Carbon Glossary

Make sure to also see our helpful list of carbon acronyms.

Abatement: Reduction in the quantity and/or intensity of greenhouse gas emissions.

Acid Rain Initiative: A nationwide cap-and-trade program that aims to reduce emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx), air pollutants that cause acid rain.

Adaptation Levy: A program aimed to assist Least Developed Countries (LDCs) to adapt to climate change. A levy of 2% of the certificates from each project is imposed on all CDM projects except those implemented in LDCs.

Additionality: Additional emissions reductions are those which occur only because of the altered set of incentives created by GHG markets.  In other words, countries and/or firms must make an active contribution to emission reduction in order to earn or sell credits instead of relying on pre-existing projects planned for other reasons.

Afforestation: The process of establishing and growing forests on bare or cultivated land which has not recently been forested. Forestry contributes to the reduction of carbon emissions and has other ancillary environmental benefits.  See also: LULUCF.

Alliance of Small Island States (AOSIS): A group of 35 small island and low-lying coastal developing countries that are particularly at risk from the effects of climate change (such as sea level rise, coral bleaching and the increased frequency and intensity of tropical storms.)  AOSIS functions as a lobbying group or negotiating coalition to the United Nations to ensure that these voices are heard from and these concerns dealt with.

Allocation: The division of emissions permits or allowances among greenhouse gas emitters to establish an emission trading market. Allocation can be done through grandfathering and/or permit auctioning.

Allotment Trading Units (ATU): An ATU is a tradable unit issued by the Illinois Environmental Protection Agency under the Illinois ERMs program. An ATU is a limited authorization to emit 200 pounds of volatile organic material emissions during the seasonal allotment period.

Allowance-based transactions: One of two main categories of carbon transactions (the other is project-based).  Under cap-and-trade schemes, regulators issue emissions allowances, which may then be purchased by buyers.  Examples include AAUs under the Kyoto Protocol or EUAs in the EU ETS.

Annex I/B: The official grouping for the nations that are subject to caps on their emissions of greenhouse gases and committed to reduction targets under international treaties on climate change. Annex I refers to the 36 countries mandated to reduce emissions by the UNFCCC while the Annex B is a modified list of 39 countries governed by the more recent Kyoto Protocol. Annex B countries have their reduction targets formally stated.  Belarus and Turkey are listed in Annex I but not Annex B, while Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not Annex I.  However, the classifications Annex 1 and Annex B are generally used interchangeably.  Annex 1/B countries are among the most developed nations with modern economies.

Annex II: Annex II is a subset of Annex 1/B.  Annex II countries are signatory nations to the UNFCCC which are also members of the OECD - the Organization for Economic Cooperation and Development – the most highly industrialized economies. These countries have further obligations to help developing nations combat climate change via technological support and financial assistance in addition to their Kyoto responsibilities.

Anthropogenic: Made or caused by human activity.  This term is often used in the context of discussions of climate change to differentiate global warming attributable to human activities such as emissions from naturally occurring climate change and shifts in global temperature.

Asia-Pacific Partnership on Clean Development and Climate (APP, AP6): An international climate change agreement that some see as a rival to the Kyoto Protocol. It was initiated in 2005 by the United States and Australia, at that time the only two industrialized nations that had not ratified the Kyoto Protocol (though Australia ratified it in 2007). The group also includes China, India, Japan, and South Korea, and now a seventh partner, Canada, who collectively account for around 50% of world GHG emissions.  It aims to encourage business to invest in clean fossil-fuel technology and renewable energy through eight public-private sector task forces covering aluminum, buildings and appliances, cement, cleaner use of fossil energy, coal mining, power generation and transmission, renewable energy and distributed generation, and steel.  The APP rejects Kyoto’s mandated emissions caps in favor of allowing member countries to set their own emissions targets, an approach that has been criticized by many outside groups.

A/R: Afforestation and reforestation.

Assigned Amount (AA) and Assigned Amount Unit (AAU): The quantity of greenhouse gases that an Annex I/B country is permitted to release in accordance with the Kyoto Protocol during the first commitment period (2008-12) is called an assigned amount. An assigned amount unit is an internationally tradable unit equaling one metric ton of greenhouse gas (tCO2e).  AAUs are allocated to developed countries up to their Kyoto target.  A country’s AA is expressed in AAUs.

Auctioning: A method of emissions permits allocation in a cap-and-trade system.  Permits are allocated to emitters on the basis of an auction system, in which the highest bidder receives the permits.  Auctioning speeds up the process of allowing the market to determine the cost of carbon.  It may also avoid some of the problems associated with other emissions permit allocation schemes, such as rent-seeking or undue special interests influence.  See also grandfathering.

Backwardation: A futures market condition in which a commodity price is lower in the distant delivery months than the spot price (the price quoted for immediate payment and delivery). The opposite of contango.

Banking or carry over: A feature of some cap-and-trade programs according to which a country may “bank” or hold onto some emission allowances or credits to use them in subsequent commitment periods.  

Base Year: The base year is a date, in month and year format, whose greenhouse gas emissions data is used as a reference to set an emissions reduction goal. For example, a company might try to reduce its emissions to 50% of January 2006 levels by January 2010.

Baseline: The forecasted emission of greenhouse gases that would occur without the contemplated policy intervention or project activity.  The utility of a particular policy is often discussed in terms of how far it improves on the baseline.  See also: BAU, additionality.

Baseline-and-credit system: Projects that are implemented outside of a cap-and-trade system, with more credits being generated with each new project.

Bilateral Transaction: A trade made on a direct one-on-one basis that does not include an intermediary such as an exchange.

Biodiesel: A non-petroleum-based diesel fuel derived from biological sources (such as vegetable oils), which can be used in unmodified diesel-engines.

Bio-ethanol: Ethanol (C2H5OH), also known as ethyl alcohol, is an alcohol derived from common crops such as sugar cane or maize.  It is often touted as an alternative to gasoline.

Biomass (fuel, energy): Combustible fuel composed of organic waste matter – i.e., recently dead biological material (as opposed to fossil fuel).  It is often made from plants, wood or wood by-products, rice husks, or bagasse.  Biomass generation refers to the use of biomass fuel for power generation.

Bubble: A bubble is a regulatory concept whereby two or more emission sources are treated as if they were a single emission source. This creates flexibility to apply pollution control technologies to whichever source under the bubble has the most cost effective pollution control options, while ensuring the total amount of emissions under the bubble meets the environmental requirements for the entity. Bubbles are closed systems. Article 4 of the Kyoto Protocol allows a bubble to be formed between Annex B countries, for example the European Union nations.

Bundling: Bundled offsets refers to a collection of offsets from several projects (much like a mutual fund) sold instead of emissions reductions from a single project.  If bundling encompasses only high quality emissions reductions, it can insure against risk and decrease transaction costs.  However, low quality emissions reductions mixed into a bundled portfolio can raise issues related to transparency, additionality, and double counting.

Business As Usual Scenario (BAU): The estimated future emissions of a company or country in the absence of policy changes given present emissions and rates of growth.  Climate scientists’ projections show BAU to be unsustainable, as a critical mass of GHGs – above 450 ppm – will likely be reached by 2050.

California Air Resources Board (CARB): A regulatory board created under AB 32 to create, monitor, and enforce emissions reduction standards and market-based mechanisms.

California Assembly Bill 32 (AB 32): The Global Warming Solutions Act.  A California bill establishing a cap-and-trade program to begin January 1, 2012.  This bill, the first U.S. statewide program to cap all GHG emissions from major industries, helped to cement California’s status as the U.S. leader on environmental regulation.

California Climate Action Registry (CCAR): A voluntary greenhouse gas registry that provides GHG reporting standards and emissions reduction verification across different sectors of industry.  Members report their GHG emissions and their reduction work.  In return, the state ensures that members are credited for early action under current and future legislation. The CCAR is a private non-profit organization, though it was originally formed by the State of California in 2001 after a group of CEOs interested in sustainable investment requested that the state create an agency to record emissions reduction histories in order to have verifiable accounts of their behavior in the event of regulation of industry.

