example, a project in a high-risk location, or one that increases the trust’s exposure to a common risk factor, may require a higher warranty fee. A project that helps diversify the portfolio may not. This approach allows the trust to keep warranties affordable while still ensuring it has enough resources to cover future reversals.
There are other factors that would affect warranty pricing, including vintage status, credit value, and coverage structure per credit. All these elements inform how a permanence trust would cover the reversal liability of the projects participating, but the flexibility of this model is what makes it accessible to all different project types and scenarios.
Vintage may affect price because older or nearer-term credits may have different monitoring history, remaining claim periods, or reversal exposure than newer credits. Credit value also matters because the Trust must hold enough resources to replace lost tonnes at their expected replacement cost. Coverage structure would also affect price, with broader, longer, or more comprehensive guarantees requiring higher fees than narrower coverage.
PUTTING THE WARRANTY FEES TO WORK
So, what happens once warranty fees are collected?
Collected warranty fees would be held in a mixed portfolio of financial assets and carbon credits. Financial assets would be invested for long-term growth, while carbon credits would provide short-term liquidity for warranty claims. To align with the ethos of the VCM, GHG emissions of the investment portfolio must be managed and aligned with an ESG focus.
In return for paying the warranty fee, the covered credit receives the permanence trust’s long-term assurance that non-permanence risk will be actively managed. This includes:
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Continuous monitoring of carbon pools the credits within the trust represent
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Reversal detection and verification
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Investment and financial management of warranty fees
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Maintenance of reserves to respond to carbon storage loss
The warranty is not simply a reserve contribution — it is the instrument through which the trust assumes and actively manages non-permanence liability over the long term.
TRANSFERABILITY
Transferability is a key design feature to the warranty price structure. A project developer may purchase the warranty at issuance, or a carbon credit buyer may purchase it at delivery, but once issued, the warranty follows the covered credit. This ensures that the warranty remains effective beyond any single holder of a carbon credit and aligns with the trust’s designated beneficiary: the atmosphere.
This is also important for the claims process. If a reversal occurs, the warranty can be called upon through a mechanical, documented, and publicly understandable process. The purpose is not to compensate a specific entity, but to remedy the reversal by replacing lost tonnes or otherwise compensating the atmosphere.
Attaching the warranty to the credit supports the trust’s portfolio-based risk management function. It allows the trust to maintain a clear record of covered liabilities, monitor the risks associated with those credits over time, and price future warranties based on the marginal risk added to the portfolio. Separating the warranty from the identity of the current credit holder helps minimize moral hazard and supports the long-term nature of the Trust.
A pricing structure like the Permanence Trust provides long-term assurances to stakeholders to scale and strengthen the market. But the key difference with the Trust is that it’s not beholden to, and therefore doesn’t tie up, landowners, project developers, or buyers — its sole beneficiary is the atmosphere. If the market has the right tool to confidently manage durability risk for the long erm, the result is a less risky market, increased confidence, boosted demand, and a stronger approach to maximizing the market as a climate-fighting tool.
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