Accredited independent entities (AIEs) are independent auditors that assess whether a potential project meets all the eligibility requirements of the JI (determination) and whether the project has achieved greenhouse gas emission reductions (verification).
A project activity is additional if anthropogenic GHG emissions are lower than those that would have occurred in the absence of the project activity.
A project activity is additional if anthropogenic GHG emissions are lower than those that would have occurred in the absence of the project activity.
The process of establishing and growing forests on bare or cultivated land, which has not been forested in recent history.
Annex I (Parties)
Annex I Parties include the industrialized countries that were members of the OECD (Organisation for Economic Co-operation and Development) in 1992, plus countries with economies in transition (the EIT Parties), including the Russian Federation, the Baltic States, and several Central and Eastern European States.
Annex B (Parties)
The 39 industrialized countries (including the European Economic Community) listed in Annex B to the Kyoto Protocol have committed to country-specific targets that collectively reduce their GHG emissions by at least 5.2% below 1990 levels on average over 2008–12.
Assigned Amount Unit (AAU)
Annex I Parties are issued AAUs up to the level of their assigned amount, corresponding to the quantity of greenhouse gases they can release in accordance with the Kyoto Protocol (Art. 3), during the first commitment period of that protocol (2008–12). One AAU represents the right to emit one metric ton of carbon dioxide equivalent.
A downward sloping forward curve (i.e., the price of the future is less than the spot price of underlying commodity). Antonym: contango.
Banking or carry over
Compliance units under the various schemes to manage GHG emissions in existence may or may not be carried over from one commitment period to the next. Banking may encourage early action by mandated entities depending on their current situation and their anticipations of future carbon constraints. In addition banking brings market continuity. Banking between Phase I and Phase II of the EU ETS is not allowed but is allowed between Phase II and further Phases. Some restrictions on the amount of units that can be carried over may apply: for instance, EUAs may be banked with no restriction while the amount of CERs that can be carried over by a Kyoto Party is limited to 2.5% of the assigned amount of each Party.
The emission of greenhouse gases that would occur without the policy intervention or project activity under consideration.
Combustible fuel composed of a biological material, for example, wood or wood by-products, rice husks, or cow dung.
California Global Warming Solution Act AB32 (AB32)
The passage of Assembly Bill 32 (California Global Warming Solution Act AB32) in August 2006 sets economy-wide GHG emissions targets as follows: Bring down emissions to 1990 levels by 2020 (considered to be at least a 25% reduction below business-asusual) and to 80% of 1990 levels by 2050. Covering about 85% of GHG emissions, a cap and trade scheme (still under design) would be a major instrument, along with renewable energy standards, energy efficiency standards for buildings and appliances as well as vehicle emissions standards.
Cap and trade
Cap and trade schemes set a desired maximum ceiling for emissions (or cap) and let the market determine the price for keeping emissions within that cap. To comply with their emission targets at least cost, regulated entities can either opt for internal abatement measures or acquire of allowances or emission reductions in the carbon market, depending on the relative costs of these options.
The potential of greenhouse gas emission reductions that a project is able to generate and sell.
Resources provided to activities generating (or expected to generate) greenhouse gas (or carbon) emission reductions through the transaction of such emission reductions.
Carbon Dioxide Equivalent (CO2e)
The universal unit of measurement used to indicate the global warming potential of each of the six greenhouse gases regulated under the Kyoto Protocol. Carbon dioxide—a naturally occurring gas that is a byproduct of burning fossil fuels and biomass, land-use changes, and other industrial processes—is the reference gas against which the other greenhouse gases are measured, using their global warming potential.
Certified Emission Reductions (CERs)
A unit of greenhouse gas emission reductions issued pursuant to the Clean Development Mechanism of the Kyoto Protocol, and measured in metric tons of carbon dioxide equivalent. One CER represents a reduction in greenhouse gas emissions of one metric ton of carbon dioxide equivalent.
Chicago Climate Exchange (CCX)
Members to the Chicago Climate Exchange make a voluntary but legally binding commitment to reduce GHG emissions. By the end of Phase I (December, 2006), all Members will have reduced direct emissions 4% below a baseline period of 1998–2001. Phase II, which extends the CCX reduction program through 2010, will require all Members to ultimately reduce GHG emissions 6% below baseline. Among the members are companies from North America as well as municipalities or U.S. States or Universities. As new regional initiatives began to take shape in the U.S., membership of the CCX grew from 127 members in January 2006 to 237 members by the end of the year while new participants expressed their interest in familiarizing themselves with emissions trading.
