The recent IMO pause on a maritime carbon price is a reminder of the importance of analyzing political exposure in the green transition.

Another recent and more specific example is in the Voluntary Carbon Market where recent government interventions highlight that that even something as complex as "permanence” should include an understanding of political exposure:

• The EPA intervened and blocked a voluntary carbon project that included super pollutants*

• The Department of Energy signaled the cancellation of funding for two major DAC facilities.

These are not technical failures or issues with scientific thoroughness. Instead they are reminders that even the most “durable” carbon storage (𝘱𝘦𝘳𝘩𝘢𝘱𝘴 𝘦𝘷𝘦𝘯 𝘮𝘰𝘳𝘦 𝘪𝘯 𝘦𝘯𝘨𝘪𝘯𝘦𝘦𝘳𝘦𝘥 𝘴𝘰𝘭𝘶𝘵𝘪𝘰𝘯𝘴 𝘵𝘩𝘢𝘯 𝘪𝘯 𝘯𝘢𝘵𝘶𝘳𝘦 𝘣𝘢𝘴𝘦𝘥) also depends on political and institutional continuity.

Permanence is usually defined as how long carbon stays out of the atmosphere. But when scaling an industry (especially engineered CDR that occasionally requires long term monitoring), permanence should also include the broader system and social infrastructure. Frankly, that means domestic and international politics.

For previously captured tons, long-term storage is subjected to government approvals (easements, permits, eminent domain etc.) and government-dependent funding (grants, tax incentives) that will need to continue to exist for decades.

For future capture and offtake purchases, the same issues exist but are only magnified. A project can cease mid-process or even be stopped immediately (as in the recent EPA case).

Buyers should assess permanence just like counterparty risk by understanding the various parties involved and the respective likelihood and impact of various scenarios. Accordingly, developers should build political-resilience into financing and approvals. All interested parties (buyers, NGO's, suppliers, etc.) should work with governments to ensure that the right policies are in place.

𝘛𝘩𝘦 𝘤𝘢𝘱𝘵𝘶𝘳𝘦 𝘮𝘢𝘺 𝘭𝘢𝘴𝘵 𝘢 𝘵𝘩𝘰𝘶𝘴𝘢𝘯𝘥 𝘺𝘦𝘢𝘳𝘴 𝘣𝘶𝘵 𝘵𝘩𝘦 𝘱𝘰𝘭𝘪𝘵𝘪𝘤𝘢𝘭 𝘴𝘺𝘴𝘵𝘦𝘮 𝘣𝘦𝘩𝘪𝘯𝘥 𝘪𝘵 𝘪𝘴 𝘵𝘩𝘦 𝘧𝘰𝘶𝘯𝘥𝘢𝘵𝘪𝘰𝘯.

*super-pollutants are often categorized as avoidance, but the health and 'permanence' of the industry is still dependent on the policy approvals