Cap-and-trade: A type of regulatory regime that combines governmental power and market mechanisms to reduce emissions. Policymakers determine a “cap,” the maximum amount of permissible emissions, and issue permits allowing a country or firm to emit up to that cap.  The cap is set lower than the status quo and decreases over time.  A market, the “trade” side of cap-and-trade, allows emitters above their quota to purchase carbon credits or permits from those who have successfully reduced their GHG emissions.  Emitters must either pay for permits or find ways to internally reduce emissions – ideally, it will incentivize innovative means of reducing emissions as the cost of carbon rises. This scheme adds the previously hidden price of carbon to the costs of doing business, forcing emitters to rethink their business models.

Carbon Asset: The financial potential of the greenhouse gas emission reductions that a project is able to generate.  In both the voluntary and compliance markets, emissions reductions that are additional can be sold to buyers looking to decrease their carbon footprint.

Carbon calculator: Applications that determine an individual or business’ carbon footprint based on inputs such as energy usage, transportation, and number of people employed or in a household.

Carbon capture and storage (CCS): A procedure that prevents carbon dioxide from being released into the atmosphere through storage of carbon dioxide in a safe manner for a specified period of time.

Carbon Credit: A way of assigning value to emissions reduction that is central to the economics of carbon trading.  Carbon credits represent emissions reductions and may be emissions allowances or offsets.  It is also possible for individuals and companies to purchase carbon offset credits in voluntary markets.

Carbon Dioxide Equivalent (CO2e): The universal unit of measurement used to indicate the global warming potential of each of the six greenhouse gases. Carbon dioxide is a naturally occurring gas that is a byproduct of burning fossil fuels and biomass, land-use changes, and other industrial processes.  CO2 is used as the reference gas against which the other greenhouse gases are measured since it has the smallest GWP

Carbon Disclosure Project (CDP): A group launched in 2003 by a global group of investors to pressure businesses to report on their carbon footprint and carbon reductions programs. The CDP sends out a survey to the world’s largest companies and then publishes their responses and those who failed to respond on its website.  

Carbon Finance: Investments in projects generating or expected to generate greenhouse gas emission reductions in the form of the purchase of carbon credits or financial instruments representing these reductions.

Carbon Financial Instrument (CFI): Parcels of emission permits traded on the European Climate Exchange and the Chicago Climate Exchange as futures contracts. Each CFI consists of 100 permits (mandatory EUAs in Europe and voluntary allowances and offsets on the Chicago market) for the emission of 100 tons of CO2e.

Carbon Finance Unit (CFU): A unit of the World Bank. The CFU purchases project-based emission reductions in developing or EIT countries with funds from OECD governments and companies in developed countries. These emission reductions are purchased within the framework of the Clean Development Mechanism or Joint Implementation through one of the CFU's carbon funds on behalf of the contributor.

Carbon Footprint: A commonly used term for the amount of carbon or CO2 equivalent an individual, firm, or country is responsible for based on their energy usage.  The concept of the carbon footprint is meant to illustrate the impact each of us has on the environment, to help conceptualize our own contribution to the problem of climate change.  The carbon footprint measures the emissions produced by a range of human activities including the use of power, transportation, food, and other consumption and adds them up to give one comparable statistic in terms of carbon dioxide equivalent.

Carbon Inventory: A thorough, verified archive of historical emissions data often undertaken by an organization or government looking to reduce its emissions.

Carbon Market: The network of firms, individuals, and regulatory bodies whose actions determine the price of carbon.

Carbon neutral: A popular term (the New Oxford American Dictionary’s Word of the Year for 2006) for an individual, family or organization that has zero net greenhouse gases emissions.  Carbon neutrality is achieved by a combination of internal abatement and clean energy use in order to reduce carbon footprint alongside offsetting emissions elsewhere.

Carbon Offsets: Carbon offsets are financial instruments that represent reductions in greenhouse gas emissions meant to balance high-emissions activities elsewhere.  Offsets reduce carbon either through the funding of projects in fields such as renewable energy, energy efficiency, or safe destruction of pollutants or carbon sequestration techniques.  Offsets are purchased in order to mitigate the carbon footprint generated by an individual through activities such as transportation or energy use or by firms compensating for their own emissions.  Offsets may be purchased in a compliance market through a mechanism such as CDM, according to which companies may use certain offsets to balance emissions over a regulatory cap.  They are more commonly associated with the voluntary markets, in which participants purchase offsets out of concern for their own harmful impact or for public relations reasons.

Carbon positive: An individual, family or organisation whose net emissions are negative due to activities that take more greenhouse gases out of the atmosphere than they emit.  Carbon positivity, a step beyond carbon neutrality, is accomplished by minimizing internal emissions and offsetting above and beyond remaining emissions.

Carbon price: The economic cost of emitting greenhouse gases.  An emissions trading scheme or a carbon tax forces emitters to add the cost of carbon into their decision-making, adding the carbon price or the economic value placed on carbon emissions.

Carbon Project: A business project that is undertaken in order to reduce emissions.  Examples include conversions to renewable energy or energy efficiency upgrades.  Carbon projects must be additional in order to be validated and become monetized.  Carbon projects help funding to be directed towards environmentally beneficial and sustainable development.  The Kyoto Protocol’s Clean Development Mechanism is the essential example of the use of carbon projects in an emissions reduction scheme.

Carbon Reduction: A quantifiable decrease in the amount of greenhouse gases emitted measured in CO2 equivalent.  Examples of carbon reductions include alternative energy projects such as solar or wind power, sequestration, reforestation, and energy efficiency improvements.  Carbon reductions are monetized in the carbon market through several mechanisms in order to incentivize environmental stewardship.

Carbon Registry: see registry.

Carbon Sinks: Natural features that absorb or sequester greenhouse gases from the atmosphere. Forests are the most common form of sink, though soils, peat, permafrost, sediments, freshwater, ocean water and carbonate deposits in the deep ocean also absorb carbon.  Carbon sinks absorb many of the naturally occurring greenhouse gases; however, the vastly increased rate of emissions resulting from human activities outpaces the natural capacity to remove carbon from the atmosphere.  LULUCF activities such as land management and forestry that utilize sinks to remove GHGs may be commodified.

Carbon tariff: A duty that may be levied on imported carbon-intensive goods by countries with emissions caps. A carbon tariff attempts to protect local industries whose goods have higher prices because they price in the cost of carbon.

Carbon tax: A direct tax on greenhouse gas emissions (as opposed to cap-and-trade).  A carbon tax sets a fixed price on emissions and allows emitters to emit however much they choose to at that price, while cap-and-trade fixes a set amount of emissions at a varying, market-determined price.

Carbon trading or emissions trading: An approach to pollution reduction that operates by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade.  A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.

Carry over: see banking.

Certification: Project-based emissions reductions need to be certified by independent third parties through a verification process. Certification requires a written document that demonstrates that the project activity has been responsible for a specific reduction of greenhouse gases during a specified period of time.  Certified emission reductions then become a tradable commodity.

Certified Emission Reductions (CERs): See Clean Development Mechanism.

Chicago Climate Exchange (CCX): The CCX is a membership-based carbon trading system whose members voluntarily agree to reduce emissions to 6% below a baseline period of 1998-2001 by 2010. Although voluntary, this agreement is legally binding.  The CCX’s members include multinational corporations, educational institutions, and municipalities.

Chlorofluorocarbons (CFCs): Compounds in the haloalkane family composed of carbon, chlorine, and fluorine.  They are commonly used as refrigerants and are now known to be among the most harmful greenhouse gases.  See GHG.

