See emissions abatement.
An entity accredited by the UNFCCC’s Joint Implementation Steering Committee (JISC) to validate and/or verify Joint Implementation Projects.
Any action to avoid, withstand or benefit from the impacts of climate change. With growing consensus that even the most progressive limits on GHG emission will not be sufficient to avoid all impacts of climate change, it is expected that considerable adaptive planning and adaptation will be required to cope with the impacts of climate change.
The capacity of a system to adapt if the environment where the system exists is changing.
In general, additionality is the requirement that emission reductions and/or avoidances from offset projects are real, measurable, long term and additional to what would otherwise have occurred absent the project in a ‘business as usual’ scenario. The definition of and evaluation criteria for additionality often differ from one cap-and-trade scheme to another.
The creation of a forest on land that was not previously forested (typically in the last 50 years).
The distribution of tradable emission permits or allowances among GHG emitters within the jurisdiction of an emissions trading scheme. Allowances (permits) are either given to (grandfathering) or sold to (typically by auction) emitters and other market participants.
Transactions in which the buyer purchases emission allowance created and allocated (or auctioned) by regulators under cap-and-trade regimes, such as Assigned Amount Units (AAU’s) under the Kyoto Protocol or EUAs under the EU ETS.
Where a regulatory body allocates – or sets aside – a portion of total allowances to provide financial incentives to: take early action; promote energy efficiency, improve land use planning; and other reduction strategies and projects that reduce emissions.
The tradable emission permit in an emissions trading (cap-and-trade) scheme. Allowances grant emitters a permit to emit a specific quantity of pollution (typically 1 tonne of CO2 or CO2e). The aggregate total of allowances in a given scheme will amount to the total ‘cap’ or possible emissions in that scheme. Entities regulated by an emissions trading scheme are typically required to surrender allowances equal to their emissions in the compliance period (true up). If an entity is (through emission reduction/abatement) able to emit less than their allowable amount they then have the right to sell any excess allowances to others.
Countries included in Annex B to the Kyoto Protocol that have ratified the Protocol, including all Annex I Parties (as amended in 1998) except Turkey and Belarus.
The 41 industrialized countries that committed to the aim of reducing their emissions to 1990 levels by the year 2000, including all the developed countries in the OECD and economies in transition. Annex I is an annex to the UNFCCC.
All developed countries in the Organization for Economic Cooperation and Development (24 original OECD countries plus the European Union).
California’s Global Warming Solutions Act. A bill passed in September 2006 which codifies California’s goal to reduce GHG emissions to 2000 levels by 2010 and to 1990 levels by 2020. The Bill directs the California Air Resources Board to develop appropriate regulation and establish mandatory reporting systems to track and monitor GHG emission levels. It is expected to in force by 2012.
A Kyoto Protocol unit equal to one metric tonne of CO2 equivalent. Each Annex I Party issues AAUs up to the level of its assigned amount of the Kyoto Protocol. Assigned amount units may be exchanged through emissions trading. AAU’s – unlike JI and CDM credits, can only be purchased by countries.
One of the means of allocating emission permits in a cap-and-trade system. In auctioning, permits are allocated to regulated emitters on the basis of an auction system. Unlike grandfathering where emission permits/allocations are granted free-of-charge (and typically based on historic emission levels), auctioning allows the market to determine the cost of carbon. Auctioning avoids rent-seeking; limits the influence of lobbying by special interests groups (regulated industrial sectors) and avoids the problem of windfall profits from the sale of permits granted for free.
In a cap-and-trade scheme, banking is when a regulated entity (emitter) has surplus allowances for a given compliance period and holds or ‘banks’ them for use (or sale) in a future compliance period. Banking allows emitters flexibility in managing their business needs; helps plan for future investments; encourages early action to reduce emissions, and encourages over-compliance. Banking is the opposite of borrowing.
Forecasted conditions under a business as usual scenario. A baseline is used to calculate the GHG emissions reduced or avoided (and thus carbon credits generated) by a carbon reduction/avoidance project. Also referred to as a baseline scenario.
In organizational GHG accounting, the base year is the year against which emissions are measured against to determine emission reductions/increases over time.
Also known as biomass fuels. A fuel produced from dry organic matter or combustible oils produced by plants. Their use in place of fossil fuels cuts greenhouse gas emissions because the plants that are the fuel sources capture carbon dioxide from the atmosphere. These fuels are considered renewable as long as the vegetation producing them is maintained or replanted, such as firewood, alcohol fermented from sugar, and combustible oils extracted from soy beans.
Organic matter derived from plant or animal matter including agricultural and forestry wastes and residues. Biomass typically refers to such plant matter grown for use as biofuel, or used for production of fibres, chemicals or heat.
See carbon tariffs.
In a cap-and-trade scheme, borrowing is when a regulated entity (emitter) borrows or uses allowances from a future compliance period. Borrowing is not common in cap-and-trade schemes as it can result in an unacceptable deferral of total emission reductions. Borrowing is the opposite of banking.
BREEAM is an environmental assessment method used for buildings. It provides market recognition for low environmental impact building and assurance that the best environmental practices are incorporated into them. It is the British equivalent to the North American LEED system.
A part of the California Environmental Protection Agency, an organization which reports directly to the Governor’s Office in the Executive Branch of California State Government.
The California Climate Action Registry is a private non-profit organization originally formed by the State of California. The California Registry serves as a voluntary greenhouse gas (GHG) registry to protect and promote early actions to reduce GHG emissions by organizations.
An emissions trading system where the total emissions are limited (capped).Cap and Trade
The process of capturing and removing carbon from the atmosphere and depositing it in a reservoir. Also referred to as carbon capture and sequestration. CCS often involves the separation of CO2 from industrial sources (energy production) and storing/isolating it from the atmosphere.
The marketable credits created by emission reduction/avoidance (offset) projects. Like allowances, carbon credits can be bought and sold and if the offset project is deemed eligible by the rules of the cap-and-trade jurisdiction where the credit is to be used, carbon credits can be used to meet regulated compliance obligations. Carbon credits are often referred to as offsets.
The most prevalent greenhouse gas and against which the global warming potential of all other GHGs are compared. This relative comparison is referred to as CO2e or CO2 equivalence. The main anthropogenic sources of carbon dioxide emissions are the combustion of fossil fuels, deforestation and industrial processes.
The amount of global warming associated with greenhouse gases expressed in terms of the amount of carbon dioxide that would have an equivalent (100 year) global warming potential.
The Carbon Disclosure Project (CDP) is a secretariat for the world’s largest institutional investor collaboration on the business implications of climate change. CDP represents a process whereby many institutional investors collectively sign a single global request for disclosure of information on Greenhouse Gas Emissions.
The greenhouse gas emissions caused directly and indirectly by and individual, organization, event or product. The two most prominent standards used to quantify a carbon footprint are the 2004 joint publication by the World Resources Institute and the World Business Council for Sustainable Development entitled The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard and the 2006 ISO publication ISO 14064-1 entitled: Greenhouse Gases – Part 1: Specification with guidance at the organizational level for quantification and reporting of greenhouse gas emissions and removals.
Carbon footprint verification is the ‘systematic, independent and documented process for the evaluation of a greenhouse gas assertion against agreed verification criteria’. The GHG Protocol and ISO 14064-1 are the most common frameworks used for quantifying an organization’s carbon footprint. Carbon footprint verification:
– Is typically required to substantiate and/or commoditize CO2 reductions
– Can increase the integrity of GHG reporting activities
– Provides assurance that a carbon footprint is complete, consistent and without material discrepancies
– Will reduce the risk of material data discrepancies and reduce the risk of reputational, operational and financial risk that such discrepancies can cause
– Can improve investment and strategic decision-making
– Is often a requirement for early action credits
Occurs when there is an increase in carbon dioxide emissions in one country as a result of an emissions reduction by a second country with a strict climate policy.
Carbon neutrality is when an entity achieves net zero carbon emissions in a given period of time by sequestering or offsetting an amount of carbon equivalent to that emitted by them. Being carbon neutral results in having a carbon footprint of zero. When carbon neutrality accounts for all GHG emissions it also referred to as being climate neutral. Carbon neutrality is a voluntary action typically undertaken by businesses to show their commitment to mitigating climate change.
A reservoir of carbon – e.g. a forest. Any system that can accumulate (and/or release) carbon.
The proposed (May 2007) UK carbon trading scheme for business that consume 6,000MWh per year but that are not included in EU ETS. It is expected to be operational in 2009.
The process of removing carbon from the atmosphere and depositing it in a reservoir such as plants and soils.
A process, activity or mechanism that leads to a net removal of atmospheric greenhouse gases.
Any process, activity or mechanism that leads to a net addition of atmospheric greenhouse gases.
To tariff (tax) an imported good that is cheaper to manufacture due to lowered emission controls by a particular company, so that a company that is using cleaner manufacturing processes, which is usually more expensive, is able to fairly compete in the marketplace.
A 10-member panel elected at COP-7 which supervises the CDM and is under the authority and guidance of the COP/MOP, and is fully accountable to the COP/MOP.
A Kyoto Protocol unit equal to 1 metric tonne of CO2 equivalent. CERs are issued for emission reductions from Clean Development Mechanism projects.
Methane – a greenhouse gas with the CO2 equivalence (global warming potential) of 21 and an atmospheric lifetime of 12 years. The main anthropogenic sources of methane emissions are the cultivation of livestock, natural gas delivery systems, landfills, and coal mining.
North America’s only, and the world’s first, greenhouse gas (GHG) emission registry, reduction and trading system for all six greenhouse gases (GHGs). CCX is a self-regulatory, rules based exchange designed and governed by CCX Members.
A wholly owned subsidiary of CCX which currently offers standardized and cleared futures contracts on sulfur dioxide and nitrogen oxide emission allowances.
Chicago Mercantile Exchange is the largest futures exchange in the United States and also owns and operates the largest futures Clearing House in the world. CME products fall into five major areas: interest rates, equities, foreign exchange, agricultural commodities and alternative investments. www.cme.com
First synthesized in 1892, chlorofluorocarbons (CFCs) are a class of chemical compounds that are odourless, non-toxic, non-flammable, and chemically inert. CFCs have been commonly used as aerosol propellants, refrigerants, degreaser and in the production of foam packaging. CFCs are now known to deplete the Earth’s ozone layer and in accordance with the Montreal Protocol, the production of CFCs (and other ozone-depleting substances) is now banned in industrial countries and will be banned ini developing in 2010.
Issued by the US EPA in March 2005, CAIR will permanently cap emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx). CAIR achieves large reductions of SO2 and/or NOx emissions across 28 eastern states and the District of Columbia.
Issued by the US EPA in March 2005 to permanently cap and reduce mercury emissions from coal-fired power plants.
CDM is an arrangement under Article 12 of the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment (Annex 1 countries) to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries. In addition enabling Annex 1 countries to meet their carbon reductions commitments, a key objective of the CDM is to address the sustainable development needs of a non-Annex 1 country hosting a CDM project. Under CDM, and in return for financing carbon reduction projects in the host country, Annex 1 countries can accrue Certified Emission Reduction units which are tradable carbon credits. CDM projects require approval from both the host country and the investor country. The CDM is supervised by the CDM Executive Board and is under the guidance of the Conference of the Parties (COP/MOP) of the United Nations Framework Convention on Climate Change.
A change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods.
A 2001 agreement between 6000 UK businesses and government to reduce energy use in exchange for a discount on their climate change levy tax.
The 6000 companies in addition to the 33 Direct Participants involved in the UK ETS (2003 – 2006) and who have negotiated agreements with Government to set energy-related targets. Companies meeting their targets receive an 80% discount from the Climate Change Levy, a tax on the business use of energy.
A partnership between companies, NGOs and research institutes seeking to promote integrated solutions to land management around the world. The CCBA develops voluntary standards to help design and identify land management projects that simultaneously minimize climate change, support sustainable development and conserve biodiversity. www.climate-standards.org
50 of the FTSE 500 corporations that submit superior responses to the Carbon Disclosure Project.
See carbon neutral.
A power generator that delivers both electricity and heat.
Standardized format for reporting estimates of greenhouse-gas emissions and removals and other relevant information by Annex I Parties.
Registry of all EU ETS transaction. An Emissions Trading Registry is a web-based application that records: ü CO2 allowances and units that are allocated to and held in installation accounts ü Annual verified emissions for installations ü The movement of allowances to and from accounts ü Annual compliance status of installations. Electronically-linked national registries are central to both the EU Emissions Trading Scheme and wider international emissions trading under the Kyoto Protocol (from 2008).
Conference of Parties of the United Nations Framework Convention on Climate Change . The supreme body of the UNFCCC. It currently meets once a year to review the Convention’s progress.
Meeting of the Conference of the Parties to the Kyoto Protocol. Often abbreviated to COP/MOP.
The period of time for which a regulated entity must submit sufficient allowances (and other compliance mechanisms e.g. offsets, early action credits) to meet their emissions for that period. Compliance periods vary in length from one scheme to another but are typically three years (as with the WCI, RGGI, MGGRA).
