600 Calyx Ratings: What have we learned

Calyx Global has rated 600 projects and counting, so we’re continuing the tradition of assessing what we’ve learned so far. In this article, we examine what’s changed about the types of projects we rate. We discuss how important local context is to measuring risk. Finally, we unpack misconceptions about quality gaps between avoidance versus removal-based carbon credits. Enjoy, and we’ll share more when the next big milestone arrives.

1. The long tail of projects can be a good source of quality

We’ve learned that turning our focus towards innovative, smaller projects has helped us find lower-risk and higher-integrity carbon credits. Compare this strategy to the early days of Calyx Global, where we concentrated on the mega projects producing carbon credits that were most actively sold and retired. These projects tended towards the low end of the ratings spectrum, which provided essential insights into where risk lives in the voluntary carbon markets (VCM). This bias is visible in the top 6 project types on the market, which make up around 80% of issuances in the VCM. The remaining projects constitute the “long tail,” where we are now discovering higher-quality carbon credits. Landfill gas projects (#5 in the list), which often display higher quality ratings, are the conspicuous exception.

Thanks to this long tail, we can provide more opportunities for meaningful carbon credit purchases. In many cases, this has meant leaning on our in-house experts, including our GHG integrity panel and partners, to discuss a range of technologies where we can expect to find higher-quality carbon credits. Much of what makes a carbon credit project successful can’t be found through a Google search. By diving deeper, we’ve been able to find many more higher-rated carbon credits for our subscribers.

Source: Ivy S. So, Barbara K. Haya, Micah Elias. (2023, May). Voluntary Registry Offsets Database, Berkeley Carbon Trading Project, University of California, Berkeley.

2. Factors outside of a project can introduce environmental and social risks

Carbon project activities inherently involve social and environmental risks; however, the local context and location they operate near can introduce additional socio-environmental challenges. For instance, the use of landfill gas in areas with ongoing community conflicts or contamination concerns can present complexities and introduce risks that may be associated with the project but unrelated to the project activity (destroying the methane from the landfill). Although these risks are not directly tied to carbon credit-generating activities, they can influence the overall perception and success of the project and, therefore, must be carefully weighed by companies who purchase such carbon credits.

3. The overall VCM suggests no quality difference between removals and avoidance

When only nature-based carbon credits are considered, removals appear lower risk than avoidance, but this narrow scope illuminates the problem with centering on carbon credit type over carbon credit quality. One reason VCM actors might miss this distinction is the recent media emphasis on Reducing Emissions from Deforestation and forest Degradation (REDD+) projects. The challenges of setting REDD+ baselines and the resulting consequences have rippled throughout the zeitgeist, potentially threatening confidence in avoidance projects altogether.

Our data do not show that this disproportionate caution around avoidance is warranted. Nature-based removals, in particular afforestation and reforestation projects, have a wide variety of integrity in our ratings system. The distribution of avoidance-based carbon credits is not substantially different from removal-based carbon credits, as illustrated by the figure below. The most effective way for a carbon credit buyer to distinguish the integrity of a carbon credit is project-by-project analysis conducted by a highly specialized consultant or a carbon credit rating agency.

With each passing rating, we learn more about the current state of the VCM. This evolving ecosystem never ceases to surprise us as we deepen our insights and continue our mission of identifying high-quality carbon credits. To stay abreast of our findings going forward, sign up for our newsletter and see what we’ve learned by project 700.