Clean Air Act:

Clean Development Mechanism (CDM): One of the mechanisms for emissions reduction provided by Article 12 of the Kyoto Protocol.  Like Joint Implementation, CDM is a project-based transaction system allowing developed countries to acquire carbon credits. A CDM project is defined as an Annex I country investing in a carbon project in a Non-Annex I country, in contrast to a JI project, in which one Annex I country contributes to a carbon project in another Annex I country.  The CDM encourages industrialized countries to finance carbon projects for reducing greenhouse gas emissions in developing countries by giving them credits in exchange for assistance. The carbon offsets given through the CDM are called Certified Emission Reductions (CERs.)  Project-based programs encourage sustainable development in the developing world and cooperation and assistance from Annex 1/B countries.

Clean Development Mechanism Executive Board (CDM EB): The CDM EB registers methodologies, third party verifiers, validates project activities as CDM projects, issues certified emission reductions to project participants, and tracks credits in the International Transaction Log (ITL).  It is accountable to the Conference of the Parties to the Kyoto Protocol.

CDM Methodologies Panel: This group develops recommendations for the CDM Executive Board on guidelines for baselines and monitoring plan methodologies and prepares recommendations on submitted proposals for new methodologies.

CDM Registry: A registry able to issue CERs for registered CDM project activities.

Clear Skies Act: Legislation that would create a mandatory federal program with enforced emissions limits (or caps) for three pollutants, SO2, NOx, and mercury, for the period 2008-2018. Clear Skies' NOx and SO2 requirements affect all fossil fuel-fired electric generators greater than 25 megawatts (MW) that sell electricity.  It has been opposed by environmental groups for reducing air pollution controls.

Climate Change Levy (CCL): A UK tax on energy use in industry, commerce, and the public sector that supports energy efficiency and renewable energy.

Climate, Community and Biodiversity Alliance (CCBA): The CCBA "is a partnership between leading companies, NGOs and research institutes" concerned with land management and usage patterns.  It aims to improve global land management techniques in order to curb climate change, build sustainable development, and protect biodiversity.

Climate Leaders: A U.S. Environmental Protection Agency program.  Climate Leaders is a voluntary industry-government partnership climate change strategy.  Companies set emissions reduction targets, inventory their emissions, and report their progress to the EPA.  The EPA recognizes these companies as corporate environmental leaders and documents their greenhouse gas reductions.

Climate Security Act (CSA): A bi-partisan compromise bill drafted by Sens. Lieberman (I-CT) and Warner (R-VA) to support significant emissions reductions in the US.  Emissions would be reduced to 63% below 2005 levels by 2050.  The bill, S 2191, would establish a cap-and-trade system under which credits would be primarily allocated by grandfathering, with some auctioning provisions.  S 2191 drew criticism from some environmental groups, who felt that it was not a sufficient response to the threat of climate change, and from conservatives who feared it would raise energy prices and slow the economy. Despite a 48-36 vote in favor of the bill, it was not passed due to a mostly Republican filibuster

Co-benefits: Some carbon standards aim to supplement emissions reductions with activities that further other goals such as biodiversity or social justice, or ensure that their projects do not inadvertently harm these ends.  Co-benefits refers to a standard's embrace of these goals

Cogeneration: The use of heat by-product from electric generation, such as exhaust from gas turbines, for useful purposes such as domestic or industrial heating. Also know as combined heat and power.

Command and Control: One term for a traditional regulatory approach through which governments bring about emissions reduction through setting limits for emitters and levying fines or initiating lawsuits to achieve compliance.

Commitment Period: The period during which Annex B countries must reduce their emissions by an average of 5.2% according to the Kyoto Protocol.  The Commitment Period is scheduled to last five years, from 2008 through 2012.  There are currently no emissions reduction targets set after this commitment period.  During this period, parties must hold a minimum level of credits in a commitment period reserve to avoid over-selling.  According to the UNFCCC, these targets will be negotiated closer to the end of the first commitment period.  Future commitment periods are also likely to follow the five-year span.  Questions for post-2012 commitment periods include the extent of developing country participation and the level at which emissions caps are set.

Commodities Futures Trading Commission (CFTC): A U.S. Government agency that protects futures market participants from fraudulent or manipulative practices in the sale of commodity and financial futures and options.  It was created by the U.S. Congress in 1974 as an independent agency tasked with the charge of regulating commodity futures and options markets as trading in futures contracts expanded into new fields.  The carbon futures market is one such market.

Community Independent Transaction Log (CITL): Under the Kyoto Protocol, the Independent Transaction Log (ITL) verifies transactions between national registries.  European carbon trading requires rules in addition to those mandated by Kyoto. The CITL is a supplemental transaction log implemented by the European Commission that records the issuance, transfer, cancellation, retirement and banking of allowances that take place in the registry.

Compliance market: A market created by a regulatory act in which participants make economic decisions in order to comply with the regulation.  In a cap-and-trade market, actors buy and sell carbon credits because of the imperative to comply with the legislative-imposed cap.  A compliance market is contrasted with a voluntary market, in which participants purchase emissions reductions because of personal commitments or for P.R. purposes.

Compliance Period:

Conference of the Parties (COP): The supreme body of the United Nations Framework Convention on Climate Change (UNFCCC).

Contango: A futures market condition in which distant delivery commodity prices are greater than spot prices, often due to the costs of storing and insuring the underlying commodity. The opposite of backwardation.

Coverage: The scope of regulations – i.e., which industries are covered by environmental legislation such as cap-and-trade programs.  Typically regulation primarily focuses on the power generation, energy production, and energy intensive manufacturing sectors, covering 40 to 50% of national emissions.

Credit: See carbon credit.

Crediting Period: The period during which a project generates carbon credits.  It cannot extend beyond the operational lifetime of the project.  CDM projects may have a 7-year crediting period which can be renewed twice up to a total of 21 years, or a non-renewable 10-year period.  The crediting period for JI products is the first Kyoto commitment period, but projects begun as early as 2000 may be eligible under JI guidelines.

Credit For Early Action: See early action.

De mimimus emissions: Emissions generated from small sources.  Since the sum of a firm’s de minimus emissions may be large, these emissions are often prime targets for internal abatement measures.

Deforestation: The human destruction of forested areas and the associated land-use change.  Examples include cutting or burning to provide land for agricultural purposes, residential or industrial building sites, roads etc., or harvesting the trees for building materials or fuel.

DEFRA: The U.K. Department for Environment, Food, and Rural Affairs.  Its responsibilities include environmental protection and climate change-related action.  Defra publishes emission factors.

Designated Operational Entity (DOE): A domestic legal entity or international organization designated to validate and request registration for proposed CDM projects and verify emission reductions from registered projects.

Determination: The evaluation process of a JI project by an independent entity.  It must be ascertained whether the Project Design Document (PDD) fulfills all of the requirements for JI projects under Article 6 of the Kyoto Protocol and the JI guidelines.  See also Validation and Verification.

Developed Countries: Industrialized countries with high incomes and human capital.  See Annex I and Annex B of the Kyoto Protocol.

Developing Countries: Countries with limited industry or in the process of industrialization. The category of developing countries also includes Least Developed Countries (LDC).

Differentiation: Differing conditions that might require flexible emissions reduction obligations for particular countries.

Discrete Emission Reduction Credits (DERs, DERCs): or open market credits, are reductions in emissions that occur over a specified time period and do not continue on into the future. Generally, unlike ERCs, DERs are not evaluated and verified by the relevant local or state government air agency. Mass-based ERCs are one type of DER.

Demand Side Management (DSM): Regulatory action taken in the energy markets to alter the economic decisions made on the demand side in areas such as patterns of use.  

Double Counting: The problem of the same emissions reductions being counted towards multiple targets.  Problems can arise from using projects for both Renewable Energy Credits and carbon offsets, both the EU ETS and JI, or from emissions reductions counted both locally and nationally or nationally and internationally, to take a few examples.

