Platts proposes reference bases for Voluntary Carbon Credit assessments

Following a market consultation, Platts, part of S&P Global Commodity Insights, is proposing to adopt reference bases for some of its suite of Voluntary Carbon Credit assessments, with effect from July 14, 2023.

Platts launched a consultation on how best to reflect baseline quality values in its carbon credit assessments, (https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/020823-platts-opens-consultation-on-reference-standards-for-voluntary-carbon-credit-assessments).

Currently, the Platts Voluntary Carbon Credit assessment methodology reflects the most competitively priced and internationally fungible credits within a specific market category. Platts current carbon credit specifications are available here: https://www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-methodology/methodology-specifications/method_carbon_credits.pdf

Feedback to that consultation has been supportive of improving clarity and transparency around the quality references in its assessments. Feedback has also been supportive of amending some assessments to no longer reflect the value of the most competitive credit in a given category, but rather to reflect the value of the most fungible credit. Under the proposed change, Platts would specify general reference bases, listed below, for its suite of voluntary carbon market price assessments, effective July 14, 2023.

Platts understands that the most competitive credits available in the market are not always widely accepted, and that the broad acceptance of particular credits has varied over time. This has meant that there have been significant changes in recent months around which particular credits carry broad market trust and fungibility. Platts understands the general reference bases listed below to be consistently representative of the voluntary carbon market categories that it assesses, while individual projects or credit types may shift between premiums and discounts within those categories.

Platts proposes to define its references bases as follows:

Platts proposes to specify which credits within each reference base are broadly accepted in the market, fungible and representative in its daily rationales for each market category.

Platts would continue to reflect bids, offers and transactions for other credits in each category, but may normalize these to the value of the reference base for assessment purposes. Normalization may include factors such as technology, standard-certification, geography and co-benefits that may impact a projects market value. Platts will continue to specify any normalizations used within the daily rationales.

For more information on the process of normalization, see Platts methodology guide here, page 10: https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/en/our-methodology/methodology-specifications/platts-assessments-methodology-guide.pdf

Platts would notify market participants about a planned change in the reference basis of its assessments with a subscriber note published before the change. Please send any feedback to Platts_Carbon@spglobal.com and pricegroup@spglobal.com by June 7, 2023.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing.