International ratings agency BeZero Carbon just announced its new BeZero Carbon Ex Ante Rating for the carbon market.
As the level of importance of independent carbon ratings continues to gain momentum in the rapidly expanding market for voluntary carbon credits, this event marks a critical first step in the development of the Voluntary Carbon Market (VCM).
However, estimates say that for every dollar spent in the secondary market, roughly $3-5 are transacted in the primary market, which is where large-scale forward purchases are facilitated.
And one of the main problems with the primary market for voluntary carbon credits to date is that it is operating without a standardized language of risk and no independent, third party ratings.
Hence, BeZero Carbon is introducing BeZero Carbon Ex Ante Ratings (BCeR) in an effort to solve this problem.
BeZero has already established what is considered to be the market’s top risk metric for the assessment of carbon credit quality.
Similarly, BCeR will be the main risk metric for assessing the quality of carbon credits that have not yet been issued.
Relevant: OxCarbon And BeZero Partner To Increase Voluntary Carbon Market Transparency
The assessment will include two components: project execution risk (i.e. the risk of a project being deployed) and the carbon efficacy risk to the credits issued by a project.
The former is a well-known concept in financial markets, and its assessment has been one of the key enablers of cash flow to infrastructure projects, which means it will have a similar effect once brought to the VCM.
BeZero Carbon has already rated three projects using the new rating and says it has been ‘flooded with interest’ from project developers, investors and end buyers with many more projects set to be rated still.
According to Article 6 of the Paris Agreement, the VCM is considered to be a major component of ‘Climate Infrastructure’, and BCeR is what will help the sector gain more recognition as such, which, in turn, will ensure more capital flow.
Read more: BeZero Carbon Finds Only 15% Of Carbon Credits Are High Quality
