Are newer carbon credit vintages better?

Are newer carbon credits really better for the planet? We turned to our ratings data for an answer to this question.

Some people will tell you that a newer carbon credit is better. We’ve even seen organizations limit themselves to vintages of a certain age. But, are newer carbon credits really better for the planet? Because we provide GHG ratings by vintage, we can answer this question in multiple ways. Here, we dive into the questions and answers about the quality of carbon credit vintages.

Question: Is a newer carbon credit vintage from a single project higher quality?

Answer: Not usually. 

Over time, the context of a carbon project can change. For example, for renewable energy projects, grid emissions could increase or decrease, or new regulations may be implemented that affect the baseline scenario. A project developer can also alter their practices or technologies used in the activity. All of these factors, in turn, can impact the emission reductions (or removals) or additionality of a project. Knowing this, we rate carbon projects by vintage. Below is a chart indicating whether GHG ratings for the same project have gone up or down after our assessment of newer vintages.

Question: Are newer carbon credit vintages higher quality?

Answer: Not yet.

When looking across the carbon market, credits from newer vintages are not a shortcut to GHG quality. As seen in the chart below, high-integrity A-rated projects are more frequently found with a vintage of 2010 or 2011 than with a vintage of 2020, 2021 or 2022 (although 2023 shows promising signs of improvements). While there are some positive indications that the riskiest projects are decreasing as a proportion of the market, there is no indication suggesting that buyers should use vintage as a tool for sorting quality.

The following are Calyx Global’s ratings of carbon credit by vintage, i.e. the year in which the emission reduction occurred.

Question: Given older vintages have already happened, doesn’t supporting newer credits create more mitigation?

Answer: Not necessarily. 

Project developers and investors take a chance when generating carbon credits – particularly those aiming to sell in the voluntary carbon market (VCM), where demand is fickle. They put up-front finance into activities to reduce emissions without knowledge of whether they will be able to sell the credits, and even less so at what price. Since the start of the voluntary carbon market, generating credits has been a high-risk proposition. 

Let’s say an investor put money into a project in 2010, but the market slumped thereafter and they had to operate at a net loss for many years. Purchasing credits can still provide rewards for additional mitigation and the risk-taking by the investor. This could encourage investors to continue taking such risks. By contrast, devaluing older (high-quality, additional) credits can put a chill on the market; it increases risk for investors if they believe there may only be a short window in which they can sell such credits. It only serves to raise the “hurdle” rate for an investment into the VCM. It also makes the market contract as investors become cautious and hesitant to invest in carbon projects due to the uncertainty of earning the income they projected.

Supporting established projects that produced older carbon credit vintages is essential for maintaining their financial viability, ensuring ongoing emission reductions, and preserving market confidence. These projects often rely on continuous income from carbon credit sales to cover operational costs and sustain their activities. Withdrawal of support can lead to project failure, loss of environmental and economic benefits and diminished market credibility. Therefore, continued investment in these projects is vital for achieving developer confidence in carbon market mechanisms.

Furthermore, many established projects provide economic benefits to local communities, such as job creation, infrastructure development and improved local services. Withdrawal of support can negatively impact these communities, reducing the socioeconomic benefits that accompany the projects. 

To consider: When faced with the prospect of their carbon credits not being sold on a long-term basis, project developers must navigate a complex landscape of financial, operational and strategic challenges. Their reactions can include budget adjustments focusing on cost-cutting measures, scaling back on the activities, reevaluating project viability, focusing on short-term sales and maintaining core activities (that may exclude the social benefits to communities, etc.).

Conclusion: Focus on quality, not vintage

New vintage carbon credits support innovation and the establishment of new project activities. Older vintage credits can offer proven impact and reputational trust. One is not necessarily better than the other. What counts is the GHG integrity of the credits.

Assessing the quality of carbon credits by vintage uniquely allows Calyx Global to take a more granular approach to understanding quality. We’ve seen cookstove, forestry and other project ratings go up and down as conditions change within a project. Most recently, we shared that the highly publicized C-Quest Capital projects received a poor rating due to over-crediting, but with their efforts to self-correct and cancel over-issued credits, it’s possible to see an improvement in GHG quality within such projects and to reward improvements. Ratings by vintage also give carbon credit buyers the ability to assess the quality of their purchases more precisely.