US federal regulations first enacted in 1975 and intended to improve the average fuel economy of cars and light trucks sold in the US.
An international convention entered into force in 1993 with the aim of:
– To conserve biological diversity;
– The use biological diversity in a sustainable fashion; and,
To share the benefits of biological diversity fairly and equitably. 191 countries are party to the convention.
CACs air pollutants that cause smog, acid rain and other health hazards. CACs are composed of oxides of nitrogen (NOx), sulphur dioxide (SO2), carbon monoxide (CO), volatile organic compounds (VOCs), and particulate matter, including total particulate matter (TPM), particulate matter with a diameter less than or equal to 10 microns, and particulate matter with a diameter less than or equal to 2.5 microns.
An office, ministry, or other official entity appointed by a Party to the Kyoto Protocol to review and give national approval (through a Letter of Approval) to projects proposed under the Clean Development Mechanism.
Independent evaluation of a JI project by an Accredited Independent Entity that the project’s Project Design Document (PDD) meets the requirements of Article 6 of the Kyoto Protocol and JI Guidelines. Also referred to as verification.
A Designated Operational Entity under the CDM is either a domestic legal entity or an international organization accredited and designated, on a provisional basis until confirmed by the COP/MOP, by the Executive Board (EB). A DOE has two key functions:
1) It 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; and/or,
2) It verifies emission reductions of a registered CDM project activity, certifies as appropriate and requests the Board to issue Certified Emission Reductions accordingly.
The issuance will be considered final 15 days after the request is made (unless a request of review is made for more detail). See link for list of DOE’s: cdm.unfccc.int/DOE/list/index.html
Commonly referred to as R-12 or Freon 12, it is a CFC and greenhouse gas now banned under the Montreal Protocol due to its ozone-depleting potential. Dichlorodifluoromethane has a global warming potential of 6,200–7,100 times that of carbon dioxide and has an atmospheric lifetime of 12 years. The main anthropogenic sources of Dichlorodifluoromethane are liquid coolants, aerosol propellants and foams.
A non-conducting substance, i.e. an insulator.
Allowances granted (under the Western Climate Initiative) to regulated entities and facilities for GHG reductions achieved before the start of the first compliance period in 2012.
Countries that are in the transition from a planned economy to a market-based economy. EIT’s are the countries in Central and Eastern Europe, Russia and the former republics of the Soviet Union.
The reduction in emission quantity or intensity.
The greenhouse gas emissions associated with a unit of energy or mass. An emission coefficient is typically expressed in terms of CO2 equivalence i.e. Kg CO2e per kWh of electricity.
A factor relating GHG emissions to a level of activity or a quantity of inputs. Emission factors are used where it is not practically possible to directly quantify GHG emissions from a certain activity, e.g. Electricity use where an emission factor would be used to quantify CO2 equivalence per kWh used.
An emission credit or allowance earned by a company when it reduces GHG emissions beyond what is required by permits and rules. It is an asset that can typically be used by its owner or sold to others.
Binding agreements between the buyer and seller of emission reduction credits. ERPAs are most commonly associated with the purchase and sale of CERs and ERUs.
A Kyoto Protocol unit equal to 1 metric tonne of CO2 equivalent. ERUs are generated for emission reductions or emission removals from Joint Implementation projects.
A scheme that allows the trading of emission permits (allowances) between market participants. Emissions trading schemes typically also allow the trading of carbon credits generated through carbon reduction/avoidance projects in sectors not covered by the permitted cap.
Industries that are carbon-intense and vulnerable through trade in the presence of a carbon price. Should a jurisdiction put a price on carbon, emissions-intense industries would incur higher costs that would disadvantage them in relation to the same industries in jurisdictions without a carbon price. This tends to result in carbon leakage, but leakage can be minimized through border adjustments or carbon tariffs.
A voluntary industry-government partnership that works with companies to develop and report on long-term comprehensive climate change strategies that are both good for business and for the environment.
An Allowance Unit of one tonne of CO2. EUAs are granted by the European Commission to EU Member States in accordance with their National Allocation Plans. EUAs have been designed to be equal to and thus fungible with Assigned Amount Units (AAU) defined under the Kyoto Protocol.
