Kyroq · Field research

The gap

Why this asset class has no record of its own failures, and what that costs the people holding it.

$15.5bninsured losses from one storm, in 1992 moneyInsurance Information Institute

The loss record came first. Every time.

Property catastrophe, credit, structured finance and commodities all built the same infrastructure in the same order, and the order is the lesson. Carbon is attempting it backwards.

0.2the weakest correlation between two vendors on the same assetsthirteen vendors, one hundred properties

Method7 min

Opinions diverge. Outcomes do not.

Thirteen vendors assessed the same one hundred properties and their damage estimates correlated as weakly as 0.2. None publishes an error rate, because none has anything to measure against. Carbon has the same structure, one step earlier.

4 yearsof carbon insurance written without a loss tablethe market’s own flagship report

Underwriting8 min

Carbon has no actuarial table. Someone has to build it.

Carbon insurance is scaling on capacity and conviction, not loss history. What underwriting carbon actually requires, and where the independent read behind the quote has to come from.

19%of 52 REDD+ projects met their reported emissions targetScience, 2025 · twelve countries

Market structure8 min

The auditor paradox: why the chain over-credits.

It was not a rogue project. It was the assurance chain working as designed. When everyone in the chain is paid to move the credit forward, the bias is structural, and methodology alone cannot fix it.

27 against 25consulting fees against audit fees, one client, one yearAndersen and Enron, before Sarbanes-Oxley

First principles7 min

The party that rates an asset cannot be the party that sells it.

Every mature market learned this once, often the hard way. Nature finance still lets the originator grade its own pool. Why independence is the precondition for a price, not a nicety.

$60bnprivate capital committed to nature, cumulativeForest Trends and The Nature Conservancy, 2026

Market structure9 min

The capital found nature. The risk layer did not.

Private investment in nature has passed sixty billion dollars. It is still priced, monitored and reported off the developer’s own paperwork. A reading of where the risk infrastructure has to go next.

The balance sheet

What happens when the position stops being a sustainability line and becomes an audited number.

$26a BBB plus tonne, against a fraction for the same nominal typetraded ranges, late 2025

Finance9 min

Carbon's subprime moment

Books full of credits carried at face value, a large share worth a fraction, graded by the people who sold them, and now an accounting rule forcing the reckoning. The analogy to issuer-paid ratings is not loose. It is precise.

FY2028first year the book is measured and tested every reporting dateFASB ASU 2026-02

Accounting10 min

The day carbon became a number the auditor has to sign

FASB ASU 2026-02 turns the voluntary carbon book into an audited, impairing balance-sheet item. The controller and the external auditor now own a market they have never had to value.

3 inputsa broker quote, a rating, a registry serial. None is a markwhat fair value actually requires

Finance10 min

How to value a carbon credit you cannot trust

A finance-native walk through what fair value and impairment actually require for a carbon book under the new accounting, and why a broker quote, a registry serial and a project rating are each insufficient as the audit-grade input.

the sellerwhere the mark on most carbon books ultimately comes fromask, and that is the answer

Valuation7 min

Who marks your carbon book?

Funds, desks and treasuries carry carbon at numbers somebody chose. Ask where the mark came from, and the answer is usually the seller. The case for an independent valuation opinion, before someone else asks the question.

0underwriter models that can validate their own book to a reinsurerindependence is the whole of the point

Underwriting8 min

Your own model cannot validate your own book.

Carbon underwriters are building and buying good analytics. None of it answers the question a reinsurer, a capital provider or an auditor actually asks, and the moment a book gets sold on is arriving now.

$6.2tnof labelled sustainable debt governed by covenantsalmost none of it linked to a monitored tonne

Finance9 min

The covenant carbon never had

There is 6.2 trillion dollars of labelled sustainable debt governed by covenants, ratchets and performance targets. Almost none of it links a single payment to the delivered, monitored performance of the carbon credits a company actually buys. That is the gap, and project finance already built the tools to close it.

The regulation

Eligibility, standards and the dates on which a standing position reprices.

6 decisionsdated, inside thirty monthseach one already published or already taken

Regulation12 min3 exhibits

Regulation is not weather. It is a sequence of dated decisions.

Three ways a carbon position loses value without anything happening to the tonne, six dated decisions in thirty months, and why holders find out at the same time as the public.

13%of legacy credits carry host country approvalUNFCCC · c.128 Mt of c.980 Mt requesting

Eligibility8 min

Nine hundred and eighty million credits are waiting at a door.

