NACW 2024: Turn up the volume, and integrity

Tuesday, 26 Mar 2024

Whether on a stage, at a booth or in a meeting, the search for volume (in both supply and demand) and integrity in the carbon markets was the theme at North American Carbon World (NACW), hosted by Climate Action Reserve (CAR). Last week the Calyx Global team joined fellow climate leaders at NACW in San Francisco to exchange insights on the direction of the carbon markets. We heard discussion of CCP labels, new carbon capture solutions and a potential future where compliance and voluntary markets combine. All of these topics circled around building a market that supports greater demand for high integrity carbon credits. Speakers from Chevron, Catona Climate and others noted the carbon market is currently demand-constrained, but also that high quality carbon credits are in short supply. This two-way constraint means that the carbon market has a lot of work to do to reach its potential and tackle climate change.

Donna Lee speaking

To this end, Calyx Global, together with, discussed a solution for increasing quality carbon credit supply through “rightsizing” carbon credits. Rightsizing is the idea of taking an existing carbon credit that suffers from over-crediting, quantifying the over-crediting risk and then identifying and retiring the number of additional credits necessary to get to one full tonne of CO2e. We shared how Calyx Global supported to build a highly-rated Rightsized portfolio – one that oneshot now provides to their customers. This is one way to take carbon credits available on the market today and turn them into high-integrity carbon credits. While this is a bandaid that can immediately generate market liquidity, it isn’t a long-term solution to high-integrity carbon credits. So what is?

Donna Lee and others talk at NACW

The ICVCM CCP labels are one step on the journey to more high-integrity credits, and a hot topic was the impending arrival of the initial set of labels in two weeks (per their announcement in their session). During a panel discussion among carbon credit rating agencies, the question was posed “how will the CCP label and ratings work together?” The answer of all of the rating agencies was united: CCP labels on different project types will help inform carbon credit buyers where the minimum bar sits, but individual projects have a range of quality above (and below) that bar and that is where ratings are helpful. Still, the market is generally optimistic about the role that the CCPs have to play in helping to steer carbon credit buyers in the right direction. For those who consider quality and integrity in their credit purchases, rating agencies will continue to be a partner that provides depth and details on carbon project analysis. 

How carbon credit rating agencies work with carbon crediting programs was also discussed. Ultimately, the standards put in place by organizations such as CAR, Verra and others will be the biggest lever in improving quality, so an emphasis was placed on the rating agencies feeding their learnings back to these bodies for continuous improvement. At Calyx Global we fully embrace this notion, and welcome the development of a more systematic sharing of learnings with carbon standards and initiatives like the ICVCM.

Other trends included multiple conversations and perspectives on how the voluntary and compliance markets can converge to create a single higher quality, higher functioning market. In addition, the concept of moving carbon credit investments upstream to pre-issuance for greater control over quality is becoming more commonplace than it was just a year ago. 

While at NACW, we heard many potential paths to get to a scalable, high integrity carbon market future state. From project developers to carbon credit buyers, rating agencies and carbon crediting programs, there is no entity in the carbon market that is not actively working on increasing quality. With that kind of collective action, we’re hopeful for the next chapter.

To learn more about rightsizing carbon credits, read the joint paper from Calyx Global and here.
To hear from Donna and others at NACW on the role of ratings agencies in the carbon market, check out the panel discussion posted by Climate Action Reserve: Path 3: Credit Ratings – Help or Hinderance - YouTube

About the author

Calyx Global

This article includes insights and input from multiple experts in Calyx Global.