The European Emissions Trading Scheme is a cornerstone in the EU’s fight against climate change. Implemented in 2005, it was the first international trading system for CO2 emissions in the world. It covers over 11,500 energy-intensive installations across the EU, which represent close to half of Europe’s emissions of CO2. These installations include combustion plants, oil refineries, coke ovens, iron and steel plants, and factories making cement, glass, lime, brick, ceramics, pulp and paper. The aim of the EU ETS is to help EU Member States achieve compliance with their commitments under the Kyoto Protocol. Phase 1 ran from 2005 to 2007 and included emissions from energy activities, production and processing of ferrous metals, mineral industry, and pulp, paper and board industries. Phase 2 runs from 2008 to 2012 the cap for EU CO2 was set to 2.08 billion tonnes. Beyond 2012 the EU plans to include all five of the other GHGs as well as emissions from aviation sources.
The ECX manages the product development and marketing for ECX Carbon Financial Instruments (ECX CFIs), listed and admitted to trading on the ICE Futures electronic platform. ECX is a member of the Climate Exchange Plc (CLE) group of companies. Other member companies include the Chicago Climate Exchange (CCX).
Emission allowances granted under the EU ETS through National Allocation Plans in the EU.
As defined by the EU’s Linking Directive, EU Member States are allowed to use ‘flexible mechanisms’ to meet their Kyoto commitments. Flexible mechanisms are:
– ERU credits from Joint Implementation projects (JI);
– CER credits from Clean Development Mechanism (CDM) projects; and,
– International Emissions Trading.
1 billion tonnes
A resource that is owned by none but available to all. The earth’s atmosphere, Antarctica and the high seas are the three global commons. Resources that are ‘common’ suffer from what biologist Garrett Hardin in 1968 coined ‘the Tragedy of the Commons’. See also tragedy of the commons.
The GEF is an independent financial organization that provides grants to developing countries for projects that benefit the global environment and promote sustainable livelihoods in local communities. The financial mechanism is accountable to the COP.
The increase in the temperature of oceans and near-surface air on Earth.
An index representing the combined effect of the differing times greenhouse gases remain in the atmosphere and their relative effectiveness in absorbing outgoing infrared radiation.
Gas 2001 IPCC GWP
Carbon Dioxide 1
Nitrous Oxide 296
Perfluoromethane (CF4) 5,700
Perfluoroethane (C2F6) 11,900
Sulfur Hexafluoride (SF6) 22,200
Initiated by WWF, SSN and Helio International, the Gold Standard is a best practice methodology and a high quality carbon credit label for both Kyoto and voluntary markets. The Gold Standard applies only to renewable energy and energy efficiency projects and is meant to ensure that projects offer real environmental and sustainable development benefits.
The process of allocating emission permits on the basis of historical emissions. Grandfathered emissions are typically provided free of charge as opposed to being sold through auction.
The atmospheric gases responsible for causing global warming and climate change. The major GHGs (Kyoto gases) are carbon dioxide (CO2), methane (CH4) and nitrous oxide (N20). Less prevalent –but very powerful — greenhouse gases are hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
See Renewable Energy Certificates (RECs)
Trifluoromethane – a greenhouse gas. HFC-23 is a by-product in the production of the refrigerant HCFC-22 and has a GWP of 12,000.
The term used to describe the excess of permits (AAUs) in countries who have experienced economic collapse or reduced production (rather than intentional efforts to reduce emissions) since their Kyoto commitment (and thus AAUs) was established. While many policy makers see hot air trading as unavoidable, countries that purchase ‘hot air’ to meet a Kyoto commitment are under increasing pressure and criticism for environmental integrity and ethical reasons. Hot air credits are most commonly associated with the Russian Federation.
A greenhouse gas with a global warming potential of 1,350 times that of carbon dioxide. The main anthropogenic sources of hydrofluorocarbons are liquid coolants, such as air conditioning and refrigerators. Hydrofluorocarbons have an atmospheric lifetime of 12 years.
The IPCC is a scientific body of nearly 2000 scientists from 130 countries tasked to evaluate the risk of climate change caused by human activity. Established in 1988 by the World Meteorological Organization and the UN Environment Programme, the IPCC surveys world-wide scientific and technical literature and publishes assessment reports that are widely recognized as the most credible existing sources of information on climate change. The IPCC is responsible for providing the scientific and technical information to the UNFCCC. This information is typically provided through the publication of periodic Assessment Reports, the latest of which is the Fourth Assessment Report at www.ipcc.ch/ipccreports/ar4-syr.htm. The IPCC is independent of the Convention. The IPCC shared the 2007 Nobel Peace Prize with former Vice President of the United States Al Gore.
