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Additionality According to the Kyoto Protocol Articles on Joint Implementation and the Clean Development Mechanism, Emissions Reduction Units (ERUs) will be awarded to project-based activities provided that the projects achieve reductions that are "additional to those that otherwise would occur". The issue is subject to further clarification by Parties. Some now make the distinction between environmental additionally and economic/financial additionality. Under financial additionality, projects will only earn credit if funds additional to existing ODA commitments are specifically committed to achieve the greenhouse gas reductions. This creates uncertainty over whether commercially viable projects will be eligible to earn credits under the Kyoto Protocol and for this reason, Financial Additionality may not remain in the Kyoto Protocol. (Source: IPIECA)
Environmental additionality requires that emission reductions represent a physical reduction or avoidance of emissions over what would have occurred under a business as usual scenario.
AEU Australian Emission Unit - Unit of trade in the now deferred Australian Carbon Pollution Reduction Scheme (Au CPRS)
Afforestation The Revised 1996 IPCC Inventory Guidelines defines afforestation as the planting of new forests on land which historically been covered by forest.
Allocation Allocation is the number of credit or allowance permits provided to an emissions source (e.g. company with net emissions) by a jurisdictional regulatory body during a specific compliance period. Allocation of permits occurs primarily through grandfathering or auctioning. 
Allowance Allowances are the unit of trade under closed systems. Allowances grant the holder the right to emit a specific quantity of pollution once (eg. one tonne). The total quantity of allowances issued by regulators dictates the total quantity of emissions possible under the system. At the end of each compliance period each source must surrender sufficient allowances to cover their emissions during that period. 
Annex B Countries Annex B countries are the 39 emissions-capped industrialised countries and economies in transition listed in Annex B of the Kyoto Protocol. Legally-binding emission reduction obligations for Annex B countries range from an 8% decrease (e.g., various European nations) to a 10% increase (Iceland) in relation to 1990 levels during the first commitment period from 2008 to 2012. 
Annex I Countries Annex I countries are the 36 industrialised countries and economies in transition listed in Annex I of the United Nations Framework Convention on Climate Change (UNFCCC or the Convention). Their responsibilities under the Convention are various, and include a non-binding commitment to reducing their greenhouse gas emissions to 1990 levels by the year 2000.
Note that Belorussia and Turkey are listed in Annex I but not Annex B; and that Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not Annex I.

In practice, Annex I of the Convention and Annex B of the Kyoto Protocol are used almost interchangeably. However, strictly speaking, it is the Annex I countries which can invest in Joint Implementation (JI) / Clean Development Mechanism (CDM) projects as well as host JI projects, and non-Annex I countries which can host CDM projects. This is true, despite the fact that it is the Annex B countries which have the emission reduction obligations under the Kyoto Protocol. 

Annex II Countries Annex II of the United Nations Framework Convention on Climate Change (UNFCCC or the Convention) includes all original OECD member countries plus the European Union. Under Article 4.2 (g) these countries have a special obligation to help developing countries with financial and technological resources. 
Anthropogenic Derived from human activities.
Assigned Amount (AA) and Assigned Amount Units (AAUs) The assigned amount is the total amount of greenhouse gas that each country is allowed to emit during the first commitment period of the Kyoto Protocol. This total amount is then broken down into measurable units. 
Au CPRS Australian Carbon Pollution Reduction Scheme - Australia's domestic emissions trading scheme - now deferred
Avoided Emissions Avoided emissions would have been emitted under a business as usual scenario but were avoided due to the implementation of an emission reduction project.


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Banking    Within the Kyoto Protocol, emission permits not used in one commitment period can be saved or 'banked' for future use in a subsequent compliance period. 
Baseline Emissions The emissions that would occur without policy intervention (in a business-as-usual scenario). Baseline estimates are needed to determine the effectiveness of emissions reduction programs (often called mitigation strategies).
Baseline and Baseline Scenario  The baseline represents the forecast emissions of a company, business unit or project, using a business as usual scenario, often referred to as the 'baseline scenario' i.e. expected emissions if the firm did not implement emission reduction activities. This forecast incorporates the economic, financial, technological, regulatory and political circumstances within which a firm operates.
Bid   A bid is the price a prospective buyer is willing to pay.
Bilateral Transaction or trade A trade that does not include an intermediary exchange and is made on a direct one-on-one basis. 
Binding Targets Binding targets are agreed or mandated emission limits on an entity that are to be met at a specific point of time or period. 
Broker   A Broker acts as an intermediary between a buyer and a seller, usually charging a commission for the services provided.
Bubble A bubble is a regulatory concept whereby two or more emission sources are treated as if they were a single emission source. This creates flexibility to apply pollution control technologies to whichever source under the bubble has the most cost effective pollution control options, while ensuring the total amount of emissions under the bubble meets the environmental requirements for the entity. Bubbles are closed systems. Article 4 of the Kyoto Protocol allows a bubble to be formed between Annex B countries, for example the European Union nations.  
Business As Usual Scenario (BAU) Estimate of a company's future and current emissions under normal operating circumstances. Depending on the scope of the business as usual scenario this may incorporate some emission reduction regulatory controls including carbon taxes etc. 
Buyer A legally recognised entity (individual, corporation, not-for-profit organisation or government, etc.) who acquires credits, reductions or allowances from another legally recognised entity through a purchase, lease, trade or other means of transfer


