Carbon Removal Delivery Assurance Portfolio Planner
Carbon removal procurement teams face a difficult balancing act: committing to ambitious net-zero targets while relying on suppliers whose delivery timelines and performance are uncertain. This Delivery Assurance Portfolio Planner is designed to help climate leads, sustainability officers, and sourcing managers size buffer purchases, quantify expected shortfalls, and understand the trade-offs between upfront cost and delivery risk.
How this planner works
The planner treats your portfolio as a set of carbon removal contracts summarized into a few key inputs: target delivered tons, average price, expected on-time delivery probability, extra buffer tons purchased above target, penalties for any shortfall, and a diversification bonus that reflects risk reduction from spreading purchases across suppliers or methods. It then produces expected cost and risk metrics, adjusted for delivery delays and discounted to present value.
Core concepts and formulas
At the heart of the tool is the relationship between your delivery target, the amount of carbon removal you contract for, and the percentage of those contracted tons that are expected to arrive on time.
- Target delivered carbon removal is the tons you must receive by a specific date to stay aligned with your climate plan.
- Buffer purchase is the percentage of extra contracted tons above that target to protect against delivery shortfalls.
- On-time delivery probability is the portfolio-weighted chance that contracted tons are delivered on schedule.
- Penalty or social cost per shortfall ton approximates the financial and reputational impact of missing your delivery target.
A simplified version of the expected delivered tons calculation looks like this:
where Buffer is the buffer percentage expressed as a decimal (for example, 35% becomes 0.35) and p is the weighted average on-time delivery probability (for example, 72% becomes 0.72).
Expected shortfall can then be expressed as:
If this value is negative, it indicates an expected surplus relative to the target; in practice, the planner may treat negative shortfall as zero for penalty calculations.
The expected penalty cost for missing your delivery target is approximated by:
Expected penalty cost = max(E[Shortfall], 0) × Penalty per ton
Incorporating diversification and discounting
The portfolio diversification bonus represents how much your overall delivery risk is reduced when you buy from multiple suppliers, geographies, or carbon removal pathways. It is modeled as a percentage reduction in the effective shortfall risk.
For example, a 12% diversification bonus means your effective expected shortfall is reduced to 88% of what it would be in a non-diversified portfolio. Conceptually:
Effective expected shortfall = E[Shortfall] × (1 – Diversification bonus)
To account for delivery delay and the discount rate, the planner uses basic net present value (NPV) logic. Delayed deliveries are less valuable today than immediate ones. A simple discount factor for a delay of m months at an annual discount rate r is:
Multiplying expected delivered value and penalties by this discount factor allows you to approximate the net present value of your portfolio performance.
Interpreting your results
When you use the planner, you will see how changing each input affects both cost and delivery assurance. Some typical interpretations are:
- Higher buffer percent raises total contract spend but generally reduces expected shortfall and associated penalties.
- Higher on-time delivery probability (for example, by favoring more mature suppliers) reduces shortfall risk without necessarily requiring a larger buffer.
- Higher penalty per shortfall ton makes it more rational to buy a larger buffer or to prioritize reliability over price.
- Higher diversification bonus indicates that a more varied supplier mix is effectively reducing your risk, potentially allowing you to hold buffers constant or even lower them while maintaining similar assurance.
- Longer delivery delay lowers the present value of your portfolio and may justify pushing for earlier delivery schedules or choosing suppliers with faster execution.
Worked example
Suppose a climate team wants to secure 50,000 metric tons of carbon removal delivered on time for a milestone year. They are considering the following inputs:
- Target delivered carbon removal: 50,000 tons
- Average contract price per ton: $425
- Weighted average on-time delivery probability: 72%
- Additional buffer purchase: 35%
- Penalty or social cost per delivered shortfall: $650 per ton
- Portfolio diversification bonus: 12%
- Discount rate: 6% per year
- Expected delivery delay: 14 months
Step 1 – Contracted tons. With a 35% buffer, total contracted volume is:
Contracted tons = 50,000 × (1 + 0.35) = 67,500 tons
Step 2 – Expected delivered tons on time. Applying the 72% on-time probability:
E[Delivered] = 67,500 × 0.72 = 48,600 tons
Step 3 – Expected shortfall.
E[Shortfall] = 50,000 – 48,600 = 1,400 tons
Step 4 – Apply diversification bonus. With a 12% risk reduction:
Effective expected shortfall = 1,400 × (1 – 0.12) ≈ 1,232 tons
Step 5 – Expected penalty cost.
Expected penalty cost ≈ 1,232 × $650 ≈ $800,800
Step 6 – Contract cost.
