Glossary of Terms
Glossary of Terms
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AAU
Assigned Allocation Units or Assigned Amount Units – Allowances for carbon emissions allocated to developed countries under the Kyoto Protocol. AAUs can also refer to an organization’s allowance for carbon emissions. One tonne of CO2e is equal to one AAU. When entities expect their emissions to exceed their quota (their “allowances”); they can purchase credits directly from another party with excess allowances, from a broker, from a JI/CDM developer, or on an exchange.
Abatement
Reduction in the quantity or intensity of greenhouse gas emissions.
AB 32 (Assembly Bill 32), also known as the Global Warming Solutions Act of 2006
The California law that sets up the first enforceable state-wide program in the U.S. to cap all greenhouse gas emissions from major industries. The law requires that by 2020 the state’s greenhouse gas emissions be reduced to 1990 levels.
Accredited Independent Entity (AIE)
An entity accredited by the Joint Implementation Supervisory Committee, responsible for the determination of whether a project meets the relevant requirements of Article 6 of the Kyoto Protocol and the JI guidelines. Corresponds to DOE in the CDM context.
Accreditation Panel (CDM AP)
Entity that prepares the decision-making of the CDM Executive Board in accordance with the procedure for accrediting operational entities.
Adaptation fund
Fund established in January 2002 (COP7, Marrakech) to help developing countries meet the cost of adaptation to climate change.
Adaptation Levy
Levy to assist least developed countries (LDCs) through the Adaptation Fund to adapt to climate change. The levy, 2% of the certified emission reductions from the project, is imposed on all CDM projects except those implemented in LDCs.
Additionality principle
The principle that a project should only be able to earn credits if the GHG emission reductions produced by the project are additional to what would have happened in the absence of the carbon credit component.
Additionality tool
Guidelines elaborated by the CDM Executive Board to help assess whether a project is additional or not.
Afforestation and Reforestation (A/R) Projects
Afforestation and reforestation (A/R) projects involve the growing of forest on land that has not been forested for a period of at least 50 years (afforestation) or on non-forested land (reforestation) through planting, seeding and/or the promotion of natural seed sources.
Agriculture, Forestry and Other Land Use (AFOLU), see Land Use, Land Use Change and Forestry
Alliance of Small Islands States (AOSIS)
Coalition of some 43 low-lying and small island countries that are particularly vulnerable to sea-level rise. AOSIS countries were the first to propose a draft text during the Kyoto Protocol negotiations calling for cuts in carbon dioxide emissions of 20% from 1990 levels by 2005.
Allocation
Allocation is the number of allowances provided to an emitter by the regulatory body during a specific compliance period.
Allowance
One allowance represents the right to emit one tonne of CO2e. Emitters are allocated allowances by the regulating body and can emit an amount of CO2e that corresponds to the number of allowances received. Companies that keep their emissions below the level of their allowances are able to sell their excess allowances. Those facing difficulty in remaining within their emissions limit have a choice between reducing their emissions, buying the extra allowances they need at the market rate, or a combination of the two.
Annex I Parties
The industrialized countries that have also accepted emissions targets for the period 2008-12 as per Article 3 and Annex B of the Kyoto Protocol. They include the 24 original OECD members, the European Union, and 14 countries with economies in transition.
Annex II Parties
The wealthy countries listed in this annex to the Convention have a special obligation to help developing countries with financial and technological resources. They include the 24 original OECD members plus the European Union.
Banking
Emission reductions not used in one commitment period can be saved or ‘banked’ for future use in a subsequent compliance period.
Baseline and Baseline Scenario
The baseline describes the GHG emissions that would occur in the absence of a GHG reduction project (i.e. business as usual scenario).
Benchmarking
An allocation method in which allowances are distributed based on output (e.g. one allowance per MWh generated) or on intensity standards in the industry, based on best-performing companies.
Borrowing
A mechanism under a cap and trade system that allows entities to use allowances designated for a future compliance period to meet current compliance period requirements.
Bubble
Entity where two or more emission sources (for example, countries) are treated as if they were a single emission source. The European Union constitutes a bubble under the Kyoto Protocol.
Bundle
Bundling signifies the bringing together of several CDM project activities, to form a single project to reduce CDM-related transaction costs.
Business As Usual Scenario (BAU)
A business as usual scenario is a policy neutral reference case of future emissions, i.e. projections of future emission levels in the absence of changes in current policies, economics and technology.
