BeZero Carbon – one of the world’s first carbon credits rating agencies, published on September 6th a white paper that introduces its methodology for discounting carbon credits, aiming to help end buyers in the voluntary carbon market (VCM) retire carbon credits based on project-level quality.
According to the company’s announcement, it creates a first-of-its-kind, financial markets framework for retiring carbon credits. When a buyer claims one tonne of carbon credit which represents a tonne of carbon removed from its carbon footprint, that carbon credit is considered retired.
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Once retired, the permit can no longer be sold or transferred and will be listed as such on carbon credit registries to avoid double counting.
BeZero methodology is designed to help buyers of carbon credits understand how many credits they should purchase to make a tonne-based claim, by enabling them to account for the risks involved in different carbon credit projects.
As carbon credit projects differ in quality and reliability, so do the credits they generate. BeZero has developed an eight-point carbon credit rating scale that reflects the projects’ quality. The new methodology sets out an estimated discount factor for each rung of BeZero Carbon’s eight-point rating scale, which can be used by credit buyers and resellers to calculate an “over-purchasing factor” per tonne of carbon required.
That way, companies will account for the risk of purchasing credits that later on may become worthless due to various factors. Forest carbon offsets, for example, hide the risk that the offsets might become wiped out if the forest burns in a fire later on. A company that has purchased carbon offsets from that forest project may have already accounted for those offsets and have made climate neutral claims.
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BeZero Carbon’s new methodology aims to help companies better understand and spread the risk associated with different carbon offset projects.
“One of the biggest challenges facing the Voluntary Carbon Market is that all carbon credits have been treated as equal– this is simply not the case. Everyone knows quality isn’t binary. But we lack the framework and tools to reflect the fact that some credits perform better than others…
Market participants should be able to use ratings to both understand risk and make credible, quantifiable claims in the market. This will allow carbon credits to play the crucial role they need to in order to reach net zero, and we’re proud to be leading the way in developing frameworks for this,” commented Sebastien Cross, Chief Innovation Officer and co-founder of BeZero Carbon.
