19 April 2022
A brief guide to BeZero Carbon Ratings
Dr Kirti Ramesh
Head of BeZero Carbon Ratings
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.