Downstream (CO2 regulation): Regulation targeted at later stages of a carbon-intensive process such as power consumers, or demand-side.

Early Action: Emissions reductions that take place before the start of the Kyoto Protocol’s Commitment Period. Credit for early action refers to the suggestion that governments or companies should receive credit for climate change mitigation actions taken before the establishment of an emissions reduction program.  The rationale is that this will stimulate investment in emission abatement projects. Under the Kyoto Protocol, Annex B governments cannot receive credits before the first commitment period (2008-12) except under the Clean Development Mechanism. This is referred to as Early Crediting.

eGRID: The Emissions & Generation Resource Integrated Database. eGRID is an inventory of electric power systems’ environmental attributes and air emissions data. Its database is based on plant-specific data for every part of the U.S. electric power grid that reports data to the U.S. government. Its air emissions data records nitrogen oxides, sulfur dioxide, carbon dioxide, and mercury.

Economies in Transition (EIT): Russia, the former republics or SSRs of the Soviet Union, and other Central and Eastern European countries that are in the process of moving from centrally-planned to market-based economies.  This category includes Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russian Federation, Slovak Republic, Slovenia, and Ukraine.

Edinburgh Centre for Carbon Management (ECCM): A consulting company that analyzes greenhouse gas emissions from corporate activities, product supply chains and terrestrial ecosystems and other subjects relating to climate change mitigation strategies and policies.

Emission factors: Figures called emission factors relate activity data to emission values in CO2e. In order to obtain transparent and reproducible emissions data for carbon-intensive activities, emitters must be able to convert activity data to CO2e.  The formula for this conversion is [activity data X emission factor = GHG emission].  Emission factors are presented in specific units, like 'kilograms of CO2e per unit of heating fuel used.'  Emission factors are published by various local, state, national or intergovernmental agencies such as the UK Department for Environment, Food, and Rural Affairs (DEFRA) and the US Energy Information Agency (EIA).

Emission Forecast: An internal prediction of future emissions incorporating knowledge about future operational, regulatory and economic impacts.  While baselines are used to quantify emission reductions, forecasts are produced by an emitter for its internal management purposes and are subject to less scrutiny.

Emission Reductions (ERs): The measurable reduction of the release of greenhouse gases into the atmosphere from a specified activity or over a specified area and a specified period of time.

Emissions Reduction Market System (ERMS): The ERMS is an Illinois EPA cap and trade program for volatile organic material emissions directed at major stationary sources in the Chicago area that focuses on ambient ozone air quality.  Participating emission sources are issued tradable units based on the initial allotment set when Clean Air Act Permit Program (CAAPP) permits are issued and historical emissions. The ERMS uses a seasonal allotment period called the “ozone season,” May 1 through September 30 of each year. If an emitter does not hold sufficient ATUs at the close of the reconciliation period, it will incur an "emissions excursion" and will be fined based on the extent of excursion.

Emission Reductions Purchase Agreement (ERPA): An agreement governing the purchase and sale of emission reductions specially developed for contract parties that want to deal directly between the project developer and buyer.  The contract details the various steps of the process from getting the project idea approved to the issuance of Certified Emission Reductions (CERs).  ERPAs determine the consequences if projects fail to deliver the agreed upon volumes of emission reductions.  Emissions reduction projects face both CDM registration risk and project performance risk; contractees must determine how to handle these risks.

Emission Reduction Units (ERUs): Tradable credits generated from project-based activities that result in emission reductions in Annex I industrialized countries, particularly ones with economies in transition.  ERUs are issued by the Joint Implementation mechanism and represent one tCO2e. See further JI.

Emission Reporting Boundaries (or System Boundaries): The scope of sources of emissions included in an inventory or forecast. Broader boundaries may allow greater opportunities for reductions compared to jurisdictional reporting requirements. For example, compliance requirements might only require reporting of production-related emissions while internal reporting boundaries may include emissions from waste.

Emission Targets: Emissions reduction goals imposed either by a regulatory body or internal, voluntary measures.  An absolute target refers to a goal defined in concrete terms, such as a percentage reduction compared to a base year that equals a specific value, while an intensity target is a reduction relative to a business activity such as growth or units of production.

Emissions to Cap (E-t-C): A metric that measures how much the market is producing relative to the seasonally adjusted cap over a specific period.  It is calculated by subtracting the seasonally adjusted cap from emissions (actual or forecasted).  A positive E-C means that the market is short, suggesting a buy signal, and a negative E-C means that the market is long.

Emissions Trading: See carbon trading.

Energy efficiency: Technological improvements or usage modifications that allow the same amount of service at a lower energy input.  One example is the replacement of incandescent light bulbs with fluorescent light bulbs – fluorescent bulbs produce the same amount of light but require less energy.  Green building draws upon energy efficient techniques for heating, cooling, and lighting improvements and the use of energy-saving appliances and equipment.  Along with increased renewable energy use, energy efficiency is an important means of moving away from carbon-intensive energy consumption patterns.

Energy Information Administration: The United States governmental agency tasked with energy usage information and analysis.

Equity share: One approach to organizational boundary-setting.  In this approach, the percentage of emissions from an operation that a company is responsible for is equal to its equity share or ownership percentage of the operation.

European Union Allowances (EUA): Tradable emission credits issued by the EU ETS equal to the right to emit one ton of carbon dioxide.

European Climate Change Programme (ECCP): The ECCP developed the European Union’s strategy for implementing its member states’ obligations under the Kyoto Protocol and is influential in shaping the EU’s energy policy.  The EU ETS, the largest emissions trading scheme in the world, is the most prominent project of the ECCP.  

European Union Emissions Trading Scheme (EU ETS): The world’s largest and highest-valued market in carbon emissions.  This Europe-wide European Union-regulated market, which began operation in 2005, is Europe’s answer to Kyoto’s challenge.  The European Union Emission Trading Scheme (EU ETS) is the largest multi-national, emissions trading scheme in the world, and is a major pillar of EU climate policy. The ETS currently covers more than 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas emissions.

Ex-ante: A purchase in which buyers pay for emissions reduction credits before the reductions have occurred. Ex-ante purchases occur mainly in the forestry sector as these projects take longer to generate credits. However, since forestry projects have fallen out of favor in recent years, ex-ante trading has become less common.  Also known as future value accounting.

Financial control: An approach to organizational boundary-setting.  According to the financial control approach, a company is responsible for an operation if it can direct the financial policies of the operation to derive economic benefit.

Flexibility Mechanisms: See Kyoto Protocol.  The flexibility mechanisms are: Clean Development Mechanism, International Emission Trading and Joint Implementation.

Food miles: One of the metrics used to assess the environmental cost of different foods.  It measures the distance foodstuffs travel and the modes of transportation used during the food production and processing until they reach the consumer. This measurement allows comparisons of the carbon footprint of various food types and sources.

Forest management: Forest stewardship practices that protect biodiversity and climate and maximize forest contributions to sustainability.

Fossil Fuels: Carbon-based fuels such as coal, petroleum, natural gas and oil.

Fuel Switching: Replacing conventional fuel technologies such as coal or oil with more efficient and less carbon-intensive fuel technologies such as natural gas or biomass.

Fugitive Emissions: Unintended emissions resulting from the processing, transmission, and/or transportation of fossil fuels.

Fungibility: Credits are fungible if they can be exchanged for different types of credits generated under a different mechanism (e.g. ERUs for AAUs).

GHG Protocol: A set of common standards and methodology for measuring and reporting corporate GHG emissions developed by a multiple-stakeholder group co-convened by the World Resources Institute and the World Business Council for Sustainable Development.

