19 April 2022

A brief guide to BeZero Carbon Ratings

Dr Kirti Ramesh

Head of BeZero Carbon Ratings

7 min

BeZero Carbon Ratings recently made our headline carbon credits ratings and ratings summary publicly accessible via our website. In light of this, we thought it was useful for Dr Kirti Ramesh, our Head of Carbon Ratings, to provide a quick refresher on how the team rates carbon projects.

What is the BeZero Carbon Rating (BCR)?

A BeZero Carbon Rating represents BeZero Carbon’s current opinion on the likelihood that a credit achieves a tonne of CO2e avoided or removed. It is an opinion on the quality of the credits being issued.

Does the (BCR) consider other, non-carbon risks?

The BCR is a carbon-focussed assessment because carbon is the only truly fungible assessment variable common to all types of project in the VCM. Other risks matter, and we continue to invest in new tools for assessing issues such as biodiversity, social impacts, and portfolio risks. But these should be treated separately. Blending these into a hybrid rating risks blurring the utility a pure carbon rating brings for all market participants. It also means other types of ratings that do consider a mix of contrasting variables are not directly comparable to one another.

Does BeZero rate projects or carbon credits?

BeZero Carbon rates carbon credits, not projects. Sometimes that’s the same thing, but carbon credit quality can also change across vintages. The distinction is important. For instance, a project may be considered to be relatively “failing” where deforestation and degradation have not been stopped completely. This can coexist with a potentially well rated credit if the rate of both has demonstrably slowed, compared to a reasonable baseline.

What is the BeZero Carbon Ratings scale?

A simple alphabetic symbol is used to communicate our rating utilising a seven point scale across three categories: AAA (high), AA (moderate), A (low) likelihood of achieving 1 tonne of CO2e avoidance or removal. The addition of a '+' (plus) or '-' (minus) signs for 'AAA' and 'AA' ratings reflects comparative standing within the category. The full range of ratings (from high to low) is therefore: AAA+, AAA, AAA-, AA+, AA, AA-, A.

What type of projects can BeZero Carbon rate?

BeZero Carbon Ratings are not limited to a sector group, such as Energy or Nature Based Solutions. The ratings team can assess any type of project, in any sector, anywhere as long as it meets all three qualifying criteria.

  • The project must have applied an additionality test or provide sufficient information on how it is deemed additional.

  • The project must be audited by a recognised third party auditor in order to ensure the robustness of the data and information published.

  • Sufficient information on the design and ongoing monitoring of the project must be available in the public domain at all times. Non-public information will not be considered.

How much of the VCM does BeZero Carbon Ratings cover?

At present, BeZero Carbon Ratings can be applied to thousands of projects in the VCM from the major accreditors. The 200 assigned ratings already cover many of the largest projects in the world representing ~48% of credits outstanding within our ratable universe. And that number is climbing. The more project developers provide public disclosure of project claims and accreditors ensure all key criteria are met, the bigger our ratable universe grows. Our ambition is that all projects adhere to our qualifying criteria and can therefore be rated.

What carbon risk factors does BeZero assess when we rate a project?

The BCR follows a robust analytical framework involving detailed assessment of six critical risk factors affecting the quality of credits issued by the project: Additionality; Over-crediting; Non-permanence; Leakage; Perverse incentives; and Policy and political environment.

What is BeZero’s Ratings process?

Every time BeZero’s team of carbon credit ratings analysts assesses a project, we follow a four step process*:

  • Stage 1: macro factor assessment using our ever-expanding research database of 1300+ publications.

  • Stage 2: project specific assessment using the above internal database, public domain datasets and project documentation

  • Stage 3: a specific weighting is assigned for each risk factor and the product of these are summed. The weightings are based on the team’s assessment of a risk’s relative importance to the overall rating. A minimum of 80% of total risk factor weightings must be accounted for in order for a project to be given a provisional BCR.

  • Stage 4: BCR committee formally reviews all provisional ratings. The committee is made up of all BCR Analysts, and is chaired by a senior member of the ratings team. Unanimous approval by the BCR committee is required for a final BCR to be assigned.

Does BeZero rely on any one particular analytical technique?

At both assessment stages, the team deploys a mix of financial, ecological, geospatial, statistical, policy, and historic assessment techniques. No single analytical tool is solely relied on because no single technique is a panacea, and a variety of analytical tools provides a richer, well-balanced picture. The team seeks to understand carbon quality from absolute (project on a standalone basis) and relative (project in relation to other projects) perspectives and uses a combination of independent (BeZero-led analysis) and dependent (third party, or project development documents) datasets to perform our analysis.