Transaction registry of national emission registries of the Kyoto Protocol emission allowances and from 2008 all transactions in the EU ETS.
Published by the International Organization for Standardization, ISO 14064 is the series of standards for greenhouse gas accounting and verification. There are three parts to the ISO 16064 standard: ISO 14064-1:2006, Greenhouse gases –
Part 1: Specification with guidance at the organization level for the quantification and reporting of greenhouse gas emissions and removals. ISO 14064-2:2006, Greenhouse gases –
Part 2: Specification with guidance at the project level for the quantification, monitoring and reporting of greenhouse gas emission reductions and removal enhancements. ISO 14064-3:2006, Greenhouse gases –
Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.
Published by the International Organization for Standardization, ISO 14065:2007 Greenhouse gases: specification for greenhouse gas validation and verification bodies for use in accreditation and other forms of recognition is the standard that specifies the principles and requirements for bodies that undertake validation or verification of greenhouse gas inventories, footprints or assertions.
A mechanism under the Kyoto Protocol through which one Annex B country (have a Kyoto commitment) can receive emission reduction units (credits) when it helps to finance projects that reduce net greenhouse-gas emissions in another Annex B country.
The six greenhouse gases controlled under the Kyoto Protocol. They are carbon dioxide (CO2); methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (CHCLF2), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
The Kyoto Protocol is an international agreement that sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas emissions. These reductions amount to an average of 5% against 1990 levels over the five-year period 2008-2012. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. 183 Parties of the Convention have ratified its Protocol to date (Jan 2009). The Kyoto Protocol includes a set of mechanisms that allow countries to meet their commitments. These mechanisms are the three procedures established under the Kyoto Protocol to increase the flexibility and reduce the costs of making greenhouse-gas emission cuts; they are the Clean Development Mechanism, emissions trading, and joint implementation. The Kyoto Protocol is an international agreement standing on its own, and requiring separate ratification by governments, but linked to the UNFCCC.
A greenhouse gas inventory sector that covers emissions and removals of greenhouse gases resulting from direct human-induced land use, land-use change and forestry activities.
US green building rating and certification system.
Leakage occurs when a carbon reduction/avoidance project changes the availability or quantity of a product or service that results in changes in GHG emissions elsewhere.
The London Energy Brokers’ Association benchmark index for the energy markets and for trades in EU emissions allowances. The aim of this independent benchmark index is to contribute towards a more transparent, liquid, traded market in emissions allowances.
The linking of emissions trading schemes and making allowances and/or credits from one jurisdiction eligible in another. Benefits of linking include increasing market liquidity and reducing the cost of compliance.
EU Emissions Trading Directive 2003/87/EC that links the EU ETS and the Kyoto Protocol through the use of CERs and ERUs as fungible credits in the EU ETS.
A CER issued for forestry projects under the UNFCCCs’ CDM rules. LCERs expire at the end of the crediting period of the project under which they were issued.
A low carbon fuel standard is regulation that requires fuel providers to meet a certain (often declining) limit of greenhouse gas emissions intensity per unit of fuel as a means of encouraging the supply and use of low-carbon transportation fuels. California introduced the world’s first low carbon fuel standard by California by Executive Order in January 2007 and at the time of writing (Sept 2009) 13 Northeast US states were in the process of developing low-carbon fuel standards and there were LCFS bills in both the US House of Representatives and the Senate.
In the context of climate change, MAC is the cost of reducing/abating one additional unit of emissions. In theory, effective market-based trading systems that allow the use of carbon credits from sectors other than those granted permits (allowances) ensures that emission reductions will be made at the lowest possible marginal abatement cost, and thus most efficiently and expediently.
1 million tonnes
A greenhouse gas with a global warming potential 21 times that of carbon dioxide, is given off by rotting organic material in reservoirs. The main anthropogenic sources of methane are the cultivation of livestock, natural gas delivery systems, landfills and coal mining. Methane has an atmospheric lifetime of 12 years.
Actions to reduce greenhouse gas emissions in order to stabilize GHG emission concentrations in the atmosphere and prevent further global warming. Also referred to as climate change mitigation.
The international agreement signed for the protection of the stratospheric ozone layer. It was opened for signing in 1987 and entered into force in 1989. It banned ozone depleting substances such as CFCs.
Allocation plan of an EU Member State that establishes the rules to issue allowances for installations covered under the EU ETS.