Global warming potential (GWP): A measure of the potency of greenhouse gases. A higher GWP reflects the power of the gas to trap heat in the atmosphere. The GWP is a numerical measure expressed in terms of carbon dioxide, the most abundant greenhouse gas, so carbon dioxide itself has a GWP of 1. The GWPs of all greenhouse gases are:

•    Carbon dioxide (CO2): 1

•    Methane (CH4): 23

•    Nitrous oxide (N2O): 300

•    Hydrofluorocarbons (HFC): 120-12,000

•    Perfluorocarbons (PFC):   5,700-11,900

•    Sulphur hexafluoride (SF6): 22,200.

Methane traps 23 times as much heat as carbon dioxide, while SF6 is 22,200 times more potent.

Gold Standard (GS): A standard for carbon offsets intended to help consumers find the most socially valuable offsets in the largely unregulated market.  It is a smaller but well-regarded standard whose constituency includes environmental NGOs such as the WWF.  It holds carbon offsets to a higher level of quality and demands attention to co-benefits.  Gold Standard credits come only from energy efficiency and renewable energy projects. 

Grandfathering: One method of emissions permits allocation.  Permits are allocated to emitters on the basis of historical emissions.  See also auctioning.

Green-e: An independent consumer protection program for retail markets in renewable energy and greenhouse gas emissions reductions.  Green-e climate is a voluntary certification program for GHG reductions based on verification and environmental integrity standards.  Green-e Energy is a certification and verification program for renewable energy.  The Green-e Marketplace allows companies to advertise their product with a Green-e logo indicating that participating suppliers are purchasing enough renewable electricity or certificates to meet their customers’ needs.

Green building: Techniques for building design and use that make energy consumption and resource use more efficient and environmentally sustainable.  Green building takes the whole life cycle of a building into account, including elements of construction such as design, materials, environmental impact, and location; facets of building use such as water and energy consumption, renewable energy use from features such as rooftop solar panels; and building removal.  Green building techniques include energy-efficient windows, efficient insulation, green roofs, on-site renewable energy, daylight use maximization, power management, smart thermostats, renewable energy use and fuel switching, and proximity to public transportation.

Green tags: See renewable energy certificates.

Greenhouse gases (GHGs): Gases released by human activity that contribute to climate change and global warming. The six gases listed in Annex A of the Kyoto Protocol are carbon dioxide (CO2), methane (CH4), and nitrous oxide (N20), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). See global warming potential for an overview of the relative harm caused by each of these gases.  Greenhouse gases trap heat in the atmosphere, which, under normal conditions, sustains life on earth by preventing the atmospheric temperature from dropping to a point too cold for living things.  However, the influx of greenhouse gases generated by human industrial activity threatens to raise the earth’s temperature, causing climate change that is potentially disastrous and almost certainly destructive.

Greenhouse intensity: The ratio of a nation’s greenhouse gas emissions to its GDP, or the volume of emissions per unit of economic output.  (Note that even if a country’s greenhouse intensity is falling, its overall emissions may still be rising due to an expanding economy.) Greenhouse intensity measures can also be used at a company, plant or industry sector level.

Green investment scheme (GIS): A new international emissions trading mechanism designed to handle the problem of hot air associated with Eastern European countries with economies in transition.  Annex I countries buy surplus AAUs from eastern European countries on the condition they earmark the proceeds for sustainable development. Green investment schemes arose in response to the criticism of international emissions trading for the presence of hot air trading, which allowed former Soviet bloc countries to profit from emissions trading without real emissions reductions.

Host Country: The country where an emission reduction project is physically located.  The Kyoto mechanisms CDM and JI allow one country to earn credits for emissions reductions it funds in another country.  A project has to be approved by its host country to receive CERs or ERUs.

Hot air: A country collecting carbon credits for emission reductions that occurred without any deliberate action. For example, under Kyoto, countries are required to reduce their emissions in terms of the base year of 1990.  However, in Russia, the Ukraine, and other former Soviet bloc countries, the 1990s collapse of Soviet-era industry led to emissions well below 1990 levels without the implementation of any climate-related measures.  Additionality requirements are designed to prevent “hot air.”  See also: green investment scheme.

Hydrofluorocarbons (HFCs): Haloalkanes containing no chlorine or bromine, the elements whose presence are known to cause damage to the ozone layer. Although HFCs are not ozone-toxic, they do contribute to the greenhouse effect.  Hydrochlorofluorocarbons (HCFCs) contain hydrogen instead of some chlorine and fluorine and as a result are far less harmful to the atmosphere.  These gases replace Chlorofluorocarbons (CFCs) in refrigeration and air conditioning equipment, though they are also inadvertently emitted during some manufacturing processes.

Incentive-Based Regulation: Regulatory action that alters the set of incentives individuals and firms face rather than mandating changes according to what is sometimes called command-and-control.  Emissions trading schemes are a prominent example of using incentive-based regulation to achieve environmental benefits: governments shape the overall framework of the emissions trading market in order to induce changes in behavior, but actual reductions are achieved by rational economic actors’ decisions in an open market.

Industrial gases: One common project type is the reduction and/or capture and destruction of greenhouse gases released by industrial processes such as HFC-23, PFC, and N20.

Integrated Gas Combined-Cycle plants (IGCC): A new type of clean coal power plant that uses synthetic gas (syngas).  Its gasification process can turn high-sulphur coal, heavy petroleum residues and biomass into syngas; since this process takes place in a gasification unit within the plant, these plants are referred to as “integrated.”  There are only two IGCC plants operational in the U.S., whose constructed was assisted by the Department of Energy Clean Coal Demonstration Project, although more are expected over the next decade.  IGCC plants have been criticized for their high cost, although future carbon legislation may make them more attractive.

Intergovernmental Panel on Climate Change (IPCC): A scientific body established to provide policymakers with objective, scientific information on climate change representing the collective work of over 2,000 scientists.  It shared the 2007 Nobel Peace Prize with Al Gore.  It was established in 1988 by the World Meteorological Organization (WMO) and by the United Nations Environment Programme (UNEP), two United Nations organizations.

International Council for Local Environmental Initiatives (ICLEI): An international council established in 1990 when more than 200 local governments from 43 countries convened at an inaugural United Nations conference, the World Congress of Local Governments for a Sustainable Future. It set out a five-milestone plan that participating local governments work through: (1) establish a baseline; (2) set a target; (3) develop a local action plan; (4) implement the local action plan; and (5) measure results.

International Emissions Trading (IET): A Kyoto Protocol flexibility mechanism.  It allows Annex B countries to trade in Assigned Amount Units (AAUs). It is expected that governments will delegate trading activity to entities within their jurisdictions so that international trading will occur between entities and not governments. IET activity will adjust each nation’s 'pool' of AAUs.

International Emissions Trading Association (IETA): A non-profit organization that argues for the establishment of markets trading in greenhouse gas emissions.

International Institute for Environment and Development (IIED): A London-based think tank that researches issues related to sustainable development and environmental economics.

ISO 14064: The International Organization for Standardization's contribution to the world of carbon offset standards.  ISO 14064 is a three-part international standard that provides guidance on developing organization-level emissions inventories; quantifying, monitoring, and reporting greenhouse gas emissions reductions at the project level; and validating and verifying greenhouse gas emissions reduction projects.

International Transaction Log (ITL): A centralized database that lists CERs issued and verifies transactions proposed by registries to make sure they are consistent with Kyoto rules.  Registries send transaction proposals to the ITL, which then returns an approval or rejection.  

Issuance: The instruction by the CDM Executive Board to the CDM registry administrator to issue a specified quantity of CERs for a project activity into the pending account of the Executive Board in the CDM registry.

Joint Implementation (JI): A Kyoto flexibility mechanism for transfer of emissions permits between countries.  Emitters in developed countries acquire carbon credits through what are referred to as project-based transactions, meaning that emitters assist specific GHG reduction projects.  A JI project is defined as one Annex I country contributing to a carbon project in another Annex I country, in contrast to a CDM project, in which an Annex I country invests in a carbon project in a Non-Annex I country.