Clean Development Mechanism (CDM)
The mechanism provided by Article 12 of the Kyoto Protocol, designed to assist developing countries in achieving sustainable development by allowing entities from Annex I Parties to participate in low-carbon projects and obtain CERs in return.
Climate Action Reserve (CAR)
The Climate Action Reserve is a U.S.-based offsets program that establishes regulatory-quality standards for the development, quantification, and verification of greenhouse gas (GHG) emissions reduction projects in North America; issues carbon offset credits known as Climate Reserve Tonnes (CRT) generated from such projects; and tracks the transaction of credits over time in a transparent, publicly-accessible system.
Community Independent Transaction Log (CITL)
The Community Independent Transaction Log (CITL) conducts “supplementary checks” to those by the ITL for transactions involving registries of at least one EU Member State, such as the issuance, transfer, cancellation, retirement, and banking of EUAs.
Conference of Parties (COP)
The supreme body of the Convention. It currently meets once a year to review the Convention’s progress. The word “conference” is not used here in the sense of “meeting” but rather of “association,” which explains the seemingly redundant expression “fourth session of the Conference of the Parties.”
Conference of the Parties serving as the Meeting of the Parties (CMP)
The Convention’s supreme body is the COP, which serves as the meeting of the Parties to the Kyoto Protocol. The sessions of the COP and the CMP are held during the same period to reduce costs and improve coordination between the Convention and the Protocol.
A term used in the futures market to describe an upward sloping forward curve (i.e., futures prices are above spot prices). Antonym: backwardation.
The crediting period is the duration of time during which a registered, determined or approved project can generate emission reductions. For CDM projects, the crediting period can be of either seven years (renewable twice) or of ten years (non-renewable).
Designated Focal Point (DFP)
Parties participating in the Joint Implementation (JI) mechanism are required to nominate a Designated Focal Point (DFP) for approving projects.
Designated National Authority (DNA)
An office, ministry, or other official entity appointed by a Party to the Kyoto Protocol to review and give national approval to projects proposed under the Clean Development Mechanism.
Designated Operational Entities (DOEs)
Designated operational entities are independent auditors that assess whether a potential project meets all the eligibility requirements of the CDM (validation) and whether the project has achieved greenhouse gas emission reductions (verification and certification).
Determination is the process of evaluation by an independent entity accredited by the host country (JI Track 1) or by the Joint Implementation Supervisory Committee (JI Track 2) of whether a project and the ensuing reductions of anthropogenic emissions by sources or enhancements of anthropogenic removals by sinks meet all applicable requirements of Article 6 of the Kyoto Protocol and the JI guidelines.
There are six Eligibility Requirements for Participating in Emissions Trading (Art. 17) for Annex I Parties. Those are: (i) being a Party to the Kyoto Protocol, (ii) having calculated and recorded one’s Assigned Amount, (iii) having in place a national system for inventory, (iv) having in place a national registry, (v) having submitted an annual inventory, and (vi) submit supplementary information on assigned amount. An Annex I party will automatically become eligible after 16 months have elapsed since the submission of its report on calculation of its assigned amount. Then, this Party and any entity having opened an account in the registry can participate in Emissions Trading. However, a Party could lose its eligibility if the Enforcement Branch of the Compliance Committee has determined the Party is non-compliant with the eligibility requirements.
Emission Reductions (ERs)
The measurable reduction of release of greenhouse gases into the atmosphere from a specified activity, and a specified period of time.
Emission Reductions Purchase Agreement (ERPA)
Agreement which governs the transaction of emission reductions.
Emission Reduction Units (ERUs)
A unit of emission reductions issued pursuant to Joint Implementation. One EUA represents the right to emit one metric ton of carbon dioxide equivalent.
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, United Kingdom.
European Union Allowances (EUAs)
the allowances in use under the EU ETS. An EUA unit is equal to one metric ton of carbon dioxide equivalent.
