Terms, abbreviations and acronyms used in the climate change debate, carbon trading markets and the Kyoto Protocol.

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Conditions of use

AAU
Assigned Amount Unit. Allowances for carbon emissions allocated to developed countries up to their target level under the Kyoto Protocol. These allowances are tradable under Kyoto's international emission trading mechanisms in place from 2008 to 2012. Each AAU equates to one tonne of CO2e. See Green investment scheme for 'greened AAUs'.

Additionality
A key eligibility test for projects designed to generate carbon credits under the Kyoto Protocol's CDM and JI programmes, as well as other carbon offset schemes. This test dictates that projects are only eligible for carbon credits if the resulting emission reductions weren't going to happen anyway, ie. they are additional to what would have occurred without the carbon credit incentive.

Annex I, or Annex B
The signatory nations to the Kyoto Protocol that are subject to caps on their emissions of greenhouse gases and committed to reduction targets – countries with developed economies. Annex I refers to the 36 countries identified for reduction in the UNFCCC while the Annex B is an adjusted list of 39 countries identified under the more recent Kyoto Protocol. Annex B countries have their reduction targets formally stated.

Annex II
A subset of Annex 1/B, Annex II countries are signatory nations to the UNFCCC which are also members of the OECD - the most industrialised economies. They have extra obligations to help developing nations combat climate change via technology transfer and financial help.

A/R
Afforestation and reforestation. Term given to the class of projects devoted to the planting of trees on unforested land for carbon emissions reduction and other environmental benefits.

Asia-Pacific Partnership on Clean Development and Climate (APP, AP6)
The Asia-Pacific climate pact is a rival international climate change agreement to the Kyoto Protocol. Its initiators in 2005 were the United States and Australia, the only two industrialised nations not to have ratified the Kyoto treaty at that time (Australia since has ratified in 2007). The group also includes China, India, Japan, South Korea and now Canada. APP rejects Kyoto-style emission reduction targets in favour of encouraging business to invest in clean fossil-fuel technology and renewable energy. 

Banking and borrowing
The ability under an emissions trading scheme to save emission permits issued in one year for use in later years (banking), or to bring forward some of a future year's permit allocation for use in the current year (borrowing).

Baseline and credit
A type of emissions trading scheme where firms are encouraged to reduce their greenhouse gas emissions below a projected “business as usual” path of increasing emissions. Any reductions below that future path earns credits for the difference which can be sold to other emitters struggling to contain increases to baseline levels. See also cap and trade.

Biochar
Carbon-rich charcoal created when plant matter is heated in an oxygen-free environment. Carbon that would otherwise combine with oxygen, burn, and be emitted to the air is contained in the charcoal, which can be used to fertilise soils or make biofuels.

Biofuels
Biofuels are renewable fuels made from plants that can be used to supplement or replace the fossil fuels petroleum and diesel used for transport. The two main biofuels are ethanol and biodiesel. Ethanol is produced from the fermentation of sugar or starch in crops such as corn and sugar cane. Biodiesel is made from vegetable oils in crops such as soybean, or from animal fats. Depending on the processes used to make biofuels, greenhouse emissions from cars and fuel-powered machinery can be substantially reduced by their use.

Bunker fuels
In Kyoto Protocol terms, these are fuels used by the international shipping and aviation industries. These industries are not included in the nation-based reporting of greenhouse emissions and have to be measured separately. In general, and historically, the term applies only to fuel oil used by ships.

Cap and trade
The most popular type of emissions trading scheme where emissions are subject to a cap, permits are issued up to that cap, and a market allows those emitting less than their quota of the cap to sell their excess permits to emitters needing to buy extra to meet their quota. See also baseline and credit.

Carbon dioxide equivalent, CO2e
See MtCO2e

Carbon capture and storage
See CCS

Carbon footprint
The global warming impact of human activities in terms of the amount of greenhouse gases they produce. The emissions associated with the use of power, transport, food and other consumption for an individual, family or organisation are added up to give one comparable measure in units of carbon dioxide equivalent.

Carbon neutral
An individual, household or organisation that is responsible for no net emissions of greenhouse gases from all its activities is considered "carbon neutral". Emissions must be cut to a minimum and any necessary emissions then offset by emission reducing activities elsewhere. Buying accredited clean electricity helps cut household or office greenhouse emissions, while investing in sustainable energy projects or afforestation schemes are examples of offsets.

