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Backing carbon credits: how carbon credit insurance is building a sustainable market

Exploring how carbon credit insurance is building a sustainable market.
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By Lara Whitmore , 

Project Manager, Climate and Sustainability

16/06/2026

The project-based carbon market is expected to surge from $2 billion to $100 billion in value by 2030. It's also called the voluntary carbon credits market, where organisations buy and sell carbon credits to meet their own carbon reduction targets. It's projected to rapidly grow as more corporates are committing to reach net zero baseline emissions. Additionally, more compulsory compliance schemes are being created by governments and international bodies like the UN which require companies to curb their carbon emissions.

Although the market is not generally regulated by law, its registries, standards, and methodologies are aimed at meeting expectations for:

  • Integrity
  • Permanence
  • Additional quality assurance
  • Robust verification

These are all factors that shape market dynamics and influence investor confidence.

Improvements in these standards mean that high-integrity credits now command a premium. Those aligned to the Integrity Council for Voluntary Carbon Market (ICVCM)’s Core Carbon Principles (CCPs) fetch prices of between 8% and 14% more than un-tagged credits, research by Abatable shows. That premium reflects growing demand from market participants that view credits as carbon credit investments rather than speculative offsets.

The emergence of mandatory compliance frameworks, like the aviation sector’s CORSIA, further accelerate standardisation. They blur the line between the project-based and regulated markets. As more sectors adopt climate solutions, the size and sophistication of carbon credit transactions will increase. This'll create a greater need for risk management and insurance products tailored to the carbon market’s unique risks.

An insurance market has quickly developed to help mitigate against risks related to carbon credits. From tentative 2022 pilots offering basic liability solutions, insurers now provide comprehensive facilities for risks including:

  • Invalidation
  • Carbon reversal
  • Political risks
  • Non delivery or non repayment scenarios.

Today, broad wordings have replaced the previous patchwork of standalone policies, offering buyers clarity and consistency. The insurance market’s rapid evolution is helping to transform carbon credits from speculative offsets to bankable assets embedded in project finance stacks for sustainable projects and carbon-removal initiatives. By providing protection and capital relief, these insurance solutions are attracting more institutional capital into forward purchase arrangements and long-term offtakes.

Insurance as Project Finance Enabler

The project-based carbon market has been described as a bridge, channelling money into emissions mitigation and carbon dioxide removal projects that otherwise might not exist. In this metaphor, insurance could be defined as the steel that underpins that bridge.

A worry among those lending money to carbon project developers, as well as those buying credits from those projects, is that they won’t deliver the promised credits. That could be because:

  • A natural catastrophe destroys their afforestation project.
  • A new government turns against its land being used for carbon capture schemes (a political risk).
  • The region where the project is sited is enveloped by political risk insurance-relevant turbulence.

Insurance builds lenders’ and companies’ confidence and trust in a carbon project, by stepping in to pay for losses if an unforeseen event prevents the delivery of the expected carbon credits. Insurance helps to address:

  • Delivery risk
  • Project performance failure
  • Project failures
  • Breach of contract certainty.

This creates contract-level certainty that makes carbon credit transactions investable.

Marsh's leading position in making this new market was shown when we placed a landmark policy for Chestnut Carbon last year. The policy, underwritten by London insurer CFC, protects Chestnut against the risk that it fails to deliver its agreed forward-sold carbon removal credits to Microsoft. The insurance was crucial in closing a $210 million non-recourse project finance credit facility led by JP Morgan and a syndicate of lenders. Chestnut will use the loan to buy and restore around 60,000 acres of land in the southern US, where it will plant over 35 million trees. The facility, backed by the afforestation project and supported by carbon insurance, is the first project financing deal of its kind in the carbon market. It demonstrates the critical role the insurance industry can play in scaling nature based solutions.

CORSIA as a catalyst for growth

Insurance has also been an enabler in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) scheme. CORSIA establishes the world's first global regulation. It mandates an entire industry to buy carbon credits to offset its carbon dioxide emissions.

Developed by the International Civil Aviation Organization (ICAO), CORSIA is aimed at helping the airline industry. This airline industry accounts for roughly 2.5% of total CO² emissions. From January 2027, airlines must purchase carbon credits to cover emissions on international flights above 2019 levels. And there are real consequences if they fail.

ICAO estimates that demand for eligible carbon credits will soar to between 980 million and 1.5 billion units when CORSIA becomes mandatory for all 193 ICAO members. With only around 40 million carbon credits currently available, there’s a significant gap for developers to plug.

Entering long-term offtake agreements is one way that airlines can guarantee a future supply of credits. This will help to smooth their procurement curves as demand for credits spikes. Insurance is integral here, by helping to guarantee these deals deliver the promised credits. This protects against non delivery and enhances contract certainty for both buyers and sellers.

Mandatory CORSIA guarantee insurance protects developers against the risk of there not being a ‘corresponding adjustment’. This is useful when a sovereign government counts the offset against one target and renders it eligible for international use. By covering this and other complex risks, insurance strengthens investor confidence and improves bankability for projects.

This requirement for insurance means the airline carbon market will be a predictable, recurring source of premium for insurers. It will offer airlines peace of mind, by removing the risks in offtake agreements. As a result, market participants can:

  • Scale carbon credit investments.
  • Shift from short-term hedging to strategic capital deployment.
  • Accelerate the delivery of climate change mitigation through durable, high-quality credits.

Marsh has launched a proprietary lineslip facility for CORSIA insurance. This will fast-track cover for carbon credit developers under the ICAO framework. It's led by market specialists and supported by established London insurers. The facility offers consistent, pre-agreed terms to cover credit delivery and validity risks. This helps airlines and corporate buyers to confidently manage their compliance exposure. This facility is the first of its kind. It demonstrates Marsh’s commitment to supporting credible, scalable carbon markets. It also highlights Marsh's commitment to creating greater risk transparency in the aviation sector. It provides a practical example of how bespoke ante carbon delivery insurance can materially reduce delivery risk in large carbon transactions. This will ultimately help airlines meet their obligations to address greenhouse gas emissions.

Marsh is working hard to expand the carbon credits insurance market. This will help ensure that more risk capital is available to enable bigger and more complex deals. Our facility makes it simpler for buyers to insure carbon credits. This helps improve contract certainty and unlock the benefits of predictable supply for long-term offtake agreements. If you’d like one of our experts to discuss how we can help you navigate regulatory questions, emerging challenges, or the mechanics of underwriting in a live browser demonstration, please contact us.

Our people

Lara Whitmore

Lara Whitmore

Project Manager, Climate and Sustainability

  • United Kingdom

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