Glossary of Terms

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Allocation
Allocation is the number of allowances provided to an emitter by the regulatory body during a specific compliance period.

Allowance
One allowance represents the right to emit one tonne of CO₂e. Emitters are allocated allowances by the regulating body and can emit an amount of CO₂e that corresponds to the number of allowances received. Companies that keep their emissions below the level of their allowances are able to sell their excess allowances. Those facing difficulty in remaining within their emissions limit have a choice between reducing their emissions, buying the extra allowances they need at the market rate, or a combination of the two.

Annex I Parties
The industrialized countries that have also accepted emissions targets for the period 2008-12 as per Article 3 and Annex B of the Kyoto Protocol. They include the 24 original OECD members, the European Union, and 14 countries with economies in transition.

Annex II Parties
The wealthy countries listed in this annex to the Convention have a special obligation to help developing countries with financial and technological resources. They include the 24 original OECD members plus the European Union.

Banking
Emission reductions not used in one commitment period can be saved or 'banked' for future use in a subsequent compliance period.

Baseline and Baseline Scenario
The baseline describes the GHG emissions that would occur in the absence of a GHG reduction project (i.e. business as usual scenario).

Cap and Trade
In a cap-and-trade system, the government sets the total amount of a pollutant that can be put into the environment by an entire industry or class of emitters. The government establishes emission allowances, which can be bought and sold among companies in the industry. The only requirements are that sources completely and accurately measure and report all emissions and then turn in the same number of allowances as emissions at the end of the compliance period.

Carbon Dioxide or CO₂
A naturally occurring gas that is a by-product of burning fossil fuels and biomass, land use changes and other industrial processes. Carbon dioxide is the reference gas against which other greenhouse gases are measured.

Carbon Dioxide Equivalent (CO₂e)
CO₂e is an abbreviation of 'carbon dioxide equivalent' and is the internationally recognised measure of greenhouse emissions. CO₂ is not a potent greenhouse gas compared to the others. However, because CO₂ is produced in such huge quantities, its effect is much greater than all the other greenhouse gasses combined. Methane (CH4), for example is 21 has a global warming potential of 21 (is 21 times more potent than CO₂). Thus 1 tonne of CH4 equals 21 tonnes CO₂e. GHG emissions are measured in tonnes CO₂e.

Carbon Sequestration
The process of removing additional carbon from the atmosphere and depositing it in other "reservoirs," principally through changes in land use. In practical terms, carbon sequestration occurs mostly through the expansion of forests.

CDM Executive Board
A 10-member panel elected at COP-7 which supervises the CDM and has begun operation in advance of the Protocol's entry into force.

Certified Emission Reduction (CER)
A unit equal to one metric tonne of carbon dioxide equivalent, resulting from a CDM project, which may be used by Annex I countries towards meeting their binding emission reduction and limitation commitments under the Kyoto Protocol.

Clean Development Mechanism (CDM)
A procedure under the Kyoto Protocol under which developed countries may finance greenhouse-gas emissions-avoiding projects in developing countries, and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions.

Climate Change
A change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere in addition to natural climate variability over comparable time periods.

Cogeneration
The production of electricity using waste heat (as in steam) from an industrial process or the use of steam from electric power generation as a source of heat

Conference of Parties (COP)
The supreme body of the UNFCCC. It currently meets once a year to review the Convention's progress.

Credit
An emission reduction in excess of the required amount. Although credits are named differently by mechanism (CER for CDM projects; ERU for JI projects, etc.), they can be sold to enable emissions trading.

Developed Countries
Industrialised countries per Annex I, Annex B of the Kyoto Protocol.

Developing Countries
Countries (non-Annex I) in the process of industrialisation with constrained resources to address their economic and environmental problems.

Emission Cap
A regulatory ceiling on emissions that can be released within a certain timeframe.

Emission Reduction Unit (ERU)
An emission reduction resulting from a Joint Implementation (JI) project under the Kyoto Protocol.

Emission Targets
Emission limits imposed on emitters by a regulatory body.

Emissions Trading
Mechanism through which parties with emissions commitments may trade units of their emissions allowances with other parties. The aim is to improve the overall flexibility and economic efficiency of reducing emissions. Parties with excess emission reductions can sell them to parties who find it less expensive to purchase emission reductions from the market than to reduce emissions at their facility.

Flexibility Mechanisms
The Kyoto Protocol (and the EU ETS through a linking directive) has provisions that allow for flexibility in choosing amongst emission reductions:

• Clean Development Mechanism (CDM) – Developed nations with reduction commitments investing in emission reduction projects in developing nations.
• Emission Trading – Trading of allowances.
• Joint Implementation (JI) – Developed nations investing in emission reduction projects in other developing nations.