Cap and Trade
A popular type of emissions trading scheme where emissions are subject to a cap. A regulatory body (e.g. government) sets the total amount of a pollutant that can be put into the environment by an entire industry or class of emitters. The government establishes emission allowances, which can be bought and sold among organizations in the industry. Participating organizations must accurately measure and report all emissions and then turn in the same number of allowances as emissions at the end of the compliance period.
Carbon Capture and Storage (CCS)
Process consisting of the separation of CO2 from industrial and energy-related sources, transport to a storage location and long-term isolation from the atmosphere. CO2 may be stored under ground in old oil and gas fields, non commercial coal fields and saline aquifers. It may also be injected into the ocean. Also known as carbon capture and geological storage (CCGS).
Carbon Credit Note
A fully underwritten obligation (in the form of a note or bond) to deliver a carbon credit (Certified Emission Reduction) to the purchaser at a specified future date.
Carbon Dioxide or CO2
A naturally occurring gas that is a by-product of burning fossil fuels and biomass, land use changes and other industrial processes. Carbon dioxide is the reference gas against which other greenhouse gases are measured.
Carbon Dioxide Equivalent (CO2e)
CO2e is an abbreviation of ‘carbon dioxide equivalent’ and is the internationally recognised measure of greenhouse emissions. CO2 is not a potent greenhouse gas compared to the others. However, because CO2 is produced in such huge quantities, its effect is much greater than all the other greenhouse gasses combined. Methane (CH4), for example is 21 has a global warming potential of 21 (is 21 times more potent than CO2). Thus 1 tonne of CH4 equals 21 tonnes CO2e. GHG emissions are measured in tonnes CO2e.
Carbon Emission Factor (CEF)
Amount of CO2 released per unit of energy produced.
Carbon leakage
Carbon leakage occurs when production of goods is moved to countries with less strict climate policy (e.g. India and China) than the original country (e.g. EU).
Carbon (Neutral) Neutrality
The practice of purchasing and retiring emission credits or allowances corresponding to the amount of GHG emissions from an activity, company or country. An entity can become “carbon neutral” by reducing its GHG emissions and acquiring offsets or allowances for any remaining balance in its GHG Inventory or “footprint”.
Carbon Offset, (Offsets)
An emissions reduction achieved by undertaking a GHG reduction project.
Carbon Pollution Reduction Scheme (CPRS)
Name of the planned federal emissions trading scheme in Australia. Scheduled to start on 1 July 2010.
Carbon Sequestration
The process of removing additional carbon from the atmosphere and depositing it in other “reservoirs,” principally through changes in land use. In practical terms, carbon sequestration occurs mostly through the expansion of forests.
Carbon Sink
Natural or human-made systems that absorb carbon dioxide from the atmosphere and store them. Forests are the most common form of sink, in addition to soils, peat, permafrost, ocean water and carbonate deposits in the deep ocean.
Carbon Trading, see Emission Trading.
Certified Emission Reduction (CER)
Emission reductions created by registered CDM projects; One (1) CER corresponds to one (1) tonne of CO2e emission reductions.
Clean Development Mechanism (CDM)
The provision of the Kyoto Protocol that governs project-level emissions reduction transactions between developed and developing countries. Developed countries may finance GHG emissions reduction projects in developing countries, and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions.
Climate Change
A change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere in addition to natural climate variability over comparable time periods.
Cogeneration
The production of electricity using waste heat (as in steam) from an industrial process or the use of steam from electric power generation as a source of heat
Compliance Market
The regulated market for emission reductions purchased by organizations with Kyoto targets.
Conference of Parties (COP)
The supreme body of the UNFCCC. It currently meets once a year to review the Convention’s progress.
Credit
An emission reduction in excess of the required amount. Although credits are named differently by mechanism (CER for CDM projects; ERU for JI projects, etc.), they can be sold to enable emissions trading.
Designated National Authority (DNA)
The official body representing the government of the host country for CDM/JI projects. For JI host countries, the national authority approves the projects and issues the emission reduction units (ERUs). For CDM host countries, the designated national authority issues a non-objection letter necessary for the project approval, if it agrees that a project is in line with its sustainable development objectives. The DNA also issues the Letter of Approval (LoA) needed for the registration of a CDM project. A project will need both a host country approval as well as investor country approval.