Carbon positive
An individual, household or organisation that is responsible for taking more greenhouse gases out of the atmosphere than it emits is said to be "carbon positive". This requires minimising one's own emissions and more than offsetting remaining emissions by paying for activities such as forest planting or investing in renewable energy.

Carbon price
An economic value placed on the emission of greenhouse gases into the atmosphere from human activity. This price is designed to create a disincentive for emissions and incentive to avoid them. A carbon price takes the form of either a carbon tax or an emissions trading scheme.

Carbon sink
Natural and potentially man-made features on the Earth's surface where carbon dioxide is removed from the atmosphere. The major natural sinks are forests and oceans which have processes that absorb CO2. Carbon sinks are vital to fighting global warming because they counteract sources of carbon emissions, such as industry and transport.

Carbon tariff
Import duty levied by countries with greenhouse gas emission caps in place on carbon-intensive goods from countries without such controls in place. The intention is to protect the competitiveness of local industries whose goods have higher prices than their imported rivals because they reflect the cost of carbon. More

Carbon tax
One form of carbon price on greenhouse gas emissions. Set by governments, a price on emissions is fixed and emitters are allowed to emit whatever they want at that price. Emissions trading prices carbon in the reverse approach; fixing emissions, with price varying.

CCS
Carbon capture and storage. A two-step measure to prevent carbon dioxide emissions from the burning of fossil fuels entering the atmosphere, particularly from power generation. Instead of CO2 being vented, it is contained and pumped underground under pressure, where it cannot contribute to global warming. This technology is still in its infancy with results largely unproven. Also known as one form of 'carbon sequestration'.

CDM
Clean Development Mechanism. A Kyoto Protocol initiative under which projects set up in developing countries to reduce greenhouse gas emissions generate tradable credits called CERs, the first step towards a global carbon market. These credits can be used by industrialised nations to offset carbon emissions at home and meet their Kyoto reduction targets. The projects include renewable energy generation, reforestation and clean fuels switching. See also JI

CER
Certified Emission Reduction. A credit generated under Kyoto’s Clean Development Mechanism (CDM) for the reduction of emissions of greenhouse gases equal to one tonne of CO2-equivalent. They are designed to be used by industrialised countries to count toward their Kyoto targets but can also be used by EU companies and governments as offsets against their emissions under the EU Emissions Trading Scheme. See also Offsets and CER market reports.

CFI
Carbon Financial Instrument. The name of the futures contract through which parcels of emission permits are traded on the European Climate Exchange and the Chicago Climate Exchange. Each CFI consists of 100 permits (mandatory EUAs in Europe and voluntary allowances and offsets on the Chicago market) covering the emission of 100 tonnes of CO2.

CO2e
Carbon dioxide equivalent. See MtCO2

Co-generation
Combined heat and power energy use from a single fuel input, eg. when the heat produced from the burning of fossil fuels in the generation of electricity is captured and used for heating or further energy production.

Copenhagen Accord
The four-nation agreement struck by the US, China, India and South Africa at the 2009 Copenhagen climate conference and noted by the UN climate convention Council of the Parties. A limited political deal that the signatories hope will form the basis of a new global climate agreement from 2013. More

COP/MOP
Shorthand for the Council Of The Parties, or signatory nations, to the UN Climate Change Convention and the Meeting Of The Parties of the Kyoto Protocol to the Convention. The fifteenth now-annual conference will take place in Copenhagen in 2009 (COP15) and has been set as the deadline for negotiating an extension of Kyoto to a second commitment period or a new replacement treaty.

Cost of carry
Generally, the costs associated with holding an investment over time - opportunity costs, fees and other expenses. In carbon markets, where the bulk of trade in emission allowances and credits is in forward contracts for their future delivery, it's largely the time value of money, or the interest rate. Here, 'cost of carry' represents the investment return foregone by the seller (who does not receive the sale proceeds until delivery) over the contract period, and is reflected in a premium built into forward carbon prices over spot prices. 

EITs
Economies In Transition. Those nations in Annex I of the Kyoto Protocol considered developed but currently in transition to a market economy. Generally the nations and former republics of the old Soviet bloc.