Forward Contract
Purchase or sale of a emission reductions at the current price, with delivery and payment scheduled for a specified future date.

Fossil Fuels
Carbon-based fuels that include coal, petroleum, natural gas and oil.

Global Warming
The continuous gradual rise of the earth's surface temperature thought to be caused by the greenhouse effect and responsible for changes in global climate patterns (see also Climate Change).

Global Warming Potential (GWP)
A factor describing the degree of harm to the atmosphere of one unit of a given GHG relative to one unit of CO₂. As evidenced by the GWPs below, reducing 1 tonne of CH4 has the same positive effect on the environment as reducing 21 tonnes of CO₂. Although SF6, HFCs and PFCs are more powerful GHGs, they are less prevalent.

• Carbon dioxide (CO₂) GWP = 1
• Methane (CH4) GWP = 21
• Nitrous Oxide (N2O) GWP = 310
• Sulphur hexafluoride (SF6) GWP = 23,900
• HFCs and PFCs GWPs vary depending on makeup
  

Greenhouse Effect
A natural layer of heat-trapping gases including water vapor, carbon dioxide (CO₂) and methane (CH4) surrounds the earth and produces a greenhouse effect. These gases keep the earth warm enough to support life. Burning large amounts of fossil fuels is dramatically increasing the concentration of these gases. Like the glass in a greenhouse, these gases collect in the atmosphere and prevent the earth’s excess heat from escaping. As the gases thicken, the earth’s temperature increases.

Greenhouse Gas Emission Reduction
A reduction in emissions of greenhouse gases in an effort to combat global warming and climate change. Greenhouse gas reductions are measured in tonnes of carbon dioxide equivalent (CO₂e).

Greenhouse Gases (GHGs)
GHGs are the six gases listed in the Kyoto Protocol: carbon dioxide (CO₂), methane (CH4), nitrous oxide (N2O), hydroflurocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6).

Host Country
The country where an emissions reduction project is physically located.

Hot Air
A concern that some governments will have excess emission reductions with no effort because their economies have greatly decreased since the 1990 baseline year under the Kyoto Protocol. In theory they could then flood the market for emissions credits, reducing the incentive for other countries to cut their own domestic emissions.

Intergovernmental Panel on Climate Change (IPCC)
International body of climate change scientists. The role of the IPCC is to assess the scientific, technical and socio-economic information relevant to the understanding of the risk of human-induced climate change (www.ipcc.ch).

Joint Implementation (JI)
A mechanism under the Kyoto Protocol through which a developed country can receive "emissions reduction units" when it helps to finance projects that reduce net greenhouse-gas emissions in another developed country. The emission reductions produced from JI projects are called Emission Reduction Units (ERUs).

Kyoto Protocol
A protocol to the International Convention on Climate Change that requires countries listed in its Annex B (developed nations) to meet reduction targets of GHG emissions to an average of 5.2% below their 1990 levels during the period 2008-12.

Methane (CH4)
Greenhouse gas with a Global Warming Potential of 21. The primary sources of methane are landfills, coal mines, paddy fields, natural gas systems and livestock.

Nitrous Oxide (N2O)
Greenhouse gas with a Global Warming Potential of 310. Results from the burning fossil fuels and the manufacture of fertiliser.

OECD
Organisation for Economic Co-operation and Development which includes the following countries: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Korea, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

Offset
An emissions reduction achieved by undertaking a GHG reduction project.

Operational Entity (OE)
Approved by the CDM Executive Board, an OE is an entity that validates and subsequently requests registration of a proposed CDM project activity which will be considered valid after 8 weeks if no request for review was made. An OE also verifies emission reductions of a registered CDM project, certifies as appropriate and requests the Board to issue Certified Emission Reductions (CERs) accordingly.

Process Change
Is an improvement of the emissions associated directly with a manufacturing process. For example, changing an animal waste management system from an open lagoon to an anaerobic digester is a process change that results in fewer greenhouse gas emissions.

Registry
A system, including electronic databases, that track and record all transactions under a greenhouse-gas emissions trading system.

Source
Any process or activity, which releases GHGs into the atmosphere.

Sustainable Development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

United Nations Framework Convention on Climate Change (UNFCCC)
An international environmental treaty produced at the United Nations Conference on Environment and Development (Earth Summit) held in Rio de Janeiro in 1992. The goal of the treaty is to reduce GHG emissions that contribute to global warming and climate change.

Validation
Independent evaluation of an emission reduction project.

Verification
An objective and independent assessment of whether the reported GHG emissions reductions are actually occurred.

Voluntary Reduction
GHG emission reductions that are made outside of a regulatory mandate.

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