Carbon Market Watch study highlights Calyx Global’s rigor

Monday, 18 Sep 2023

Calyx Global recently received praise for our rigorous approach in a Carbon Market Watch study called “Rating the raters: Assessing the quality of carbon credit rating agencies.” The report said “Of the rating agencies assessed, Calyx stands out as being more conservative, with a more reliable way of assessing carbon credit quality.” While being the tough one in the room isn’t the persona we sought, it is one we embrace, because we know that it helps buyers and the market.

The Carbon Market Watch study assessed the four major carbon credit rating agencies. It focused on understanding our frameworks and sought to discern our effectiveness in our role as arbiters of quality. As an industry, ratings agencies exist to help carbon credit buyers make more informed decisions before they purchase. If the credit rating agencies fulfill their purpose, the carbon market will move towards transacting on higher quality carbon credits. Standards bodies and guidelines setters will also continue to use these assessments to raise the caliber of new credits. Studies like this one by Carbon Market Watch provide the rating agencies the necessary feedback to improve and achieve their collective goal.

The study compared approaches along three dimensions:

  1. An analysis of frameworks that is applicable to all carbon project types, regardless of these being nature-based or technological. Carbon Market Watch also compared these approaches to those of established NGOs.
  2. The frameworks applied to REDD+ avoided deforestation projects.
  3. A comparison of agencies’ ratings and frameworks when applied to the same project.

After the analysis Carbon Market Watch provided recommendations to rating agencies, identifying suggestions for improvement. It is important to note that the recommendations don’t mean anyone is failing on their mission and are solely based on the criteria Carbon Market Watch considered. Calyx Global already achieves nearly all of the recommendations Carbon Market Watch provided, including our recently announced ratings by vintage. As Carbon Market Watch notes on our vintage-based ratings, “Calyx is the only agency that assigns different non-permanence risk ratings to credits based on their vintage. This is an important element to consider as following the start of a project, most monitoring obligations end after a certain number of years. For example, a project that monitors reversals for 30 years will only be monitoring carbon stored in year 28 for two years. This creates a difference in quality.”

We also acknowledge that the area of “Safeguards ratings should be incorporated into the credit quality score” was called out as the opportunity for us. As Carbon Market Watch noted within the report, we are already at work on something here and will be sharing more in the coming months.

Through this report, we also heard that the rating industry’s differing approaches can be confusing for buyers of carbon credits. Calyx Global recognizes this and as a company that is focused on decreasing confusion in the carbon market, we take that feedback seriously. As a young industry, it isn't surprising that we don’t completely align out of the gate. At Calyx Global, we work with leading GHG and SDG experts to ensure that we're utilizing the very latest knowledge and science in our approach, and we will continue to work to bring clarity and transparency into how we do that.

What else stood out in the report was multiple places where carbon credit buyers were advised to not be dissuaded by toughness.

“Don’t shoot the messenger. Strict rating frameworks by design assess risks more thoroughly. Don't focus blame on rating agencies for low scores, but rather on low-scoring projects for their shortcomings.”

“It is important that buyers do not disregard the agencies that provide stricter ratings. Rating agencies should be considered as a reliable source of information on credit quality that shines light on some uncomfortable truths, and not as a scapegoat for companies when they might be accused of greenwashing.”

As for being the carbon credit rating agency known for being tough, we don’t deny it. We believe being clear-eyed about what is being purchased means you make better decisions for your reputation and the planet. So, we will embrace the label that may put us in the same bucket as your high school math teacher. Just as their harsh assessments may have pushed you to improve, we believe our “tough love” will push the carbon markets to grow in a positive direction. 

We were pleased with the results of the Carbon Market Watch study and its assessment that “Carbon credit rating agencies contribute to improving credit quality and transparency by raising the currently low bar for quality criteria.” At Calyx Global we will continue to do our part to live up to that role and welcome feedback on how we can do it better. 

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About the author

Calyx Global

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