The carbon offset market is booming, as more companies buy up offsets to compensate for their carbon emissions. From 2020 to 2021, it quadrupled in market value to $2bn.
As demand increases, there’s a burgeoning sector of tech startups setting up shop to rate the quality of carbon offsets. One of those is British company BeZero Carbon, which has today raised a $50m Series B round.
The raise is one of the largest for a European carbon offset ratings company, and brings BeZero’s total funding to $70m. Investors in the round include:
- US investment firm Quantum Energy Partners
- EDF Pulse Ventures, the VC arm of EDF
- Hitachi Ventures
- Intercontinental Exchange
- Molten Ventures
- Illuminate Financial
- Contrarian Ventures
What is the carbon market?
BeZero works with offsets on the voluntary carbon market — which is where companies and individuals buy offsets, as opposed to the compliance markets, which are at state level.
Offsets are equivalent to one metric tonne of CO2 removed from the atmosphere. There are different types — things like sequestering carbon using nature-based techniques, or tech-enabled removals like direct air capture.
Not all offsets are created equal. Finnish carbon offsetting company Compensate reported that 91% of offsets it analysed failed to match up to the claims they were making.
There are often issues around the permanence of sequestration, unreliable baselines or offsets which aren't additional in any way — including one that pledged to protect forests that were already protected.
What does BeZero do?
Rating agencies like BeZero assess the quality of offsets. It has a team of climate scientists, Earth observation specialists and data scientists which assess each project that offers offsets.
The ratings are free for anyone to access on BeZero’s website. Paying clients can see fuller project assessments and risk tools. Marketplaces and exchanges, where offsets are bought and sold, can plug in an API of BeZero’s ratings.
“The more information available to interrogate a credit’s carbon efficacy, the more confidence investors and end-buyers can have that it's achieving its climate claim,” BeZero says.
There's strong investor appetite for any tools involved in the brokerage of offsets. The price of offsets is surging — currently standing at an average of $3 to $5 per metric tonne, but forecast to rise tenfold by 2030.
As more and more offsets are traded at higher prices, there’s money to be made in brokering the sales — and in any tech that can be applied to the transaction.
Who’s the competition?
One of Europe’s other largest ratings agencies is Sylvera, based in London, which raised $32m in January this year. Compensate, based in Helsinki, is currently bootstrapped.
Aside from ratings companies, there are platforms like Supercritical, also based in the UK, which sells offsets it deems to be of high quality.
What’s next for BeZero?
BeZero is working with marketplaces like Cloverly and Patch, as well as energy and commodity companies like Glencore and Equinor — though the use of offsets by petroleum companies remains controversial.
BeZero is working on a partnership with the Intercontinental Exchange, which operates financial exchanges and clearing houses, to launch standardised exchange traded products.
The company says it’ll also use the funds to expand further into Asia and continental Europe.