European Union Emission Trading Scheme (EU ETS)
The EU ETS was launched on January 1, 2005 as a cornerstone of EU climate policy towards its Kyoto commitment and beyond. Through the EU ETS, Member States allocate part of the efforts towards their Kyoto targets to private sector emission sources (mostlyutilities). Over 2008–12, emissions from mandated installations (about 40% of EU emissions) are capped on average at 6% below 2005 levels. Participants can internally reduce emissions, purchase EUAs or acquire CERs and ERUs (within a 13.4% average limit of their allocation over 2008–12). The EU ETS will continue beyond 2012, with further cuts in emissions (by 21% below 2005 levels in 2020 or more, depending on progress in reaching an ambitious international agreement on climate change).
First Commitment Period
The five-year period, from 2008 to 2012, during which industrialized country have committed to collectively reduce their greenhouse gas (or “carbon”) emissions by an average of 5.2% compared with 1990 emissions under the Kyoto Protocol.
Green Investment Scheme (GIS)
A GIS is a voluntary mechanism through which proceeds from AAU transactions will contribute to contractually agreed environment- and climate- friendly projects and programs both by 2012 and beyond.
Greenhouse gases (GHGs)
Both natural and anthropogenic, greenhouse gases trap heat in the Earth’s atmosphere, causing the greenhouse effect. Water vapour (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4), and ozone (O3) are the primary greenhouse gases. The emission of greenhouse gases through human activities (such as fossil fuel combustion or deforestation) and their accumulation in the atmosphere is responsible for an additional forcing, contributing to climate change. The Kyoto Protocol regulates six GHGs: carbon dioxide (CO2), methane (CH4), and nitrous oxide (N20), as well as hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).
Global Warming Potential (GWP)
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.
Internal rate of return
The annual return that would make the present value of future cash flows from an investment (including its residual market value) equal the current market price of the investment. In other words, the discount rate at which an investment has zero net present value.
International Transaction Log (ITL)
the ITL links together the national registries and the CDM registry and is in charge of verifying the validity of transactions (issuance, transfer and acquisition between registries,cancellation, expiration and replacement, retirement, and carry-over). It is the central piece of the emissions trading under the Kyoto Protocol.
Japan-Voluntary Emissions Trading Scheme (JVETS)
Under the J-VETS, companies receive subsidies to implement mitigation activities in line with voluntary commitments and can resort to emissions trading (incl. offsets) to meet their commitments with more flexibility. Though growing, impact remains limited: over the first three years of the scheme, participants (288 companies) have reduced their emissions by about one million tCO2e. The J-VETS has contributed to the development of MRV system, third-party verification system, and the registry system. The J-VETS has been incorporated to the Experimental Integrated ETS as one of participating options.
Joint Implementation (JI)
Mechanism provided by Article 6 of the Kyoto Protocol, whereby entities from Annex I Parties may participate in low-carbon projects in hosted in Annex I countries and obtain Emission Reduction Units in return.
Kyoto Mechanisms (KMs)
the three flexibility mechanisms that may be used by Annex I Parties to the Kyoto Protocol to fulfill their commitments. Those are the Joint Implementation (JI, Art. 6), Clean Development Mechanism (CDM, Art. 12) and International Emissions Trading (Art. 17).
Adopted at the Third Conference of the Parties to the United Nations Convention on Climate Change held in Kyoto, Japan in December 1997, the Kyoto Protocol commits industrialized country signatories to collectively reduce their greenhouse gas emissions by at least 5.2% below 1990 levels on average over 2008–12 while developing countries can take no regret actions and participate voluntarily in emission reductions and removal activities through the CDM. The Kyoto Protocol entered into force in February 2005.
A set of requirements for monitoring and verification of emission reductions achieved by a project.
National Allocation Plans (NAPs)
The documents, established by each Member State and reviewed by the European Commission, that specify the list of installations under the EU ETS and their absolute emissions caps, the amount of CERs and ERUs that may be used by these installations as well as other features such as the size of the new entrants reserve and the treatment of exiting installations or the process of allocation (free allocation or auctioning).
New South Wales Greenhouse Gas Reduction Scheme (NSW GGAS)
Operational since January 1, 2003 (to last at least until 2012), the NSW Greenhouse Gas Abatement Scheme aims at reducing GHG emissions from the power sector. NSW and ACT (since January 1, 2005) retailers and large electricity customers have thus to comply with mandatory (intensity) targets for reducing or offsetting the emissions of GHG arise from the production of electricity they supply or use. They can meet their targets meet their targets by purchasing certificates (NSW Greenhouse Abatement Certificates or NGACs) that are generated through project activities.
