Reforestation Premium
Exploring the Impact of IFM and Afforestation / Reforestation in Environmental Planning
Evaluating the Risk of a Reversal
The GreenTrees project asked a leading parametric insurance underwriter to assess the project’s reversal risk. The resulting analysis found a de minimis risk of reversal (0.2%), an extraordinary contrast to the 16.6% required by ACR. The analysis is summarized below and described in more detail in the accompanying source documents.
Category
Risk Score
Reversal Probability
Notes
Wildfire
1/100
0.1%
Looking at the state level, it becomes evident, that the project area is in the lowest fire risk area.
Flood
2/100
0.1%
The overall probability for floods in the area is higher than with fire, but the impact is significantly lower, as the flood would have to be severe and stay for months, if not years to substantively harm the area.
No flood will cover the entire project area over the next 5 years. If water is stagnant for 2-3 weeks, young trees die. But if the water moves, it helps the trees more than it hurts them by introducing oxygen.
Earthquake
1/100
0.1%
The highest ever recorded earthquake in the project area is of magnitude 4.7, which is not sufficient to destroy trees. Earthquakes are in many cases beneficial to trees, as they loosen up the earth around them.
Disease and Pest
4/100
0.2%
Trees dying from indigenous diseases typically take years, while still removing carbon from the air, thus generating credits, that can be used to offset a potential future reversal.
Hurricanes
2/100
0.1%
Hurricanes typically form over the Gulf of Mexico and quickly deteriorate after making landfall from the South. The southern project area is generally more prone to be hit by hurricanes, but the impact is low, due to rapid deterioration of the storms.
