Beyond ‘permanence’: A buyer’s guide to managing carbon credit reversal risk

The opinions expressed here by Trellis expert contributors are their own, not those of Trellis or its editors.

The climate benefits of purchasing carbon credits hold only if the carbon stays out of the atmosphere. For many solutions, though, including nature-based ones like forest protection and restoration, that carbon can eventually be released. Forests burn, pests spread, land use changes. That release is called a reversal, and the risk of it is what the debate over “permanence” is really about: How long will the carbon stay removed, and how confident can a buyer be?

Permanence is among the most contested and confusing issues faced by sustainability executives when investing in carbon credits. The market usually frames it as a binary between “permanent” and “impermanent,” offering little practical guidance. 

Two recent white papers move the conversation from abstract debate to a usable toolkit. Together they offer corporate buyers a shared vocabulary and a clear menu of mechanisms for managing reversal risk.

“Buffer Pools & Beyond” comes from the Science for High-Integrity Frameworks to Transform Carbon Markets (SHIFT-CM) initiative, led by Yale University and The Nature Conservancy. “Contracted Durability” presents a framework from the Beyond Alliance, RMI and the American Forest Foundation. They were developed independently, yet they share the same core insight: Permanence is not a fixed property that a credit either possesses or not. It’s more useful, and ultimately more beneficial to the climate, to think in terms of durability, which varies along a spectrum.

Why the binary framing fails buyers

Carbon markets often use a 1,000-year time horizon to distinguish between permanence and impermanence. But this dichotomy masks important nuance: A high risk of carbon release for one project does not mean that all nature-based solutions offer only short-term storage. Some forests and soils have reliably stored carbon for thousands of years. Treating durability as a binary tends to push policy toward one of two failure modes: Nature-based pathways that are affordable and deployable today get eliminated, or they get approved without ensuring that the carbon stays stored long enough to back the projects’ claims.

Replacing the binary with a continuous concept of durability gives companies a more precise way to talk about how long carbon is likely to stay stored, how confident they can be in that duration and what it takes to close any gap. That enables buyers to match a credit’s durability to the claim the developers are actually making.

A shared vocabulary

The most immediately useful contribution of these papers is language. Both adopt a taxonomy that distinguishes between three kinds of durability:

• Estimated durability: A projected estimate of the length of time a tonne of carbon dioxide equivalent will remain stored out of the atmosphere based on risk assessments of carbon loss from a given carbon sink. 
• Guaranteed (or contracted) durability: the length of time a tonne of carbon dioxide equivalent is guaranteed to remain out of the atmosphere by an entity, often through contractual or legal means.
• Realised durability: how long the carbon actually stayed stored, which can only be confirmed after the fact.

Alongside these sits the durability threshold: the length of time carbon must remain stored to satisfy a given policy, standard, or claim. (the Yale/Nature Conservancy study  calls it “guaranteed durability”; the Beyond/RMI/AFF paper calls it “contracted durability.”)

For a sustainability executive, this vocabulary makes it possible to speak precisely with project developers, standard setters and boards of directors. Rather than  “Is this credit permanent?” the question becomes “What is this credit’s estimated durability, what durability is contractually guaranteed, and does that match the threshold my claim requires?”

The menu of mechanisms

The upshot is that  companies do not need to wait for perfect, centuries-long certainty before acting. A range of mechanisms already exists to manage reversal risk, and a wave of innovation is filling in the gaps. SHIFT-CM presents seven approaches broken into three strategies.

Risk-transfer strategies shift reversal risk from one party to another, usually by pooling it across many projects.

• Buffer pools withhold a portion of a project’s credits in reserve to replace any that are reversed. They are by far the most common mechanism, with an estimated 10 to 20 percent of credits held in reserve, and nearly every major registry uses a version. 
• Insurance provides compensation, in credits or cash, when a covered reversal occurs. It’s developing rapidly as a complement to buffer pools, though policies typically run only one to five years, and only credit-based payouts preserve the underlying climate claim.
• Carbon trust funds (also called permanence trusts or funds) take a fee at issuance into an endowed, independently managed institution that assumes liability for monitoring and compensation, potentially well beyond the project’s own lifespan.

Purchasing strategies can extend durability.

• Vertical stacking means over-purchasing upfront so that even if some credits reverse, enough remain to cover the claim.
• Horizontal stacking means sequentially replacing credits as they expire or reverse, carrying the storage obligation forward, potentially into longer-duration storage over time.

Accounting strategies re-quantify a credit’s value based on its durability or climate impact, through risk-weighted portfolio approaches or the more contested time-weighted (“tonne-year”) accounting.

The “Contracted Durability” paper frames the challenge around two functions that any credible solution must perform across the full threshold: ongoing liability (someone responsible for monitoring and compensating reversals at every point) and compensation (tools to make good on a reversal). And it shows that buffer pools and insurance can compensate for reversals but cannot, on their own, assign liability across a long threshold.

Why this matters now

Forward-looking companies should understand these mechanisms now. The EU is defining durability and quality requirements for removals and international credits ahead of its 2040 target. California is shaping permanence standards in a range of legislative processes. The Article 6.4 Supervisory Body under the Paris Agreement is operationalising its standard on non-permanence and reversals, including the still-undefined concept of “negligible risk of reversal.” And SBTi’s updated Corporate Net-Zero Standard is reshaping how companies must treat short- and long-lived removals as they approach net zero.

What to do with this

Match the durability mechanism to the claim being made. Understand what tools are in place to compensate for any reversal that occurs, and for how long each holds. Recognize that combining risk reversal mechanisms will often manage risk better than any single tool.

The main takeaway is that the tools to invest in high-quality nature-based carbon credits with confidence already exist, and they are improving quickly.