Are BeZero Carbon Ratings analysts specialists or generalists?

The BeZero Carbon Rating team brings together specialists from the three key skill sets required to rate a carbon project: finance, earth sciences, and policy. Many have worked in some of the world’s leading academic institutions, global corporations, or public authority bodies bringing credibility, experience, and rigour to everything we do.

Does BeZero use Earth Observation techniques?

Earth Observation (EO), such as the use of remote sensing imagery, can help to better understand issues such as baseline setting and leakage for nature-based projects. 

EO assessments apply mainly to nature-based projects, while ~85% of carbon projects, and ~50% of credits outstanding in the market today, are in other sector groups. 

We are constantly refining our analytical frameworks and will include EO techniques in the coming months. However, it is pertinent to note that risk assessments for nature-based projects cannot, and should not, rely solely on EO data.

What will BeZero’s EO team be looking at?

BeZero has been investing heavily in bringing together a world class EO team, led by Dr Phil Platts. 

The EO team combines more than 50-years’ experience across different academic, research and government institutions, including space agencies such as NASA, universities such as Cambridge, Imperial, Oxford and York, and non-profits such as the World Resources Institute, the World Agroforestry Centre, and the Amazon Environmental Research Institute. 

Dr Platts’ team is focused on the systematic design and application of cutting-edge EO techniques for assessing carbon risks associated with nature-based projects. Remote sensing, ecosystem modelling and geostatistics, together with ground truthing activities, will be important, but not exhaustive, components of the BCR methodology and ratings assessment processes.

How is BeZero Carbon Rating different from similar assessments?

We are aware of other assessment tools for rating carbon credits in the VCM at various stages of development in the market. Understanding how these tools differ from the BeZero Carbon Rating is complicated by the lack of publicly available criteria, transparency of headline ratings, and publication of the rating methodology documents in some cases.

Is the BeZero Carbon Rating a static or dynamic assessment?

BeZero Carbon Ratings are not a one time exercise - we monitor the projects on an ongoing basis. We rate projects based on all publicly available information to assign a rating. Once assigned, the team is responsible for monitoring all material developments on the project and factors affecting the project. In case we are of the view that any of these developments will have an impact on the assigned rating, we reserve the right to put ratings under ‘watch’ and/or revise them. 

A ‘watch’ system is used to alert the market of potential changes to assigned ratings. Ratings may be put under ‘watch’ in the event BeZero Carbon is aware of new information and/or changes to information relating to project and/or macro factors which may have a material impact on the rating.

How can I access BeZero Carbon Ratings?

Last week, BeZero gave everyone the chance to freely access our headline letter ratings, and ratings summaries, for 200 rated carbon projects via www.bezerocarbon.com/listings

The release accompanies the launch of BeZero Carbon Markets - our online intelligence platform providing the world’s largest coverage of carbon credit ratings, and underlying data, research and analytics. 

It means all market participants now have a choice between our free access for essential ratings information, our ratings processes and ratings methodology; and paid access for more detailed project ratings and analytics. Much of our analysis is also available via API for commercial partners, such as Patch or AirCarbon Exchange.

Why does a commitment to transparency matter?

BeZero is committed to building the public markets-type information infrastructure the Voluntary Carbon Market (VCM) needs to scale, urgently. The more participants have access to credible, risk-based analysis the better the VCM can be in pricing and managing risk effectively so that quality and pricing is positively correlated.

Are BeZero Carbon Ratings independent and free of conflicts?

The BeZero Carbon Rating is an independent assessment of the likelihood that a credit achieves a tonne of CO2e avoided or removed. BeZero Carbon undertakes this activity entirely free of any conflict that may impact our assessment. This includes, but is not limited to buying, selling, owning or recommending carbon credits, developing or advising on the development of carbon credit projects, receiving any financial benefit linked to the rating assigned to a project and its credits.

More information on the BeZero Carbon Ratings scale; Qualifying criteria; Rating process; Sector classification; Analytical framework; and our broader FAQs are all available on www.bezerocarbon.com/ratings.

*This link was edited 22/07/22 to display our latest methodology documents.
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Read more from BeZero Carbon:

23 May 2022
Assigning, Monitoring and Watch processes
22 March 2022
A Simple Sector Syntax