Ratings, Quality, and Market Reality – With Calyx Global

The Market Is Growing Up: From Volume to Value

The voluntary carbon market (VCM) has spent much of its first two decades grappling with growing pains: fragmented rules, competing narratives, and a mismatch between stories sold and impact delivered. Now, 2025 data shows a new signal emerging: quality is being priced in.

Across the first half of this year, credit issuances fell 9% year-over-year (YoY) to 111 million, while retirements climbed to a record 85 million, a modest 3% YoY gain, but one that masks a deeper shift. Buyers are rewarding evidence over heuristics, and data now punishes the habits that pushed volume without verifying value.

Calyx Global, one of the most influential independent rating agencies in the VCM, has been at the center of this transformation. Their latest ratings paired with pricing data show a striking separation: by Q2 2025, Tier 1 credits commanded a premium of more than 60% over Tier 3, with the spread most visible in afforestation/reforestation (ARR) and landfill gas projects.

The implication is simple but profound: integrity now shapes price.

Ratings as Market Memory

Critics sometimes cast ratings agencies as villains, injecting risk into a fragile system. In reality, ratings reveal risk that already exists, they do not create it. In fact, they are giving the carbon market something it has never had before: memory.

Calyx Global’s framework is consistent across project types, from nature-based solutions to energy and waste. It is anchored in a single question: what does the atmosphere see, and does that match the claim made by the credit? That evidence-based lens is precisely what the market lacked when it relied on labels, anecdotes, and trust in registries.

On the buy side, appetite for ratings is clear. Corporate sustainability teams and investors care deeply about reputational risk, and comparative ratings help them distinguish quality. On the sell side, the picture is more mixed. Developers often want predictable rules: “tell me the requirements and I will comply.” The challenge is that standards evolve, and expectations shift, a natural part of a maturing market.

As Duncan van Bergen put it, the market has often been its own worst enemy, with credit types competing for legitimacy by disparaging others (“my ton is better than your ton”). Ratings, when applied rigorously, can cut through this noise and anchor decisions to evidence rather than marketing slogans.

The Orca Case: Lessons from Direct Air Capture

Calyx Global drew headlines earlier this year when it assigned its lowest tier rating to Orca, Climeworks’ flagship direct air capture (DAC) facility in Iceland. The reaction was loud, some saw the rating as an attack on technology. In truth, the analysis was about accounting, not ideology.

The rating focused on two issues: the time profile of removals and the embodied emissions in construction materials like steel and cement. In Orca’s early years, the atmosphere effectively saw a large source of emissions from building the plant, and only a small amount of carbon removal from operations. If a credit issued in year one claims a ton removed, the claim diverges from what the atmosphere actually experienced.

This is not a death knell for DAC. Calyx explicitly notes that ratings will improve over time as operations scale and construction emissions are amortized. Engineered removals will be essential by mid-century. The caution is against front-loading claims in a way that undermines trust.

To tackle this issue, Calyx and Meta recently co-authored a white paper on embodied emissions in engineered removals, offering a framework for more accurate accounting (https://bit.ly/4fD9Ove). The principle is straightforward: claims must reflect atmospheric reality. If we deviate, financing may flow, but credibility will collapse.

The Market’s Uneven Standards

The Orca debate also exposes another imbalance: the market has often been harsher on nature-based solutions than on engineered removals. Avoidance projects in forestry and land use have faced scrutiny and perceived reputational risk, even when delivering clear co-benefits, nature conservation, and near-term mitigation. Meanwhile, engineered technologies sometimes receive a “halo effect,” benefiting from association with innovation, even when their accounting is less robust.

Rene's framing and our overall viewpoint at Valitera is worth underscoring: portfolios need both. Avoidance delivers immediate mitigation, while removals build long-term balance. Neither should be judged by aesthetics, both should be judged by measurement.

Corporate Climate Action: Quieter but Deeper

Despite political headwinds, corporate climate action has not slowed. As of August 2025, nearly 11,000 companies have set science-based targets through the SBTi, covering more than 40% of global market capitalization. Net zero commitments have tripled in the past 18 months, with Asia, especially China, Thailand, Japan, and Korea, as the growth engine.

Donna Lee observed that companies are still “marching forward, maybe a little more quietly.” That quietness reflects a shift from press releases to operational integration.

One of the biggest shifts is the rise of insetting, projects within a company’s own supply chain or industry footprint. For a food and beverage company, improved forestry management that reduces supply chain risk is attractive not just for carbon, but for productivity and resilience. For an airline, investing in sustainable aviation fuel (SAF) feedstock infrastructure makes more financial sense than supporting cookstove projects.

Insetting ties decarbonization to CFO logic: lower input costs, operational resilience, and measurable productivity gains. But it must also maintain rigor. As Duncan cautioned, insetting should not fall into “wet finger methods” — internal methodologies need to be as robust as verified offset methodologies.

The lesson is balance. Insetting delivers financial and operational value, but must complement, not replace, external investments in ecosystem protection and removals.

Five-Year Outlook: Evidence Over Slogans

Looking forward, the data suggests three durable trends:

1. Quality premiums are here to stay. The 60% price spread between top- and bottom-rated credits will not converge quickly. Projects that demonstrate credible baselines, community safeguards, and consistent monitoring will command market share. Others will face falling prices and eventual obsolescence.
2. Category heuristics will fade. Nature vs. technology is not a quality filter, it is a portfolio choice. The right filter is evidence, whether the atmosphere sees what the claim asserts.
3. Governance will matter more than marketing. The projects and jurisdictions that build trust through transparent accounting and safeguards will attract the bulk of future finance.

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For buyers and investors, three practical implications follow:

• Stop buying categories, start buying evidence.
• Use ratings as a screen, then conduct project-level diligence.
• Build time-diversified portfolios that combine near-term avoidance with long-term removals.

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Closing Thoughts

Ratings are not the final word in the carbon market, but they are a critical part of its maturation. They create consistency, comparability, and memory, attributes every functioning market needs.

As Donna Lee emphasized, market maturity requires education, fewer internecine battles, and more focus on whether we are achieving more mitigation or less. If it is more, the path is right; the task is to keep improving.

At Valitera, we share that conviction. Carbon markets are at their best when they reward measurable outcomes, share risk fairly, and tie claims directly to atmospheric reality. That is the only foundation on which trust, capital, and climate impact can scale.

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