Emissions trading
One form of carbon price creating a market-based system for regulating the emission of greenhouse gases. The quantity of emissions is controlled and the price allowed to vary by the issuing of tradable emission permits. These rights to emit can be traded in a commercial market under an emissions trading scheme. More in FAQs

ERPA
Emissions Reduction Purchase Agreement. Contracts governing the sale of CER carbon credits from UN CDM and JI projects. Heavily used for forward sales of CERs not yet issued, in projects under development, as a means of project financing. The price of such primary CERs is discounted in ERPAs to reflect the risks of non-delivery.

ERU
Emission Reduction Unit. Tradable credits generated from activities to reduce greenhouse emissions in in industrialised countries, particularly those of the former Soviet-bloc, under the Kyoto Protocol’s Joint Implementation (JI) mechanism.

ETS
Emissions Trading Scheme. See FAQs

EU ETS
European Union Emissions Trading Scheme. See FAQs

EUA
European Union Allowances. Tradable emission credits from the EU Emissions Trading Scheme. Each allowance carries the right to emit one tonne of carbon dioxide.

Food miles
Refers to the distance foodstuffs travel through the various stages of production and processing to the point at which they reach the consumer. A measure of both distance traveled and mode of transportation allows comparisons of the energy use and the contribution to greenhouse emissions associated with various food products and their origin.

Fugitive emissions
Unintended leaks of gases into the atmosphere from the extraction, processing or transportation of fossil fuels. For example, gas emissions from leaking pipelines or methane escaping from the ground during the mining of coal.

GHG
Greenhouse gas. See FAQs

Greenhouse intensity
Refers to the ratio of a nation’s greenhouse gas emissions to its GDP, or the volume of emissions per unit of economic output. A country’s greenhouse intensity may often be falling yet overall emissions are rising due to an expanding economy. Greenhouse intensity measures are also used at a company, plant or industry sector level.

GIS
Green investment scheme. An arrangement whereby Annex 1 industrialised countries buy the surplus Kyoto carbon emissions credits, AAUs, of eastern European countries on the condition they invest the proceeds in low-emissions technology. GISs came about due to pressure on former Soviet bloc countries to use these surpluses, known as "hot air", responsibly, ie. to build environmentally-sustainable industry. Credits traded through GISs are termed 'greened AAUs'.

GWP
Global warming potential. This refers to the potency of greenhouse gases, that is, their ability to trap heat in the atmosphere. The GWP is a numerical measure relative to carbon dioxide, the most abundant greenhouse gas. So carbon dioxide itself has a GWP of 1. For the GWPs of all greenhouse gases, see FAQs.

Hot air
Also called paper credits, the term refers to carbon credits for emission reductions that occurred without any deliberate action. The prime example being the carbon credits arising under Kyoto in Russia and the Ukraine where the collapse of Soviet-era industry in the 1990s has seen emissions fall well below 1990 levels, the base year for reduction calculations, without the implementation of any climate-related measures.

IPCC
Intergovernmental Panel on Climate Change. An international scientific panel charged with informing the UNFCCC with the latest scientific evidence on climate change. With representatives from 130 nations it is the world's pre-eminent scientific advisory body on global warming.

ITL
International Transaction Log. The means by which carbon allowances and credits generated under the mechanisms of the Kyoto Protocol - AAUs, CERs and ERUs - are traded between countries. An online IT platform that connects UN and national greenhouse emissions registries, facilitating the emerging global carbon market.

JI
Joint Implementation. A Kyoto Protocol mechanism which allows developed countries, particularly those in transition to a market economy, to host carbon-reducing projects funded by another developed country. The arrangement sees the credits generated, called ERUs, go to the investor country while the emission allowances (AAUs) of the host country are reduced by the same anount.

Kyoto Protocol
See FAQs

Leakage, carbon leakage
Occurs when laws or activities designed to cut greenhouse gas emissions implemented in one jurisdiction or project area lead to the shifting of the targeted emitting activities elsewhere, thus undermining the attempt to reduce emissions.

LULUCF
Land use, land use change and forestry. The term given to the sector covering reforestation & afforestation, land clearing and agriculture. Each of these activities can make significant contributions to atmospheric carbon emissions and/or removals.

MRV
Monitoring, Reporting & Verification or Measurable, Reportable, Verifiable. The underpinnings of robust, genuine carbon emissions reductions. Particularly used in the context of forest carbon activities where such standards pose great challenges. Before emissions reduction or carbon sequestration activity can deliver credible market credits, activities generating them must be accurately measured, reported transparently, and verified by third parties.

