Wiley Interdisciplinary Reviews: Climate Change
De‐Risking or Dividing? Jurisdictional Carbon Markets and the Politics of Risk Management
2026-09-02
Jurisdictional approaches under Article 6.2 of the Paris Agreement are rapidly shaping global carbon markets. By linking emissions mitigation activities to state action and broader policy frameworks, these approaches are often presented as a way to address some of the integrity and ethical concerns associated with project‐based carbon crediting. Yet the risk of not delivering committed credit volumes persists regardless of scale, governance actor, or institutional structure. To manage this credit delivery risk, financial products such as carbon insurance are increasingly viewed as critical. This paper argues that private performance insurance should not be understood as a neutral technical fix. While it may help manage some delivery risks, it can also create new forms of inequity by making coverage more costly, restrictive, or unavailable for jurisdictions deemed “higher risk”. These jurisdictions may also be those most in need of climate finance. Private insurance should therefore be considered only as part of a broader risk management architecture that includes public or hybrid insurance mechanisms, carbon buffers, temporary crediting, and direct investment in risk reduction. Considered policy design is essential to ensure Article 6.2 initiatives and jurisdictional carbon markets promote inclusive, sustainable, and effective climate outcomes. This article is categorized under: The Carbon Economy and Climate Mitigation > Policies, Instruments, Lifestyles, Behavior Policy and Governance > International Policy Framework Policy and Governance > Governing Climate Change in Communities, Cities, and Regions