Carbon credits are one of the primary tools available right now that can mobilise additional private financing – at the necessary speed and scale – to help mitigate climate change and build climate resilience. They enable companies at any stage in their decarbonisation and sustainability journey to meet their climate commitments and contribute to global climate ambitions as well as the United Nations' 17 Sustainable Development Goals (SDGs).
However, not all carbon credits are created equal. Every carbon finance project, regardless of geography or design or type, comes with uncertainty. It is important to discern the underlying quality of individual projects and the carbon credits that are associated with them.
CIX exists to drive real impact by increasing access to credible quality carbon credits. For us, quality means that the projects we choose to make available to our customers deliver a minimum acceptable level of positive climate, environmental and social impacts that are measurable, last for a meaningful amount of time, and do not simply displace emissions elsewhere.
Through our project assessment process, we aim to serve as a trusted partner in the purchase and retirement of carbon credits. Our goal is to bring confidence and clarity to those that do not have the resources or expertise to perform their own assessment in-house, while complementing the efforts of those that can. Upon request, we are also able to provide transaction advisory services to our customers to assist them with their buying decisions.
At its core, we are helping our customers to glean a better understanding of projects and their potential; make informed assessments on whether a credit type or project is acceptable; and procure credits of a certain minimum level of quality.
Our value proposition to our customers involves two key aspects:
CIX offers different types of credits that support a range of greenhouse gas (GHG) reduction activities. Emission reductions decrease the amount of GHGs that enter the atmosphere by avoiding or removing GHG emitting activities, while emission removals eliminate GHG emissions after they have entered the atmosphere. All solutions are needed to reach global net-zero by mid-century and combat climate change. Climate action now with available solutions can contribute to much needed GHG reductions, as technologies that can sequester carbon for thousands of years are still nascent and not yet mature.
To ensure that a carbon credit is of sufficient quality, the underlying project must be reviewed to ensure it is using a robust carbon standard, how that carbon standard is applied, project design and implementation quality, as well as commercial considerations for different vintages of carbon credits. Both carbon market experience and our own team’s experience have shown that projects often fall short in terms of acceptable quality.
We have established an approach (see below) and a process (Figure 1) for curating projects on CIX Marketplace and CIX Auctions. Our process and approach build on the work of international standards setters, industry subject matter experts, multi-stakeholder groups, capital markets risk management approaches, lessons learned from carbon finance project field experience, and our team’s expertise built on decades of carbon markets experience. Our approach is binary. We either choose to list a project or not. Should any material project changes occur after our listing decision, we will re-evaluate.
CIX’s in-house quality assessment process comprises three key steps:
Step 1: Verify
Our first pre-requisite is that projects must be certified by globally recognised carbon standards. We currently recognise the American Carbon Registry (ACR), Architecture for REDD+ Transactions’ REDD+ Environmental Excellence Standard (ART TREES), Climate Action Reserve (CAR) and its country-specific versions, Gold Standard, Puro.earth, and Verra’s Verified Carbon Standard (VCS). We are flexible and will expand the list of standards in line with carbon market developments.
We also seek projects that complement these carbon credit certifications with additional certifications for other attributes (e.g., Climate, Community & Biodiversity (CCB) Standards, Forest Stewardship Council (FSC) certification, etc.), and/or which meet the requirements of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
We are in alignment with the Integrity Council for the Voluntary Carbon Market's (ICVCM) Core Carbon Principles (CCPs). As more detailed guidance is shared in the future, we will consider it as a part of our dynamic process for determining quality. Carbon markets are not static, and we will stay abreast of market developments accordingly. In addition, we feel it is crucial to go beyond certifications or broad project types to screen each project individually based on its own quality and relevant location-specific project context.
Step 2: Screen
Next, to ensure minimum acceptable quality, projects available via our CIX Marketplace and CIX Auctions offerings must pass one of two quality screening processes:
Identified projects will have to pass CIX’s quality assessment by our in-house quality team should the projects not have a rating, have a provisional rating, or if we have supplementary information that may augment an existing rating.
Our assessment approach is holistic and involves integrated inter-disciplinary project risk assessment across four main risk categories described in the next section (Figure 2). Projects that meet our in-house quality evaluation threshold are labelled on our platforms as “CIX Evaluated” (Figure 3). Whilst we believe all projects offered on Marketplace and CIX Auctions are of sufficient quality, ‘CIX Evaluated’ projects are selected by us as a service to our customers.
Where a carbon credit rating is available, we look to independent carbon credit rating agencies to complement our in-house quality screening process. Projects which achieve a minimum ‘BBB’ or higher rating from independent carbon rating agencies, such as Sylvera and BeZero, are eligible for listing on CIX Marketplace and Auctions. These are labelled as “Independently Rated”.
We recognise that the list of projects evaluated by rating agencies is not exhaustive and made a deliberate decision to reference the rating of at least two different providers if available. In the event of multiple providers having rated a project, we will reference the lower rating as part of our assessment. Please note that in some cases CIX evaluates risk parameters that some of the rating agencies do not.
Where a rating does not exist, we will only list the project if it has been “CIX Evaluated” and deemed to be of sufficient quality. Our in-house project evaluation process may also result in the listing of projects that have either been assigned a provisional rating or have a rating lower than ‘BBB’ – this occurs where CIX, after careful consideration, believes that the project is of sufficient quality. A project with a rating below BBB will only be listed if we have access to supplemental information that justifies a better rating in our opinion and that is defensible. CIX evaluations also augment existing ratings with Environmental and Social Safeguards, climate risk, and operations and granular technical assessments by project type.
Step 3: Clarify
We actively engage project developers and/or suppliers to seek further clarification and context as required, which is critical for carbon credit assessment. Following clarification of key information, CIX’s quality assessment team makes a final recommendation for project listing.
Each customer must decide for themselves whether CIX’s evaluation, or that of a ratings agency where available, adequately supports their transaction decision. While these assessments cannot offer an absolute guarantee, we believe that the combined expertise of CIX and our partners will provide buyers with a sufficient basis for making informed decisions.
Read more about how we conduct our project assessments here.
April 11, 2024