Total contract cost = 67,500 × $425 = $28,687,500
Step 7 – Discounting for delay. With a 14‑month delay and 6% annual discount rate, the discount factor is approximately:
DF ≈ 1 / (1.06)^(14/12) ≈ 0.93
Applying this factor gives you a sense of the present value of both your contract spend and the expected penalty exposure. You can then tweak buffer, supplier mix, or delivery schedules to see how your risk–cost profile changes.
Scenario comparison
The table below illustrates how different portfolio strategies might compare, holding the target of 50,000 tons constant while varying buffer and diversification assumptions. Values are approximate and meant to show directional trade-offs rather than prescriptive answers.
| Scenario | Buffer (%) | Diversification bonus (%) | Approx. contracted tons | Approx. E[delivered] (tons) | Approx. effective expected shortfall (tons) | Qualitative risk level |
|---|---|---|---|---|---|---|
| Low buffer, low diversification | 10% | 0% | 55,000 | 39,600 (at 72% on-time) | 10,400 | High |
| Moderate buffer, moderate diversification | 35% | 12% | 67,500 | 48,600 | ≈1,232 | Medium |
| High buffer, strong diversification | 60% | 25% | 80,000 | 57,600 | 0 (surplus vs. target) | Low |
In practice, you would adjust these parameters based on supplier quotes, internal risk tolerance, and the severity of any penalties or reputational impacts from missing targets.
Who should use this tool and when
This planner is particularly useful when you are:
- Designing a multi-year carbon removal procurement roadmap aligned with net-zero or SBTi commitments.
- Negotiating advance purchase agreements (APAs) and need to justify buffer levels to finance or leadership.
- Comparing portfolios that favor lower-cost but riskier suppliers against those with higher prices but stronger delivery track records.
- Translating qualitative delivery concerns into quantitative metrics that can feed into broader enterprise risk discussions.
Limitations and assumptions
While this planner can sharpen decision-making, it rests on simplifying assumptions. You should keep the following in mind when interpreting results:
- Aggregated portfolio view. The tool uses a single weighted average on-time delivery probability rather than modeling each supplier separately. It does not capture non-linear interactions between suppliers or technologies.
- Simplified probabilities. The on-time delivery probability is treated as a fixed parameter. Real-world delivery risk can be path-dependent, time-varying, and influenced by policy or market shocks.
- Linear penalties. Penalty or social cost per shortfall ton is modeled as a linear function of the shortfall. In practice, reputational or compliance impacts may escalate non-linearly once certain thresholds are breached.
- Diversification as a single number. The diversification bonus collapses complex correlations (across suppliers, technologies, and geographies) into a single percentage. It does not replace rigorous portfolio risk modeling.
- Financial discounting only. The discount rate and delivery delay treatment are purely financial. The tool does not explicitly model climate damages from delayed removals or the potential value of signaling and learning effects from early purchases.
- No counterparty or policy risk modeling. The planner does not include explicit credit risk, contract renegotiation, regulatory changes, or market liquidity constraints. Those must be handled in your broader risk framework.
Because of these limitations, you should treat the outputs as decision support rather than precise forecasts. Use them to compare scenarios, stress-test your assumptions, and structure conversations with internal and external stakeholders.
Next steps
To get the most value from this planner, start with conservative estimates for on-time delivery and diversification, then explore how results change as you adjust buffer sizes, penalties, and risk reduction assumptions. Document the assumptions behind your chosen parameters so that future teams can revisit them as markets mature and more empirical data on carbon removal performance becomes available.
Delivery Assurance Summary
Total tons to contract: 0 tCO₂e
Expected delivered tons after risk: 0 tCO₂e
Residual shortfall exposure: 0 tCO₂e
Total procurement cost: $0
Expected shortfall penalty value: $0
Net present value of program: $0
About This Carbon Removal Delivery Assurance Portfolio Planner
Corporate climate leaders are confronting an uncomfortable truth: paying for tons of carbon removal is not the same as receiving them. Projects slip, verification backlogs pile up, and the reputational damage from missing public milestones can dwarf contract costs. This planner helps sustainability executives build a defensible procurement strategy by combining delivery probabilities, buffer purchases, and penalty modeling in one transparent view. Rather than relying on generic percentages, the tool encourages you to input your own supplier reliability data, whether sourced from ratings programs, internal diligence, or insurance quotes. It then shows how diversification and contract buffers influence expected delivery, revealing the trade-offs between tying up capital and guaranteeing tonnage.
Many organizations still budget carbon removal as a simple volume times price equation. That approach ignores the variability across technology types. Direct air capture facilities may offer high permanence but low near-term delivery. Biochar projects deliver quickly yet face permanence risk. By modeling the weighted average on-time probability of your mix, the calculator highlights where additional diversification could close the gap. The diversification bonus input captures the effect of holding uncorrelated supply sources. For instance, adding ocean alkalinity alongside enhanced rock weathering might reduce the chance that weather-driven delays hit every project simultaneously.