New Zealand Emissions Trading Scheme (NZ ETS)
The NZ ETS will progressively regulate emissions of the six Kyoto gases in all sectors of the economy by 2015. Forestry is covered since 2008 and by July 1, 2010, stationary energy, industrial process, and liquid fossil fuel will be phased-in. The government recently announced, however, that full implementation could be delayed if adequate progress is not made in establishing similar regulations in other developed countries.
Offsets designate the emission reductions from project-based activities that can be used to meet compliance—or corporate citizenship—objectives visa- vis greenhouse gas mitigation.
A transaction between the original owner (or issuer) of the carbon asset and a buyer.
Project Design Document (PDD)
A central document of project-based mechanisms, the PDD notably describes the project activity (including environmental impacts and stakeholders consultations), the baseline methodology and how the project is additional as well as the monitoring plan.
Project Idea Note (PIN)
A note prepared by a project proponent presenting briefly the project activity (e.g., sector, location, financials, estimated amount of ERs etc.).
All activities that reduce emissions from deforestation and forest degradation, and contribute to conservation, sustainable management of forests, and enhancement of forest carbon stocks.
Regional Greenhouse Gas Initiative (RGGI)
Under RGGI, 10 Northeast and Mid-Atlantic states aim to reduce power sector CO2 emissions by 10% below 2009 levels in 2019. Within this 10-year phase, there are three shorter compliance periods. During the first and second compliance periods (2009–2011 and 2012–2014) the cap on about 225 installations is set at 171 MtCO2e (or 188 M short ton CO2e). This is followed by a 2.5% per year decrease in cap during the third compliance period (2015–2018).
This process increases the capacity of the land to sequester carbon by replanting forest biomass in areas where forests have been previously harvested.
The formal acceptance by the CDM Executive Board of a validated project as a CDM project activity.
Removal unit (RMU)
RMUs are issued by Parties to the Kyoto Protocol in respect of net removals by sinks from activities covered by Article 3(3) and Article 3(4) of the Kyoto Protocol.
A transaction where the seller is not the original owner (or issuer) of the carbon asset.
Following the Marrakesh Accords, the use of the Kyoto mechanisms shall be supplemental to domestic action, which shall thus constitute a significant element of the effort made by each Party to meet its commitment under the Kyoto Protocol. However there is no quantitative limit to the utilization of such mechanisms. While assessing the NAPs, the European Commission considered that the use of CDM and JI credits could not exceeded 50% of the effort by each Member State to achieve its commitment. Supplementarity limits may thus affect demand for some categories of offsets.
United Nations Framework Convention on Climate Change (UNFCCC)
The international legal framework adopted in June 1992 at the Rio Earth Summit to address climate change. It commits the Parties to the UNFCCC to stabilize human induced greenhouse gas emissions at levels that would prevent dangerous manmade interference with the climate system, following “common but differentiated responsibilities” based on “respective capabilities”.
Validation is the process of independent evaluation of a project activity by a Designated Operational Entity (DOE) against the requirements of the CDM. The CDM requirements include the CDM modalities and procedures and subsequent decisions by the CMP and documents released by the CDM Executive Board.
Verified Emission Reductions (VERs)
A unit of greenhouse gas emission reductions that has been verified by an independent auditor. Most often, this designates emission reductions units that are traded on the voluntary market.
Verification is the review and ex post determination by an independent third party of the monitored reductions in emissions generated by a registered CDM project, a determined JI project (or a project approved under another standard) during the verification period.
The voluntary market caters for the needs of those entities that voluntarily decide to reduce their carbon footprint using offsets. The regulatory vacuum in some countries and the anticipation of imminent legislation on GHG emissions also motivates some pre-compliance activity.
Western Climate Initiative (WCI)
The WCI covers a group of seven U.S. states (Arizona, California, Montana, New Mexico, Oregon, Utah, and Washington) and four Canadian provinces (British Columbia, Manitoba, Ontario, and Quebec), with an aggregate emissions target of 15% below 2005 levels by 2020. Other U.S. and Mexican states and Canadian provinces have joined as observers.