Founded in 1970, the NRDC is a national, non-profit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment.
A term coined in 1989 by Amory Lovins that refers to the ‘virtual generation’ of electricity by improving energy efficiency and thus reducing energy demand rather than investing to increase electricity generation capacity.
Implemented as part of the 1977 Clean Air Act Amendments, New Source Reviews require new stationary sources of air pollution in the US to get permits from the EPA before commencing construction.
Nitrous Oxide is a greenhouse gas with a global warming potential of approximately 300 times that of CO2. Nitrous oxide is produced by both natural and human sources. The main human sources of N2O are agricultural soil management, animal waste management, sewage treatment, the combustion of fossil fuel, adipic acid production (which is used in the production of nylon fibers, plastics and plasticizers for polyvinyl chloride), and nitric acid production. Nitrous oxide has an atmospheric lifetime of 120 years.
Offsets are credits created by emission reduction projects not within the boundary of a cap-and-trade program. In a regulated cap-and-trade scheme, capped emitters are legally mandated to reduce their emissions by specific amounts and an offset mechanism enables regulated entities to offset their own emissions by purchasing emission reduction credits generated through projects external to the entities/sectors/geographies covered by the cap.
To compensate for real emissions with the use of offset credits.
An approach to allocating emissions allowances under a cap-and-trade system that is based on some measure of output (i.e. goods produced, levels of activity, revenue, etc). It avoids penalizing companies for growth, easily allows for new entrants into the market, and segments sectors into similar industrial groups.
British Standards Institute’s Publicly Available Specification PAS 2050 – Specification for the Measurement of the Embodied Greenhouse Gas Emissions in Products and Services.
Financing expenditures with existing funds, rather than borrowed. Under the PAYGO rules a new proposal must either be “budget neutral” or offset with savings derived from existing funds.
The principle that if an action or policy might cause severe harm to people or the environment, even in absence of scientific consensus and proof that no harm would ensue, we must act to avoid such potential harm.
In a cap-and-trade scheme, a legal maximum limit on the price of allowances (at auction).
In a cap-and-trade scheme, the use of price controls (ceilings and floors) to limit excessive fluctuations in the price of allowances. Price controls act to limit market volatility, create a degree of price certainty and limit speculation in carbon markets.
In a cap-and-trade scheme, a legal minimum limit on the price of allowances (at auction).
When creating carbon credits or offsets, a protocol sets out the methodology for quantifying greenhouse gas emission reductions for a specific project type (i.e. reforestation; landfill methane capture and destruction; animal waste management; etc).
A greenhouse gas with a global warming potential of approximately 6,500 – 9,200 times that of CO2and with an atmospheric lifetime of 50,000 years. The main anthropogenic sources of perfluorocarbons are aluminum production; medical applications; as a dielectric insulator in electronic and electrical equipments; refrigerants; and semi-conductor industry applications.
Transactions in which the buyer purchases emission credits from a project that can verifiably demonstrate that it reduces GHG emissions compared with what would have happened otherwise. The most notable examples of such activities are CDM and JI mechanisms of the Kyoto Protocol.
The document which outlines the proposed plans and reductions for a planned CDM project. The PDD is a key document for validation and registration of a CDM projects.
The direct human-induced conversion of non-forested land to forested land through planting, seeding or promotion of natural seed sources on land that was forested but has been converted to non-forest land.
REACH is a new European Community Regulation on chemicals and their safe use (EC 1907/2006). It deals with the Registration, Evaluation, Authorisation and Restriction of Chemical substances. The new law entered into force on 1 June 2007.
A Kyoto Protocol unit equal to 1 metric tonne of carbon dioxide equivalent. RMUs are generated in Annex I Parties by LULUCF activities that absorb carbon dioxide.
See Renewable Portfolio Standard.
A Renewable Energy Certificate is tradable financial product created when a megawatt-hour of renewable energy is generated. A REC can be traded separately from the electricity generated in the creation of the REC. REC transactions are an additional source of revenue for renewable generators and provide a means for electricity suppliers to demonstrate compliance with an RPS in addition to directly purchasing renewable electricity. RECs are also known as Tradable Renewable Certificates (TRECs) or Green Tags.
Regulation on fuel suppliers (e.g. refiners, blenders, importers) that stipulates a minimum content of renewable fuel (e.g. ethanol, biofuels, biodiesel) contained in fuels. RFSs exist in the US (2008) and Canada (2010).
