Energy Transition, Natural Gas, Electric Power, Renewables, Emissions, Carbon

July 17, 2023

Platts introduces reference bases for Voluntary Carbon Credit assessments

Following a market consultation, Platts, part of S&P Global Commodity Insights, has adopted reference bases for its suite of Voluntary Carbon Credit assessments, with effect from July 17.

The move followed a consultation on how best to reflect baseline quality values in Platts carbon credit assessments initiated on Feb. 8 and available here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/020823-platts-opens-consultation-on-reference-standards-for-voluntary-carbon-credit-assessments).

Platts published a proposal on reference bases on May 10, which can be found here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/051023-platts-proposes-reference-bases-for-voluntary-carbon-credit-assessments

Previously, the Platts Voluntary Carbon Credit assessment methodology reflected the most competitively priced and internationally fungible credits within a specific market category.

Feedback on the consultation and proposal was supportive of improving clarity and transparency around the basis references in Platts assessments.

Feedback was also 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 competitive, most internationally fungible credits.

Platts now specifies general reference bases, listed below, for its suite of voluntary carbon market price assessments, effective July 17.

Platts understands that the most competitive credits available in the market may be less fungible.

That has meant significant changes in recent months around which particular credits carry broad market fungibility.

In addition to its reference bases, Platts specifies other parameters, including vintages, volume and SDGs that its voluntary carbon market assessments reflect.

Bids, offers and transactions will be normalized back to the new reference basis for the purposes of the assessment (see below).

Platts voluntary carbon market price assessments will continue to consider price information of all carbon credits from the five largest standards indicated in the Platts carbon methodology (GS, Verra, ACR, CAR, Architecture for REDD+) and from all geographies, but all credits will be normalized to the reference bases introduced.

Reference Bases

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 defines its references bases as follows:

Category

Reference bases from July 17

"Most competitive, most internationally fungible

Change form current specification

"Most competitive of internationally fungible" under current methodology
Platts Household Devices Gold Standard certified cookstoves credits sourced from Africa Platts has been reflecting VCS-certified cookstove credits from India. Platts has observed that the spread between VCS and GS cookstove credits has been volatile over the past months in a range of $0.50-$2.00/mtCO2e. Based on market engagement, Platts understand that the GS-VCS premium incorporates the premium of African projects versus India based projects.
Renewable Energy Gold Standard-certified wind and solar renewable energy credit from India and Turkey Platts has been reflecting VCS-certified wind and solar credits from India and Turkey. Platts has observed that the spread between VCS and GS wind and solar credits has been volatile over the past months in a range of $0.50-$1.50/mtCO2e.
Methane Collection Verra Carbon Standard-certified Turkish landfill gas credits Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
Industrial Pollutants American Carbon Registry/Climate Action Reserve-certified US industrial pollutants credits Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
Nature-Based Avoidance REDD+ credits with recognized performance and broad market acceptance Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
Natural Carbon Capture Afforestation and Reforestation Credits with suitable performance and broad market acceptance Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
Tech Carbon Capture Biochar credits Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
CEC Most competitive CORSIA eligible credits including CORSIA eligible standardized contracts Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.
CNC Most competitive nature-based credits including standardized contracts Platts understands that credits reflective of the stated reference base are in line with the historic values reflected in this assessment.

Platts daily rationale specifies the reference base for each price assessment, as well as the most competitive, most internationally fungible bid and offer meeting Platts specifications heard at the 1200 GMT market close including, when possible, the name of the underlying project.

Normalization

Platts continues to consider bids, offers and transactions for credits that differ from the reference base, but may normalize these to the value of the reference base for assessment purposes.

Normalization may be applied for factors such as technology, standard-certification, geography, and co-benefits that may impact the market value of a credit.

For example, for Platts Household Devices, if an offer was reported at $3.00/mtCO2e for VCS cookstove credits from Africa, and the observed spread between VCS and GS cookstove credits was $2.00/mtCO2e, then the offer would be normalized under the new methodology to $5.00/mtCO2e for assessment purposes.

Under the previous methodology, the $3.00/mtCO2e for VCS cookstove credits from Africa would have been normalized towards the most competitive reference basis which was VCS India cookstoves credits, therefore subtracting the African premium towards India.

If the cookstoves African premium towards India was reported at $1.00/mtCO2e, the $3.00/mtCO2e offer for VCS Africa credits would be normalized to $2.00/mtCO2e for VCS India credits.

Platts continues 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 will notify market participants about a planned change in the reference bases of its assessments with a subscriber note published before the change.

Symbols

The introduction of reference bases does not change the names and symbols of Platts voluntary carbon credits price assessments.

Platts intends to publish further differentials for its core carbon credit assessments and invites feedback on which differentials would be most relevant for market participants.

Please send any further feedback to platts_carbon@spglobal.com and pricegroup@spglobal.com.

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

Platts will consider all comments received and will make comments not marked as confidential available upon request.