Procurement teams also have to consider the financial cost of falling short. Missing a net-zero milestone can trigger make-good purchases at premium prices, environmental, social, and governance (ESG) rating downgrades, or stakeholder trust issues. The penalty per ton input allows you to quantify that exposure, whether it represents contractual liquidated damages, the social cost of carbon, or an internal reputational risk proxy. Converting that into a dollar figure clarifies why buffers are more than a compliance checkbox—they are an insurance policy for your climate credibility.
Delivery timing matters as well. If projects slip into later years, the value of carbon removal can change due to evolving regulatory schemes or voluntary market price swings. The calculator discounts future deliveries back to present value based on your cost of capital. A 14-month delay at a 6% discount rate may not sound dramatic, but across tens of thousands of tons it can erode millions in value. By blending delay, price, and penalty inputs, the planner reports a net present value that reflects the complete economic picture.
How the Model Works
The tool first calculates the total tons to contract by applying your buffer percentage to the target delivered tons. It then adjusts the on-time delivery probability by the diversification bonus, recognizing that spreading bets across suppliers can reduce correlated risk. Expected delivered tons equal the total contracted tons multiplied by this adjusted probability. Any gap between expected delivery and the target volume is the residual shortfall. Expected penalty value is the shortfall multiplied by the penalty cost per ton. Total procurement cost equals the contracted tons multiplied by the average price per ton. Net present value subtracts both procurement cost and penalty value, then adjusts for the time value of money associated with delivery delays.
MathML Formula
The discounted net value of the program can be expressed as:
where
Worked Example
Consider a buyer targeting 50,000 tons of removals in 2027 with an average contract price of $425 per ton. The weighted probability of on-time delivery across direct air capture, biomass carbon removal, and mineralization projects is 72%. The buyer plans a 35% buffer by over-contracting to 67,500 tons. After applying a 12% diversification bonus, the adjusted reliability climbs to roughly 80.6%, yielding an expected 54,405 tons delivered. That exceeds the target by 4,405 tons, giving comfortable headroom. The procurement cost totals $28.7 million. Because there is no expected shortfall, the modeled penalty is zero, and the discounted value primarily reflects the time value of money from a 14-month delivery delay. Even with that delay, the program maintains a positive net present value versus the reputational cost of missing the commitment.
Scenario Comparison
| Scenario | Adjusted reliability | Expected delivery | Shortfall risk |
|---|---|---|---|
| Base portfolio | 80.6% | 54,405 t | 0 t |
| No buffer purchases | 63.4% | 31,700 t | 18,300 t |
| Insurance-backed contracts | 88.0% | 59,400 t | 0 t |
The table illustrates how buffers and diversification shape risk. Without a buffer, the organization would miss its target by a wide margin. Insurance or performance guarantees can raise confidence without dramatically increasing contracted tonnage.
Limitations and Assumptions
The planner simplifies the portfolio into a single weighted probability, so it does not model individual supplier correlations or waterfall delivery schedules. It assumes penalties only apply to residual shortfalls rather than partial delays, and it treats the diversification bonus as a direct reduction in non-delivery risk. Users should adapt the inputs if they expect staged payments, volume flex provisions, or merchant market purchases to close gaps. The discounting approach also assumes linear delivery over the delay period, which may not hold for large infrastructure projects that deliver in batches.
Related Planning Tools
Teams evaluating other climate strategies can reference the enhanced rock weathering CO₂ removal calculator and the direct air capture cost calculator to benchmark technology pathways.
Carbon removal procurement also intersects with accounting and audit requirements. Assurance providers increasingly expect granular schedules that match delivery certificates to the fiscal period in which claims are made. Because this calculator tracks expected deliveries and buffers, you can export the numbers into a ledger that reconciles with sustainability disclosures. It becomes easier to satisfy auditors, explain variances during earnings calls, and align sustainability strategy with financial reporting. If you pursue insurance or guarantee products, underwriters can plug in their own reliability adjustments to validate pricing assumptions.
The tool can even support innovation portfolio management. By adjusting price and reliability inputs for pre-purchase agreements with early-stage suppliers, you can quantify how much venture-style risk your climate strategy can absorb. Some companies deliberately over-index on frontier technologies to accelerate commercialization, while others need bankable tons to meet compliance markets. Experimenting with the sliders lets you compare those philosophies in a common financial language. Pair the results with scenario storytelling and you have a robust narrative for sustainability committees and investor relations teams.
Building a resilient carbon removal portfolio requires more than chasing the lowest price. This calculator provides a defensible framework for balancing buffers, supplier diversity, and financial exposure. Use it to brief executives, report to sustainability committees, and negotiate performance clauses that protect your net-zero roadmap even when delivery timelines slip.