Designated Operational Entity (DOE), [Known as an Accredited Independent Entity (AIE) for CDM JI projects.]
A domestic legal entity or an international organization accredited and designated by the CDM EB. The DOE validates and requests registration of a proposed CDM projects activity as well as verifies emission reductions of a registered CDM project activity.
Developed Countries
Industrialised countries per Annex I, Annex B of the Kyoto Protocol.
Developing Countries
Countries (non-Annex I) in the process of industrialization with constrained resources to address their economic and environmental problems.
Emission Cap
A regulatory ceiling on emissions that can be released within a certain timeframe.
Emission Reductions
A general term relating to “Units” ascribed to the reduction of greenhouse gas (GHG) related emissions.
ERPA – Emission Reduction Purchase Agreement
Emission Reduction Unit (ERU)
An emission reduction resulting from a Joint Implementation (JI) project under the Kyoto Protocol. 1 ERU corresponds to 1 tonne of CO2e emission reductions.
Emission Targets
Emission limits imposed on emitters by a regulatory body.
Emissions Trading
Mechanism through which parties with emissions commitments may trade units of their emissions allowances with other parties. The aim is to improve the overall flexibility and economic efficiency of reducing emissions. Parties with excess emission reductions can sell them to parties who find it less expensive to purchase emission reductions from the market than to reduce emissions at their facility.
European Union Emissions Trading Scheme (EU ETS)
A market-based “cap and trade” system for GHG adopted by the European Union member states in January 2005 in advance of their obligations under the Kyoto Protocol.
European Union Allowance (EUA)
Allowance unit issued to installations covered by the EU ETS.
Flexibility Mechanisms
The Kyoto Protocol (and the EU ETS through a linking directive) has provisions that allow for flexibility in choosing amongst emission reductions:
- Clean Development Mechanism (CDM) – Developed nations with reduction commitments investing in emission reduction projects in developing nations.
- Emission Trading – Trading of allowances.
- Joint Implementation (JI) – Developed nations investing in emission reduction projects in other developing nations.
Forward Contract
Purchase or sale of a emission reductions at the current price, with delivery and payment scheduled for a specified future date.
Fossil Fuels
Carbon-based fuels that include coal, petroleum, natural gas and oil.
Global Warming
The continuous gradual rise of the earth’s surface temperature thought to be caused by the greenhouse effect and responsible for changes in global climate patterns (see also Climate Change).
Global Warming Potential (GWP)
A factor describing the degree of harm to the atmosphere of one unit of a given GHG relative to one unit of CO2. As evidenced by the GWPs below, reducing 1 tonne of CH4 has the same positive effect on the environment as reducing 21 tonnes of CO2. Although SF6, HFCs and PFCs are more powerful GHGs, they are less prevalent.
- Carbon dioxide (CO2) GWP = 1
- Methane (CH4) GWP = 21
- Nitrous Oxide (N2O) GWP = 310
- Sulphur hexafluoride (SF6) GWP = 23,900
- HFCs and PFCs GWPs vary depending on makeup
Greenhouse Effect
A natural layer of heat-trapping gases including water vapor, carbon dioxide (CO2) and methane (CH4) surrounds the earth and produces a greenhouse effect. These gases keep the earth warm enough to support life. Burning large amounts of fossil fuels is dramatically increasing the concentration of these gases. Like the glass in a greenhouse, these gases collect in the atmosphere and prevent the earth’s excess heat from escaping. As the gases thicken, the earth’s temperature increases.
Greenhouse Gas Emission Reduction
A reduction in emissions of greenhouse gases in an effort to combat global warming and climate change. Greenhouse gas reductions are measured in tonnes of carbon dioxide equivalent (CO2e).
Greenhouse Gases (GHGs)
GHGs are the six gases listed in the Kyoto Protocol: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydroflurocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6).
Host Country
The country where an emissions reduction project is physically located.
Hot Air
A concern that some governments will have excess emission reductions with no effort because their economies have greatly decreased since the 1990 baseline year under the Kyoto Protocol. In theory they could then flood the market for emissions credits, reducing the incentive for other countries to cut their own domestic emissions.
Intergovernmental Panel on Climate Change (IPCC)
International body of climate change scientists. The role of the IPCC is to assess the scientific, technical and socio-economic information relevant to the understanding of the risk of human-induced climate change (www.ipcc.ch).
