First Credit Ratings Agency for Carbon Offsets Launched
IDEA Carbon today launches The Carbon Ratings Agency, “the world’s first independent carbon credit ratings service.”
The service will provide detailed credit ratings for carbon offset assets in the CDM, JI and voluntary markets. Each asset studied will be given a rating based on a detailed analysis of the underlying project, leading to an assessment of the likelihood of it delivering its stated emissions reductions in the stated time period.
The Carbon Ratings Agency also considers the economic and social development benefits that the project does, or does not bring.
The Carbon Ratings Agency says it will provide ratings to market participants both on a mandated basis (where project owners or investors commission the agency to rate their carbon assets) and through the Agency’s Market Initiated Ratings Service, which will give subscribers access to a representative range of carbon asset ratings on an ongoing basis.
Independent credit ratings are well established instruments for enhancing the transparency and efficiency of financial markets. Like standard credit ratings, the new service will award scores ranging from AAA for the highest quality, lowest risk offset assets, through to C and D for the highest risk assets which are least likely to meet their stated goals, IDEACarbon says.
This development should help London solidify its position as the world center of carbon trading. IFSL’s new report on Carbon Markets shows that ECX (European Climate Exchange) carbon futures contracts, traded on the London-based ICE Futures Europe exchange, made up 89% of exchange trading in the EU Exchange Trading System in 2007. The UK is also the leading investor in project-based transactions accounting for 59% of credits purchased in 2007, up from 54% in 2006.
Trading in the rapidly expanding carbon markets jumped a further 70% in 2007, with the volume of carbon dioxide emissions transacted worldwide rising from 1,745 million tonnes carbon dioxide to 2,983 mtCO2. Allowance-based transactions, accounted for over two thirds of trading and project-based transactions the remainder.
Uncertainty persists over the future of carbon trading after the Kyoto Protocol expires in 2012. But despite considerable differences to be resolved, Point Carbon’s 2008 report indicated that at least a half of its survey participants expect all the major
developed countries including Europe, Japan, Australia, Canada, New Zealand, Russia and the US to participate with commitments in a post-2012 scheme. There was less confidence about wider buy-in with only about a third saying that other countries such Ukraine, South Korea, China, India and Mexico would participate.
Point Carbon also reports that manmade emissions of carbon dioxide from the use of fossil fuels is likely to rise over 50 per cent by 2030 as developing countries such as China and India will remain heavy users of coal to fuel economic growth, according to the statistical arm of the US Department of Energy.
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