Keidanren Voluntary Action Plan: A voluntary commitment made by major Japanese industries to reduce CO2 emissions from fuel combustion and industrial activities to 1990 levels by 2010.  Keidanren is a major component of Japan’s plans to meet its Kyoto obligations.

Kyoto Protocol: A legally binding amendment to the international treaty on climate change.  The protocol calls for a reduction of greenhouse gas emissions in order to prevent “dangerous anthropogenic interference with the climate system.”  Countries may choose from several policy options, including reducing domestic emissions through a carbon tax, cap-and-trade, or subsidization, trading emissions permits (AAUs) between member states, or purchasing emissions reductions credits (CERs) from project-based mechanisms (CDM and JI). The Kyoto Protocol commits industrialized country signatories to reduce their greenhouse gas (or “carbon”) emissions by an average of 5.2% compared with 1990 emissions in the period 2008-2012.  Some countries which have signed are not mandated to reduce emissions because they are labelled as Non-Annex I.  The most prominent Non-Annex I signatories are China, India, and Brazil.  However, these countries have an important role under Kyoto: hosting projects that reduce emissions and are used as compliance mechanisms by Annex I countries.  See also the three Kyoto flexibility mechanisms, JI, CDM, and emissions trading.

Kyoto Commitment Period: See Commitment Period.

Kyoto Forests: Article 3 of the Kyoto Protocol states that only carbon sequestered from forests planted after January 1, 1990 during will gain credit for the commitment period of 2008-2012.

Land Use, Land Use Change and Forestry (LULUCF): A project category that includes reforestation, afforestation, slowing of deforestation, land clearing, agriculture, and forestry sequestration. These activities increase the removal of greenhouse gases from the atmosphere or reduce emissions.  Land-use change such as the conversion of forested areas into agricultural land is a major contributor to climate change, as well as causing a wide range of ecological harm.  However, there are many questions about the validity of emissions reductions from LULUCF projects, including additionality, permanence, accurate measurement and quantification of emissions reduction.  Because of the difficulty of accurately assessing the reductions achieved by LULUCF methodologies, regulators in compliance markets are very scrupulous about their use.   However, LULUCF projects are quite popular in the voluntary market.

Leakage: The problem of emission reductions in one location being offset by an increase in emissions in another location.  Leakage occurs when laws or activities designed to cut greenhouse gas emissions implemented in one jurisdiction or project area lead to the movement rather than the reduction of the targeted emitting activities, such as a carbon-intensive industry moving from an Annex I nation to a non-Annex I nation in response to regulation.

Least Developed Countries (LDC): Countries with the lowest scores on the United Nations’ Human Development Index based on income, human resources, and economic vulnerability.  Sometimes referred to as “Fourth World” countries.  See developing countries.

Lieberman-Warner: See Climate Security Act.

Linking Directive: A provision that allows operators covered by the EU ETS to use a certain amount of Kyoto certificates from flexible mechanism projects in order to balance their emissions.

Long-term Certified Emission Reductions (lCERs): Credits issued for an afforestation or reforestation CDM project activity that expire at the end of the crediting period for which it was issued.  See also Temporary Certified Emission Reductions (tCERs).

Marginal abatement cost (MAC): The cost of reducing emissions by one additional unit.

Marrakech Accords: A 2001 conference that established the emissions reduction mechanisms for Kyoto signatories.

Meeting of Parties (MOP): The Supreme Body of the Kyoto Protocol. The first Meeting of Parties to the Kyoto Protocol was held in Montreal in December 2005 during the 11th Conference of Parties.

Methane capture: The capture, flaring, or combustion of methane gas, including capture from landfills, agricultural waste, coal beds, and mines.

Midwestern Greenhouse Gas Accord (MGGA): A regional agreement signed by midwestern U.S. states and Canadian provinces calling for a reduction in greenhouse gas emissions and productive responses to climate change.  The Midwest’s industrial and agricultural sectors make it the most coal-dependent region in North America.

Millennium Development Goals (MDGs): Eight goals agreed on by the international community that announce an expanded vision of development that aims to bring unprecedented progress to the world’s poorest.  Environmental sustainability is among the Millenium Development Goals. The goals have been commonly accepted as a framework for measuring progress in worldwide development.

Monitoring: The collection and archiving of all relevant data necessary for determining the effect of a project, including the baseline, measuring emissions by sources of greenhouse gases (GHG) within the project boundary, and leakage.

Monitoring Plan (MP): A set of requirements for monitoring and verifying of emission reductions achieved by a project.

MtCO2e, tCO2e: Metric tons or tons of carbon dioxide equivalent. This is the metric measurement unit for greenhouse emissions. The global warming impact of all greenhouse gases is measured in terms of equivalency to the impact of carbon dioxide (CO2). For example, one million tons of emitted methane, a far more potent greenhouse gas than carbon dioxide, is measured as 23 million tons of CO2 equivalent, or 23 million MtCO2e.

National Allocation Plan (NAP): The distribution of CO2 allowances allotted to countries committed to the Kyoto Protocol or the EU ETS. Emissions permits or allowances are allocated among emitters to establish a carbon trading market. The distribution of permits/allowances occurs through grandfathering or permit auctioning.

New England Power Pool (NEPOOL): A voluntary association of New England electric power business groups formed in 1971. NEPOOL members include investor-owned utility systems, municipal and consumer-owned systems, joint marketing agencies, power marketers, load aggregators, generation owners and end users. The NEPOOL Generation Information System (NEPOOL GIS) is an accounting system that creates an electronic certificate for each megawatt hour of power generated; certificates are created on a monthly basis and put into the system on a quarterly basis.  These record information such as when and where power was generated; the type of fuel source used and the amount and type of certain pollutant emissions released; renewable portfolio standard eligibility in relevant states; and other characteristics such as vintage and green-e eligibility. Retail electric suppliers use this information to report compliance with requirements such as minimum renewable power purchase levels, disclosure, and maximum emissions. Certificates may be sold or otherwise transferred off line.

New South Wales Greenhouse Gas Abatement Scheme (NSW GGAS): An Australian mandatory state-level emissions reduction scheme launched in 2003 that is the world’s second-largest regulated cap-and-trade market (after the EU ETS).  Its purpose is to “reduce GHG emissions associated with the production and use of electricity; and to develop and encourage activities to offset the production of GHG emissions.” It mandates annual statewide reductions of 7.27 tons per capita.  The program requires participants in the electricity market to meet benchmarks based on their market share.  Offenders must pay a fine of $11.50 AU$ or purchase New South Wales Greenhouse Abatement Certificates (NGACs), New South Wales’ carbon offsets, which are generated through project-based emissions reduction. It was launched in 2003, two years before the EU ETS.

New Zealand Emissions Trading Scheme (NZ ETS): A national emissions trading scheme launched by the government of New Zealand.  It covers all sectors of the economy and regulates all six of the greenhouses gases identified by the Kyoto Protocol.  Sectors will be progressively phased in, beginning with forestry in 2008.  New Zealand policymakers are considering linking to a broader scheme of an Oceanian carbon market.

Non-Annex I countries: Developing countries which have no emissions reduction targets under the Kyoto Protocol.

Non-Governmental Organization (NGO): A private group often active in a field with some public benefit.  Many NGOs play important roles in the fight against climate change. For example, an NGO might evaluate a voluntary market’s credit quality.

OECD (Organisation for Economic Co-operation and Development): An international organization joining governments committed to representative democracy and free markets.  It has a broad mandate covering economic, environmental, and social policy.  The OECD 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.

Official Development Assistance (ODA): Funding provided by governments of developed countries to developing countries in order to assist in various community, health and commercial projects. Financial additionality requirements ensure that projects will only earn credit if funds additional to existing ODA commitments are specifically committed to achieving greenhouse gas reductions.

Offsets: See Carbon offsets.

