These companies are trying to bring more trust to carbon credits

With buyers ranging from Taylor Swift to Apple, carbon offset credits seem poised to grow in the coming decades as companies work to meet compliance requirements and climate goals.

But it’s been an especially rough few years for the often controversial financial device, in which companies—or individuals—can buy credits for projects that claim to have reduced emissions or removed carbon from the atmosphere to offset (hence the name) their own carbon-producing activities. Multiple reports have questioned the veracity of claims made by projects sold on the voluntary carbon market, casting a pall over the whole system.

That’s where businesses like Sylvera, BeZero Carbon, and Calyx Global want to help. The companies are part of a nascent cottage industry designed to act as ratings agencies for these instruments in the same way companies like Moody’s do for bonds. They generally work on behalf of companies that purchase carbon offsets, doing research to gauge the integrity and efficacy of a given carbon-reduction program, and issuing ratings on their own scales.

Calyx co-founder Duncan van Bergen said there’s been “what you could call a crisis of confidence” in the past couple years, “not because quality credits aren’t out there, it’s just that there is variability.” On the one hand, that’s led to buyers—and risk departments—being savvier about diligence and enlisting the services of companies like Calyx. On the other, if companies have too little trust in the market, they could choose to forgo credits altogether.

“Awareness has grown. And that’s led to more interest in what we do and corporate [clients] reaching out. So that’s been a positive,” van Bergen said. “But obviously, what’s important also in the mid- to long-term, if we’re to have a big and growing business, and that impact realized, is that there is a market. And that the crisis of confidence doesn’t lead to people saying, ‘Well, hey, this is just too touchy, too risky. I’m out.’”

Green gauging?

Carbon offset credits have often been at the center of accusations of “greenwashing”—marketing that exaggerates the eco-friendliness of a product—because they allow companies to effectively outsource decarbonization initiatives while continuing to emit carbon themselves. But in ideal practice, they can help fund decarbonization efforts like reforestation and solar installation from companies that might be polluting either way.

That all depends on those projects doing what they say they do. Calyx “looks at the core claim a carbon credit makes…that it stands for one tonne of removed or reduced emissions. Our assessment, our rating, are a gauge to what extent a buyer can rely on that,” he said. To help determine that, Calyx examines factors like whether the climate action would have happened without the project, whether a project is issuing too many credits, and whether it’s creating emissions somewhere else in the process, van Bergen said.

“Is this really net net for the planet?” van Bergen said. “Or is it a balloon squeeze? You have a little bit less here, but then it pops up somewhere else.”

BeZero, which claims it’s the only of these agencies that publishes all of its ratings publicly, has now rated more than 400 projects at various stages in their life cycles, according to co-founder and Chief Innovation Officer Sebastien Cross. He said new ways to use AI—from computer vision of satellite imagery to the automated synthesizing and summarizing of disclosure documents—are also set to change the way BeZero operates.

Frequent, higher-res satellite imagery itself has already made monitoring easier for both ratings agencies and developers, Cross said.

“As a dataset, it just completely changes the game and how you think about designing projects and monitoring their ongoing performance,” he said. “We can track fires, we can track droughts, we can track forest lots—we can track basically everything going on in these projects.”

Sylvera, a carbon data and analytics provider, uses data and automated tests alongside human analysts to assess projects.

“It could be, let’s say, a mangrove restoration project. So the project developer will report in this format,” Sylvera CEO and co-founder Allister Furey. “And then the question is, is what they reported true? So then we would use a different set of data to figure that out, and it might be like satellite data…So we’re basically using satellite data, processing that with machine learning models, and then using that to monitor the changes in the project.”

“Then it’s an accounting exercise,” he added. “We take these observed changes, we map it back to what they’ve claimed, and we see if there’s any discrepancy.”

Standardization needed

However, a report from a watchdog group last fall found that ratings between the agency companies can vary greatly for the same project and recommended more public availability of methodology, among other measures.

Van Bergen said he expects to see more standards and regulation coming to the carbon market soon from both regulatory bodies and industry groups. For instance, he pointed to a California law passed in October around voluntary carbon market disclosures.

Furey also pointed to that state law as a step in the right direction. “If you could just clone that bill globally, that’d be wonderful,” he said.