Carbon credit rating service launched

The 'world’s first independent carbon credit ratings service' was launched by carbon finance analysts IDEAcarbon in the City of London on Wednesday

Chaired by former World Bank head of sustainable development Ian Johnson, IDEAcarbon has spent the last two years developing the ratings system, which is run by its wholly-owned subsidiary the Carbon Ratings Agency.

The service will cover offsets in the Clean Development Mechanism, Joint Implementation and voluntary markets, assessing the likelihood of the underlying projects delivering their stated emissions reductions in the stated time. It has already produced market-initiated ratings for a representative sample of 25 CDM projects across a range of technologies and geographies. Summaries of this initial set of ratings have been compiled in a report that reveals that very few of the projects achieved the top rating and a significant proportion are liable to under-perform compared to volumes projected at the project design stage.

The Agency will rate carbon reduction projects in a similar way to standard credit ratings. It has been launched in response to problems with the delivery of both voluntary projects and those operating under the Kyoto Protocol.

The ratings will take into account factors including project developer expertise, regulatory risks and country risks. However, it will not include an independent assessment of additionality, or whether reductions are beyond those which would have happened without intervention.

Mr Johnson said the rating service would increase transparency in the market, help purchasers differentiate between credits, and make carbon "a market like any other kind of asset". The initiative drew strong support from Lord Stern, author of the groundbreaking 2006 Stern review of the economics of climate change.