Operational control: An approach to organizational boundary-setting.  According to the operational control approach, a company is responsible for an operation if it can implement operating or management policies at the operation.

Operational Entity (OE): An independent entity, accredited by the CDM Executive Board, which validates CDM project activities, and verifies and certifies emission reductions generated by such projects.  See also designated operational entity.

Oregon Standard: The first legislation regulating CO2 emissions in the United States.  This 1997 law requires that new Oregon power plants reduce their emissions to 17% below those of the most efficient combined cycle plant.  Plants may achieve this goal through reduction or offsets, including specific projects or paying mitigation funds to The Climate Trust.

Over-the-counter market (OTC): The phrase “over-the-counter” is used in the field of carbon trading as an umbrella term for the wide range of transactions that occur in voluntary markets.  Since OTC transactions occur outside of formal, regulated markets that operate under cap-and-trade systems, almost all carbon offsets purchased “over-the-counter” are project-based.  There are three primary project types in the OTC markets – forestry sequestration, renewable energy, and industrial gases. 

Period: The frequency of emissions reduction data reporting.  Periods may be yearly, semi-annually, quarterly, or monthly.

Pre-compliance market: Trading in anticipation of future regulations.  There has been a recent example of a pre-compliance market in the U.S, as speculators aim to make profitable investments in the voluntary carbon market before any significant legislation that establishes a national cap-and-trade program.

Pre-registered Emission Reductions (pre-CERs): See VERs.

Primary Market: The exchange of emission reductions, offsets, or allowances between buyer and seller where the seller is the originator of the supply and the product has not been traded more than once.  Contrasted with the secondary market.

Project-Based Emission Reductions: Under Kyoto, emission reductions created by JI or CDM projects rather than through emissions trading or transfer of assigned amount units.  Emissions reductions sold as carbon offsets in voluntary markets are also project-based.  Typical carbon offset projects under the CDM and voluntary markets include industrial gas projects, methane capture, renewable energy, energy efficiency, fuel switching, and forestry/LULUCF.

Project-based transactions: One of two main categories of carbon transactions (the other is allowance-based).  If a project (such as investing in renewable energy or energy efficiency improvements) can be demonstrated to have reduced GHG emissions, it can sell its ERs to a buyer in need of carbon credits.  The CDM and JI Kyoto mechanisms are the two prime examples of project-based transactions.

Project Concept Note (PCN) and Project Idea Note (PIN): A brief (around 6 pages) description of a project prepared by a project proponent entity or intermediary presented for consideration to the PCF’s Fund Management Committee and the Participants’ Committee. It provides information such as type, size and location of the project and estimation of the anticipated GHG reduction compared to the baseline.

Project Design Document (PDD): A document required in order to register a project under the CDM or JI that details that a project will result in verifiable emissions reductions.  It enables the Operational Entity to ascertain whether the project (i) has been approved by the parties involved in a project, (ii) is additional, (iii) has an appropriate baseline and monitoring plan.

Protocol: A protocol is a rule or set of rules that govern how an agreement (often an international treaty) is to be implemented.  For example, the Kyoto Protocol is a framework for the international implementation of the UNFCCC.  This term may also refer to a methodology for measuring and reporting emissions such as the WRI/WBSCD.

Reduced Emissions from Deforestation and Degradation (REDD): An avoided deforestation initiative that attempts to reduce greenhouse gas emissions by providing incentives to protect forests.

Reference Year: A year whose GHG emissions data is used to set reduction targets. For example, according to the Kyoto Protocol, Annex 1 countries must reduce their emissions relative to 1990 totals.

Reforestation: The planting of trees and similar ecological projects in areas which have been deforested.  This process increases the local ecosystem’s capacity to sequester carbon by replanting forest biomass in areas whose natural mechanisms for storing carbon have been damaged or destroyed.

Registration: A stage in the CDM project implementation process.  Registration is the formal acceptance by the CDM Executive Board of a validated project as a CDM project activity and the prerequisite for verification, certification and issuance of credits.

Registry: A public database of organizational emissions and reductions.  Carbon trading requires trading registries similar to financial exchanges for stocks and bonds in order to facilitate the market for emission reduction credits.  There are two types of registry being implemented under Kyoto, national registries and the CDM registry, both of which record holdings of Kyoto units and deliver units from sellers’ to buyers’ accounts.  In voluntary markets, emission reductions may be registered with one of many independent registries with individual rules regarding what information is reported.

Regional Greenhouse Gas Initiative (RGGI): An agreement signed by the north-eastern U.S. states Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Maryland to reduce emissions via a regional cap-and-trade agreement beginning January 1st, 2009.  It will initially affect power plants that generate electricity primarily through fossil fuels and may be expanded to include additional GHGs and offsets from projects and/or project-based transactions.

Removal Units (RMU): A specific carbon credit relating to land use and forest management and sequestration in Annex 1 countries, equal to one metric ton of CO2e. RMUs cannot be banked for use in any subsequent commitment period and are not accepted in the EU ETS.  They can, however, can be converted into AAUs by a national registry.

Renewable Energy: Energy generated from natural resources such as sunlight, geothermal heat, wind, moving water, biomass, and biofuels. These energy sources are renewable because they use resources that are naturally regenerated over a short time.  Renewable energy technology does not rely on carbon-intensive fossil fuels or waste products from inorganic sources.  Investment in renewable energy has become increasingly common as awareness of human impact on the environment has grown.  Renewable energy technologies include solar panels, solar photovoltaic and thermal plants, wind turbines and wind farms, micro hydro hydroelectric power, damless hydroelectric power, tidal power and wave farms, biodiesel, biomass, or ethanol combustion and geothermal plants.  Renewable energy projects replace carbon-intensive energy sources with clean energy.

Renewable Energy Certificates (REC): A tradable environmental commodity created to provide proof that one MWh (megawatt-hour) of electricity was generated using a renewable energy source such as wind, low-impact hydropower, geothermal, solar, or biomass power. RECs were created to add economic incentive to renewable energy generation and are tradeable in compliance markets.  RECs are increasingly sold as offsets since they can be sold separately from their associated physical energy, allowing customers to purchase the environmental and social benefits of renewable energy separately from their retail power supply. RECs are also known as green tags or tradable renewable energy credits.

Renewable Obligation: A requirement that U.K. power generators use renewable fuel sources to produce a fixed percentage per year of their electricity output. Renewables Obligation Certificates (ROCs) and Levy Exemption Certificates (LECs) are both tradable units issued under the scheme that are used as a market-based mechanism to allow generators to reach their targets.  A Renewable Energy Guarantee of Origin (REGO) is issued for each kilowatt hour produced from renewable energy sources in the UK.

Renewable Portfolio Standards (RPS): Legislation existing in 27 U.S. states that creates a compliance market for renewable energy.  RPS mechanisms aim to increase energy production from sources such as solar, wind, geothermal, and biomass power.  RPS programs mandate that power suppliers generate a set percentage of total annual energy production from renewable sources. (i.e., if the RPS is set at 3%, and a power company produced 2,000,000 MWh annually, 60,000 of those MWh must come from renewable energy.)

Renewable Transport Fuel Obligation (RTFO): A mandate in the United Kingdom that will require 5% of all road vehicle fuel to be supplied from sustainable renewable sources by 2010.

Retirement: In order to reduce emissions, credits must be removed from the market or retired, not simply resold.  Some worry that secondary markets, which create a class of carbon traders speculating on the price of carbon futures, will slow the retirement of credits.

Scope: A reporting company’s operational boundaries.  Scope 1 emissions are direct emissions, scope 2 emissions are indirect emissions from sources such as purchased electricity, heating, and transportation, and scope 3 emissions are indirect emissions not covered in scope 2.

Secondary markets: Markets in securities or assets in which participants buy from other participants rather than the issuing companies, or, in the case of the carbon market, agencies.  The existence of secondary markets creates a class of carbon traders speculating on the price of carbon futures.