International Emissions Trading (IET)
International emissions trading, one of the three flexible mechanisms under the Kyoto Protocol, allows for transfer of AAUs across international borders or emission allowances between companies covered by a cap-and-trade scheme. See emissions trading.
International Organization for Standardization (ISO)
The world’s largest developer and publisher of International Standards. The ISO is composed of a network of the national standards institutes of 157 countries, with a Central Secretariat in Geneva, Switzerland. In March 2006, ISO launched the ISO 14064:2006 standards for GHG accounting and verification.
International Transaction Log (ITL)
The means by which carbon allowances and credits generated under the mechanisms of the Kyoto Protocol (AAUs, CERs and ERUs) are traded between countries.
Joint Implementation (JI)
A mechanism under the Kyoto Protocol through which a developed country can receive “emissions reduction units” when it helps to finance projects that reduce net greenhouse-gas emissions in another developed country. The JI generally applies to transitional economies mainly covering the former Soviet Union and Eastern Europe.
Kyoto Protocol
The Kyoto Protocol is an amendment to the United Nations Framework Convention on Climate Change. It is an international agreement, negotiated on December 11, 1997 in Kyoto, Japan. It is the agreement under which participating industrialized countries have committed to reduce GHG emissions. The protocol requires countries listed in its Annex B (developed nations) to meet reduction targets of GHG emissions to an average of 5.2% below their 1990 levels during the period 2008-12.
L
LULUCF – Land use, land use change and forestry.
The term given to tree-planting projects, reforestation and other agricultural activities designed to remove carbon from the atmosphere.
Marginal Abatement Cost (MAC)
The cost of reducing emissions by one additional unit. Aggregated marginal costs over a number of projects or activities define the marginal abatement cost curve.
Methane (CH4)
Greenhouse gas with a Global Warming Potential of 21. The primary sources of methane are landfills, coal mines, paddy fields, natural gas systems and livestock.
Midwestern Greenhouse Gas Reduction Accord (MGA)
A regional agreement by governors of the states in the US Midwest and one Canadian province to establish a multi-sector cap and trade program to reduce greenhouse gas emissions.
Members: Illinois, Iowa, Kansas, Manitoba, Michigan, Minnesota, and Wisconsin.
Observers: Indiana, Ohio, and South Dakota.
National Allocation Plan (NAP)
Plan from a Member State for how to distribute EU allowances across installations taking part in the EU ETS in that given country.
NERC E-Tags
A NERC Tag, also commonly referred to as an E-Tag, represents a transaction on the North American bulk electricity market scheduled to flow within, between or across electric utility company territories. Elements of a NERC Tag included control areas, transmission providers, purchasing/selling entities, transmission points of receipt, and points of delivery, as well as product codes for several transmission and generation priorities
New Entrant Reserve
In the EU ETS, this is the amount of allowances the countries have set aside for new installations (“new entrants”) or expansions at existing installations.
New South Wales Greenhouse Gas Abatement Scheme (NSW GGAS)
Emissions trading scheme in the Australian state of New South Wales. Operational since 1 Jan, 2003, NSW GGAS operates on a benchmarkbaseline-and-credit principle. The NSW GGAS establishes annual GHG reduction targets, and requires individual electricity retailers and other parties who buy or sell electricity in NSW to meet mandatory benchmarks based on the size of their share of the electricity market, or buy domestic offset credits for overshooting emissions.
Nitrous Oxide (N2O)
Greenhouse gas with a Global Warming Potential of 310. Results from the burning fossil fuels and the manufacture of fertiliser.
OECD
Organisation for Economic Co-operation and Development which includes the following countries: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Korea, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
Offset
An emissions reduction achieved by undertaking a GHG reduction project.
Operational Entity (OE)
Approved by the CDM Executive Board, an OE is an entity that validates and subsequently requests registration of a proposed CDM project activity which will be considered valid after 8 weeks if no request for review was made. An OE also verifies emission reductions of a registered CDM project, certifies as appropriate and requests the Board to issue Certified Emission Reductions (CERs) accordingly.
Process Change
Is an improvement of the emissions associated directly with a manufacturing process. For example, changing an animal waste management system from an open lagoon to an anaerobic digester is a process change that results in fewer greenhouse gas emissions.
Project Design Document (PDD)
The official application drawn up by an entity applying for a (emissions reduction) project approval under the Clean Development Mechanism (CDM).
