Cutting The Fat Tail Of Climate Risk: Carbon Backstop Technologies As A Climate Insurance Policy

Monday, May 20, 2019
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A variety of promising technologies that might be considered “carbon backstops” are now emerging. Such technologies would be impactful in reducing greenhouse gas emissions, scalable, and available for rapid deployment—but too expensive to justify broad deployment today. In this paper we consider political, regulatory, and market structure barriers of scaling: (1) small modular nuclear reactors, (2) dispatchable negative emissions through the direct air capture and sequestration or use of carbon dioxide, and (3) other new approaches towards better controlling the composition and behavior of the global atmosphere. In doing so we argue that such technologies already hold significant social carbon “option value” and that, despite high costs, continued investment could improve their credibility as a backstop insurance policy to help reduce the fat-tail risk of severe climate change scenarios.

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