Sequestration: See CCS, LULUCF.  Types include forestry sequestration, geosequestration, ocean sequestration, and terrestrial sequestration.

Small scale CDM projects: CDM projects that will generate small quantities of emissions reductions may follow a simplified process. Small scale projects include renewable energy projects under 15 MW, energy efficiency projects that reduce energy consumption by fewer than 15 GWh per year, or project activities which emit less than 15 kilotonnes CO2 equivalent per year.

Spark spread: The difference between the cost of electricity and the cost of converting natural gas to electricity.

Stakeholders: Individuals, groups or communities affected or likely to be affected by a proposed project activity or actions leading to the implementation of a project.

Standards: Carbon offsets sold in voluntary markets have been criticized for their mixed quality. Factors cited include non-additionality, questionable accounting, and a lack of transparency as well as the potential for slowing internal improvements.  In response, several voluntary standards have been developed to establish that offsets represent real emissions reductions.  Standards have clearly defined rules for accounting, monitoring, verification, certification, registration, and enforcement that allow buyers to be sure that offsets represent real, additional, and permanent emissions reductions.  Some frequently mentioned standards are the Gold Standard (GS), Voluntary Carbon Standard 2007 (VCS 2007), VER+, Chicago Climate Exchange (CCX), Voluntary Offset Standard (VOS), the Climate, Community, and Biodiversity Standards (CCBS). At present, the majority of offsets sold are still not certified by a standard.

Supplementarity: A requirement under the Kyoto Protocol stipulating that emissions trading should be a supplement to domestic action to reduce emissions.  There is still dispute over the proper interpretation of this requirement.

Sustainable development: An approach to development that aims to balance present-day needs and demands of human beings in developing countries with an awareness of future generations and ecological imperatives.

Temporary Certified Emission Reductions (tCERs): A unit issued for an Afforestation/Reforestation CDM project activity which expires at the end of the commitment period following the one during which it was issued. It is equal to one tCO2e. See also Long-term Certified Emission Reductions (lCERs).

The Climate Registry (TCR): A nonprofit organization that records greenhouse gas emissions in 31 U.S. states and 3 Canadian provinces.  Its goal is an emissions measurement protocol that allows for accurate and verifiable emissions data for both voluntary and mandatory reporting programs.  The Registry includes the combined forces of smaller state-sponsored registries, such as the California Climate Action Registry and Eastern Climate Registry.

The Climate Trust: A legally mandated non-profit that implements projects that avoid, sequester, or displace GHG emissions.

Tradable Renewable Certificates (TRCs): See renewable energy certificates.

United Nations Framework Convention on Climate Change (UNFCCC): An international legal framework adopted in June 1992 at the Rio Earth Summit to address the growing problem of climate change. It commits the parties to the UNFCCC to the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (man-made) interference with the climate system.”  The Kyoto Protocol is an amendment to the UNFCCC.

U.S. Climate Action Partnership (USCAP): A group of businesses and environmental groups lobbying the federal government to pass legislation mandating reductions in greenhouse gas emissions. The partnership is the result of a ten-year effort to engage the private sector in the design of business strategies and market-based policies to achieve strong national legislation.  Its six principles are: 1. Account for the global dimensions of climate change; 2. Create incentives for technology innovation; 3. Be environmentally effective; 4. Create economic opportunity and advantage; 5. Be fair to sectors disproportionately impacted; and 6. Reward early action.

Unilateral CDM Projects: Projects undertaken without a foreign investor.  Developing countries may begin CDM projects without an Annex I partner and market the resulting emissions credits.

Upstream (CO2 regulation): Regulations targeted at the early stages of a carbon-intensive activity such as power suppliers, or supply-side.

Validation: One of the steps that must be taken before a project can generate emissions reductions credits through the CDM. A designated operational entity must make an assessment of the project’s Project Design Document, which describes its emissions reduction goals.  Validation entails confirming that the parties are voluntarily participating, stakeholders are aware, documentation on environmental impact has been submitted, the project is additional, and that the methodology and provisions for monitoring, verification, and reporting are consistent with CDM rules.  The DOE must then issue a validation report and request that the CDM Executive Board register the project.

Verification: Part of the process by which a carbon reduction project accrues carbon credits under the CDM or JI. After the project has been registered, a designated operational entity examines the project and prepares a verification report detailing the findings of the verification process, including the reductions of emission of greenhouse gases that have been found to have been generated.  It provides independent assurance that real emissions reductions have occurred or will take place.  CERs are only delivered once verification has occurred.

Verified Emission Reductions (VERs): A unit of greenhouse gas emission reductions that has been verified by an independent auditor but that has not yet undergone the procedures for verification, certification and issuance of CERs or ERUs (CDM- or JI-specific) under the Kyoto Protocol, and may not have yet met the legal requirements. Due to stringent requirements, many metric tonnes of GHG reductions do not meet the qualifications for compliance offsets under the primary schemes (such as CDM, RGGI, and AB-32) – fortunately, there are still buyers for these in the voluntary markets.  Purchasers of VERs assume all of the potential carbon-specific policy and regulatory uncertainties, such as the possibility that the VERs are not ultimately registered as CERs or ERUs. Because of this inherent element of risk, buyers tend to pay a discounted price for VERs. Offsets that meet standards such as the Voluntary Carbon Standard and Gold Standard in terms of sustainability, verifiability, and social responsibility command higher prices. Also referred to as pre-CERs. 

VER+: A carbon offset standard that resembles the Kyoto mechanisms’ project standards.  It does not focus on co-benefits.

Vintage: The year that an allowance or credit is applied.

Voluntary Carbon Standard (VCS): A standard for VERs that denotes a high quality of emissions reduction.  It focuses on GHG reduction rather than environmental or social benefits.  It was jointly developed by the Climate Group, the International Emissions Trading Association, and the World Economic Forum Global Greenhouse Register.

Voluntary Markets: There is strong consumer demand for emissions reductions that go beyond the compliance markets created by regulations, particularly in countries such as the United States which have not yet set forth a serious legislative program for addressing climate change.  Buyers may be environmental groups or environmentally conscious individuals looking to financially support action to reduce greenhouse gas emissions or corporations who want to advertise themselves as carbon-neutral or environmentally friendly.  The Chicago Climate Exchange (CCX) is the largest of the voluntary markets.  There are also extensive over-the-counter markets.   Buyers purchase verified emissions reductions (VERs), project-based carbon offsets that do not meet the qualifications for compliance offsets under the primary schemes (such as CDM, RGGI, and AB-32).  However, these still represent genuine emissions reductions and can be purchased as VERs.  Pricing is determined by the quality of the offset – generally, projects that rate highly in terms of sustainability, verifiability, and social responsibility command higher prices.  Standards such as the Voluntary Carbon Standard and CDM Gold Standard can be employed to verify quality.

Western Climate Initiative (WCI): A regional agreement including the U.S. states Arizona, California, Montana, New Mexico, Oregon, Utah, and Washington and the Canadian provinces British Columbia, Manitoba, and Quebec that attempts to curb emissions through market-based reduction mechanisms.  Other Western U.S. states, Canadian provinces, and Mexican states participate as observers.  Previously known as the Western Regional Climate Action Initiative or WRCAI.

White tag: A certificate equal to 1 MWh (megawatt-hour) of energy savings.  White tags attempt to commodify energy efficiency, much as other programs commodify renewable energy or emissions reductions.

World Business Council for Sustainable Development (WBCSD): A coalition of 170 international companies united by a shared commitment to sustainable development through the three pillars of economic growth, ecological balance and social progress.

World Resources Institute (WRI): An organization that brings together four influential forces to accelerate change in business practice: corporations, entrepreneurs, investors, and business schools. The GHG Protocol Initiative is managed by WRI’s Sustainable Enterprise Program.