Reduced emissions from deforestation and degradation (REDD)
Reducing emissions from deforestation and [land] degradation. Mitigation action that seeks to preserve existing carbon stocks in forests (typically tropical rainforests), peat lands etc. The approach would be additional to project-based efforts such as the CDM. Issues to be solved are permanence, leakage, monitoring and baselines.
Regional Greenhouse Gas Initiative (RGGI)
A regional cap and trade system that currently includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. In addition, the District of Columbia, Pennsylvania, the Eastern Canadian Provinces, and New Brunswick are observers in the process. The scheme covers CO2 emissions from power plants in the region, and requires a 10 percent reduction in these emissions by 2018. The first three-year compliance period started on 1 January 2009.
Registration
Registration is the formal acceptance by the Executive Board of a validated project activity as a project activity. Registration is the prerequisite for the verification, certification and issuance of credits related to that project activity.
Registry
A system, including electronic databases, that track and record all transactions under a greenhouse-gas emissions trading system. Other registries include those for recording and verifying GHG inventories.
Removal Units (RMUs)
A unit relating to land use, land use change and forestry activities and is equal to one metric tonne of CO2 equivalent. RMUs cannot be banked for use in any subsequent commitment period, but can be converted into Assigned Amount Units (AAUs) within a national registry.
Revegetation
A direct human-induced activity to increase carbon stocks on sites through the establishment of vegetation that covers a minimum area of 0.05 hectares and does not meet the definitions of afforestation and reforestation.
Secondary Transaction
A transaction where the seller is not the original owner (or issuer) of the carbon asset. A commonly used acronym for secondary CERs is “sCER.”
Secondary Market
The secondary market signifies the second transaction or trading of Certified Emissions Reductions (CERs) related to CDM projects or Emission Reduction Units (ERUs) from JI projects.
Sinks
The removal of greenhouse gases (GHGs) from the atmosphere through land management and forestry activities that may be subtracted from a country’s allowable level of emissions.
Source
Any process or activity, which releases GHGs into the atmosphere.
Sulfur Hexafloride or SF6
One of six GHGs curbed under the Kyoto Protocol. It is mostly used in the heavy industry to insulate high-voltage equipment and assist in the manufacturing of cable-cooling systems.
Sustainable Development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
T
Tonne
A unit of measurement for weight; also referred to as a metric ton equaling 1000 kilograms.
tCO2e – Tonnes of carbon dioxide equivalent
The measurement unit for carbon dioxide equivalent calculations. MtCO2e refers to millions of tonnes of CO2 equivalent.
United Nations Framework Convention on Climate Change (UNFCCC)
An international environmental treaty produced at the United Nations Conference on Environment and Development (Earth Summit) held in Rio de Janeiro in 1992. The goal of the treaty is to reduce GHG emissions that contribute to global warming and climate change.
Validation
Independent evaluation of an emission reduction project.
Verified Emission Reduction (VERs)
Emission reductions created by projects which have been verified outside of the Kyoto Protocol – including credits from pre-registration CDM projects and voluntary projects; one (1) VER corresponds to one (1) tonne of CO2e emission reductions.
VERPA – Verified Emission Reduction Purchase Agreement.
Verification
An objective and independent assessment of whether the reported GHG emissions reductions are actually occurred.
Voluntary Market
Market for emission reductions purchased by organizations wishing to offset their carbon footprint on a voluntary basis.
Voluntary Carbon Standard (VCS)
A standard originally developed by the International Emissions Trading Association (IETA), The Climate Group and the World Business Council for Sustainable Development (WBCSD) – associated with voluntary emission reduction (offset) programs.
Western Climate Initiative (WCI)
Regional initiative launched in February 2007 by states and provinces along the western rim of the United States, Canada, and Mexico. The initiative, which is based on the combined goals of the participants’ individual states, looks to develop a mulit-sector cap-and-trade system covering 90 percent of the emissions from the partner jurisdictions. The proposed target is to reduce greenhouse gas emissions by 15 percent below 2005 levels by 2020.
Members: Arizona, British Columbia, California, Manitoba, Montana, New Mexico, Ontario, Oregon, Quebec, Utah, Washington…
Observers: Alaska, Colorado, Idaho, Kansas, Nevada, Wyoming, Saskatchewan, and the Mexican states of Baja California, Chihuahua, Coahuila, Nuevo Leon, Sonora and Tamaulipas.
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