NAPs
National Allocation Plans. These set out the overall emissions cap for countries in phases I and II of the EU Emissions Trading Scheme up to 2012, and the emissions allowances that each sector and individual installation within each country receives.

Offsets
Carbon offsets, offset credits. Credits issued in return for a reduction of atmospheric carbon emissions through projects such as the provision of renewable energy to replace fossil fuel energy, or reforesting cleared land to create a carbon sink. By paying for such emission reducing activities, individuals and organisations can use the resulting credits to offset their own emissions, either voluntarily or under the rules of most emissions trading schemes. One offset credit equates to an
emission reduction of one tonne of CO2. See also CER and CER market reports.

PDD
Project Design Document. The official application drawn up by an entity applying for project approval under the UN Clean Development Mechanism (CDM) or a verification standard in the voluntary carbon market. PDDs must be validated by an independent third party, then approved and registered by the CDM Executive Board or voluntary standard provider before a project qualifies as a CER or VER carbon credit earner.

Permanence
A key pre-requisite for the credibility of any carbon sequestration activity, particularly tree planting; that it have in place safeguards to cover the possibility that carbon removed from the atmosphere may be released in the future, for example, due to fire, disease or logging. In practice, ongoing verification of planted trees must take place where carbon offset credits have been generated for those carbon reductions.

REDD
Reduced Emissions from Deforestation and Degradation. An initiative to cut greenhouse gas emissions associated with forest clearing by the inclusion of “avoided deforestation” in carbon market mechanisms. More simply, payment in return for the active preservation of existing forests.

REDD-plus, REDD+
The extra consideration in reducing greenhouse emissions beyond deforestation and forest degradation (REDD) being given to sustainable forest management and afforestation/reforestation in developing countries.

RGGI
Regional Greenhouse Gas Initiative. A ten-state regional US emissions cap-and-trade scheme covering power plants from 2009. Scheduled to run until the end of 2018 unless superseded by a federal scheme, current members are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

RMUs
Removal Units. Credits earned from land use, land-use change and forestry projects (LULUCF) in industrialised countries, including such projects under the Kyoto Protocol’s JI mechanism.

tCO2e, MtCO2e
Tonnes of carbon dioxide equivalent, and millions of tonnes 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 tonnes of emitted methane, a far more potent greenhouse gas than carbon dioxide, is measured as 23 million tonnes of CO2-equivalent, or 23 MtCO2e.

Term offsets, temporary credits
Non-lasting carbon offset credits of limited life span, typically five years, issued for land-based carbon sequestration. Egs. include temporary CERs (tCERs) in CDM forestry and proposed farm and forest offsets in the US cap-and-trade bill. Such offsets must be replaced on expiry, either by new ones issued after a successful re-verification of the project showing emissions reductions still intact, or, by buying permanent offsets elsewhere. Conceived as a way of dealing with potential non-permanence of carbon storage in trees, which may be cut down or otherwise die and see carbon returned to the atmosphere.

UNFCCC
United Nations Framework Convention on Climate Change. Also referred to informally as the UN climate change convention. It is the international agreement for action on climate change and was drawn up in 1992. A framework was agreed for action aimed at stabilising atmospheric concentrations of greenhouse gases. The UNFCCC entered into force on March 1994 and currently has 192 signatory parties. The UNFCCC in turn agreed the Kyoto Protocol in 1997 to implement emission reductions in industrialised countries up to 2012 and is currently seeking the negotiation of a new treaty to extend commitments beyond 2012.

Validation
The stage in carbon offset project development where an independent third-party audits a project's design to ensure it meets the rules of a prescribed standard, such as the CDM. Checks include whether emissions reductions and other benefits are real and permanent compared to a business-as-usual baseline.

VCU
Voluntary Carbon Unit. The name of carbon offset credits specifically verified to the Voluntary Carbon Standard, one of the leading independent standards established to demonstrate integrity in project-based emission reductions in the unregulated voluntary carbon market.

VERs
Verified Emission Reductions. The general name given to carbon offset credits in the voluntary carbon market. These are tradable credits for greenhouse emission reductions generated to meet voluntary demand for carbon credits by organisations and individuals wanting to offset their own emissions. See VER market reports


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