The CDM to Article 6.4 transition is the largest eligibility event the carbon market has produced. Around 13 per cent have host country approval, the two largest historical suppliers are absent, and nobody is keeping the score in public.

10,000+companies holding validated science-based targetsSBTi · over 40 per cent of global market capitalisation

Standards9 min

Markets strand assets when demand changes, not when they expire

SBTi V2.0 cuts avoidance and REDD+ credits out of target accounting and pushes the obligation into expensive, long-dated durable removals. The legacy book and the forward removal programme are now two separate, unmanaged exposures.

$1bnend-user spend, roughly flat while volume fellmarket reporting, 2025

Reclassification8 min

The sorting machine: how a vintage gets repriced overnight, with no watchlist

The Integrity Council's Core Carbon Principles and the CORSIA eligibility regime function as binary sorting machines. A methodology or a vintage is in, or it is out, and when the line moves it can reprice a whole cohort at once. There is no watchlist, no gradual downgrade and no advance notice. A book that holds certificates rather than a live read on risk finds out last.

1 rulingcan reprice an entire category at oncethe carbon market’s version of a ratings migration

Policy7 min

When a standard reprices a vintage, it reprices your book overnight.

Reclassification is the carbon market’s version of a ratings migration. A methodology revision or a council ruling can move a whole category at once. The exposed capital should see it coming, not read about it after.

27 Sep 2026offset-based product claims banned across the EUEmpowering Consumers Directive

Regulation9 min

The claim is now illegal, and the credits are still on the books

From 27 September 2026 the European Union bans offset-based product claims outright. The Green Claims Directive that was meant to soften the regime has been withdrawn. The result is a hard prohibition with no safe harbour, fines reaching four per cent of turnover, and a litigation record that is already winning. The carbon book bought to support a claim has become a liability the general counsel now owns.

35 yearsthe minimum storage life recognised in productsEU Carbon Removal Certification Framework

Policy8 min

The EU made durable removals a regulated asset. The risk layer has to catch up.

The Carbon Removal Certification Framework pulls durable removals inside regulation. Regulated assets need an independent, continuous risk read. That infrastructure does not yet exist.

3xthe strongest credits against the weakesttraded ranges, late 2025

Pricing6 min

Integrity has a price now. Most books cannot see the line.

The strongest credits already trade at roughly three times the weakest. The spread is widening, and it is invisible to any book that holds a certificate instead of a risk read.

The method

How the evidence is assembled, and the disciplines that decide what may be published.

3 figurespublished for one eligibility loss, all of them correct236, 240 and 268 Mt over different denominators

Method6 min

A ratio without its denominator is a rhetorical device.

The same eligibility loss has been published as 32 per cent, a third, and 30.6 per cent. All three are correct. The convention that fixes it is small, unglamorous, and the reason a figure can be cited rather than merely quoted.

3% to 5%the discount rate move that flips the sign of the answerflood barrier appraisal, New York

Method7 min

Four conditions before you price a counterfactual.

Estimable, attributable, decision-linked and inside your mandate, all four at once. Fail one and the honest output is a direction, labelled as such. Why we apply the test to ourselves.

96%of mangrove regeneration was spontaneous, not plantedForest Ecology and Management, 2020

Methodology12 min

VM0047 is the most rigorous baseline in carbon. It still cannot price the risk.

Verra’s ARR methodology moved baselines from assumption to observation, and proved a forest can be read from orbit. It also drew, more clearly than any document before it, the line where methodology ends and risk begins.

2 to 4%the wildfire contribution to California’s buffer poolCARB forest protocol 2015 · total 8.7 to 19.2%

Permanence10 min

The buffer pool is a shared overdraft no one is reconciling.

Forty years of monitoring, pooled reserves, and a reversal definition still being standardised. As fire-return intervals shorten, the question is whether the buffer is sized to the risk it actually carries.

168,000credits issued for carbon the trees never capturedsatellite reassessment · of close to 500,000 issued

Case study11 min

The ghost carbon in the mangrove.

The world’s largest mangrove restoration sold close to half a million credits. A peer-reviewed satellite reassessment found roughly 168,000 of them were for carbon that never existed. Every audit had passed.

Where this market is mispricing risk.

The buffer account, reconciled.

The empty chair in carbon risk.

The delivery ledger: what was contracted, what arrived.

Eleven charts. Every one from a public record.