A ROC is tradable emission certificate demonstrating that electricity is from renewable sources and has been generated in accordance with the Renewable Obligations Order (2002) in the UK.
The Renewables Obligation Order(s) in the UK require licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. Renewables Obligation Orders came in to effect in Scotland in 2002; in Northern Ireland in 2005 and shall come into force on 1st April 2009 for England and Wales.
Regulation imposed on electricity suppliers that stipulates a minimum required amount of renewable energy in its total portfolio of energy sources. Electricity suppliers can typically purchase renewable energy and/or Renewable Energy Certificates to demonstrate RPS compliance. Sometime referred to as a Renewable Electricity Standard. RPS mechanisms now exist in the United Kingdom, Italy, Belgium and 27 US states.
A Business Roundtable initiative seeking to have every company in every sector of the US economy undertake voluntary actions to control greenhouse gas (GHG) emissions and improve the GHG intensity of the U.S. economy.
A mechanism to award funds to emission reduction/avoidance projects whereby project bidders commit to certain operational outcomes at a particular price based on agreed performance criteria.
The process of increasing the carbon content of a carbon pool (other than the atmosphere). Biological sequestration is the sequestration of carbon into biological pools (e.g. forests) and geological sequestration is the process of sequestering carbon into geological pools (e.g. underground reservoirs).
Body that meets twice a year to assess the progress of the implementation of the United Nations Framework Convention on Climate Change.
Where a regulatory body allocates – or sets aside – a portion of total allowances to provide financial incentives to: take early action; promote energy efficiency, improve land use planning; and other reduction strategies and projects that reduce emissions.
Body that meets twice a year to provide scientific and technological advice to the Conference of Parties.
A standard forward agreement launched by Barclays Capital to standardize the trading of CERs in the secondary CER market.
Investment (also known as Sustainable and Responsible Investment) which allows investors to take into account wider concerns, such as social justice, economic development, peace or a healthy environment, as well as conventional financial considerations.
Sulphur hexafluoride is a greenhouse gas with a global warming potential of approximately 23,900 times that of CO2 and has an atmospheric lifetime of 3,200 years. The main anthropogenic source of sulphur hexafluoride is as a dielectric fluid used in electrical equipment, such as transformers.
A CER issued for forestry projects under the UNFCCCs’ CDM rules. LCERs expire at the end of the commitment period following the one in which they were issued.
Tragedy of the Commons In 1968, biologist Garrett Hardin coined the phrase ‘Tragedy of the Commons’. The tragedy of the commons is the situation where environmental degradation results when a resource is owned by none and shared by all. In such a situation access to use (pollute) the resource is free and individuals (or businesses) act in self interest and under that assumption that if they do not use the resource someone else will. When all individuals act in this way, and as the access to use/pollute is unregulated, the cumulative effect is that the resource is used/polluted beyond its sustainable yield and then available to none – hence the Tragedy.
The earth’s atmosphere, Antarctica and the high seas are the three global commons.
The process whereby a regulated entity submits to regulators, emission allowances and other means of compliance (e.g. offsets, early action credits) equivalent to their emission levels during that compliance period.
Entered into force in 1994, the UNFCCC is the framework convention that provides the basis for a global response to climate change.
The UNFCCC recognizes that the climate system is a shared resource whose stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases. The Convention enjoys near universal membership, with 192 countries having ratified.
Under the Convention, governments:
-Gather and share information on GHG emissions, national policies and best practices;
-Launch national strategies for addressing GHG emissions and adapting to expected impacts, including the provision of financial and technological support to developing countries; and,
-Cooperate in preparing for adaptation to the impacts of climate change. unfccc.int
Pollutants that have the same global potential for damage regardless of their points of release. GHGs are uniformly mixed pollutants.
Launched in January 2007, the USCAP is a group of businesses and leading environmental organizations that have come together to call on the US federal government to enact national legislation to require significant reductions of GHG emissions.
The independent evaluation of a CDM project by a designated operational entity. Validation is the ex ante determination that a CDM project will be eligible under CDM rules and that proposed emission reduction/avoidance quantification are correct and use appropriate quantification methodologies.
While most commonly associated with CDM projects, validation can refer to the ex ante assessment of other GHG reduction/avoidance projects.
The systematic, independent and documented process for the evaluation of GHG reductions/avoidances against agreed verification criteria.
The term verification is used for ex post evaluations of CDM and other reduction/avoidance projects and organizations.