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Cap and Trade The Cap and Trade system involves trading of emission allowances, where the total allowance is strictly limited or 'capped'. A regulatory authority established the cap which is usually considerably lower (50% to 85%) than the historic level of emissions. Allowances are created to account for the total allowed emissions (an allowance is a unit of measurement refer AAU). Trading occurs when an entity has excess allowances, either through actions taken or improvements made, and sells them to an entity requiring allowances because of growth in emissions or an inability to make cost-effective reductions.  
Carbon Dioxide Equivalent (CO2e)


Is the universal unit of measurement used to indicate the global warming potential (GWP) of each of the 7 greenhouse gases. It is used to evaluate the impacts of releasing (or avoiding the release of) different greenhouse gases.   
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 Equivalent (CE) A metric measure used to compare the emissions of the different greenhouse gases based upon their global warming potential (GWP). Greenhouse gas emissions in the U.S. are most commonly expressed as "million metric tons of carbon equivalents" (MMTCE). Global warming potentials are used to convert greenhouse gases to carbon dioxide equivalents. Carbon dioxide equivalents can then be converted to carbon equivalents by multiplying the carbon dioxide equivalents by 12/44 (the ratio of the molecular weight of carbon to carbon dioxide). Thus, the formula to derive carbon equivalents is: MMTCE = (million metric tons of a gas) * (GWP of the gas) * (12/44)
Carbon Offsets   See Offsets.
Carbon Sequestration It refers to projects that capture and store carbon in a manner that prevents it from being released into the atmosphere for a specified period of time. The storage area is commonly referred to as a carbon sink. Carbon Sequestration projects include:

> Forest Sequestration
> Land Conservation
> Soil Conservation & Land Use
> Waste CO2 Recovery/Deep Injection

Carbon Sink Biomass or other land-based systems that allow carbon to be stored. Sinks include forests, soils, oceans, or underground in depleted oil and gas reservoirs, coal seams and saline aquifers. 
Carbon Taxes A surcharge or levy on the carbon content of oil, coal and/or gas to discourage the use of fossil fuels, with the aim of reducing carbon dioxide emissions. 
CDM Executive Board The CDM Executive Board has an oversight role in the development and dissemination of standards to promote the consistency of CDM projects across the globe.

The CDM Executive Board was established by the COP/MOP during COP7 in Marrakech. The Board comprises of 10 members and 10 alternatives.

The CDM Executive Boards is to approve:

> Develop and implement its operational procedures
> New Methodologies
> Accredit Designated Operational Entities (DOE)
> Issue Emission reduction credits earned through CDM projects, known as 'Certified Emissions Reductions' (CERs). 
> In addition the Executive Board may establish committees, panels or working groups to assist it in the performance of its functions.

Certification Emission reductions are certified by independent third parties through a verification process. Certification is to endorse the existence, eligibility and title of the emission reduction (in relation to the underlying project). Once certification has occurred the emission reduction then becomes a separate tradable commodity. 
Certified Emission Reductions (CERs) Annex I investors in Clean Development Mechanism (CDM) projects can earn Certified Emission Reduction units (CERs) for the amount of greenhouse emission reductions achieved by their CDM projects, provided they meet certain eligibility criteria. For example, CERs generated under the CDM will only be recognised when: the reductions of greenhouse gas emissions are additional to any that would occur in the absence of the certified project (see Additionality) requirements of the Host Country are met and the CDM Adaptation charge is paid ie. the Levy to offset climate change adaptation costs in "vulnerable" developing countries. This levy is generally envisioned as an initial percentage of the total financing cost and is paid up front by the project sponsor, in the form of either currency or emission credits, which are then auctioned. Proceeds are held in an adaptation fund for later disbursement.
Chlorofluorocarbons and Related Compounds This family of anthropogenic compounds includes chlorofluorocarbons (CFCs), bromofluorocarbons (halons), methyl chloroform, carbon tetrachloride, methyl bromide, and hydrochlorofluorocarbons (HCFCs). These compounds have been shown to deplete stratospheric ozone, and therefore are typically referred to as ozone depleting substances. The most ozone-depleting of these compounds are being phased out under the Montreal Protocol.
Clean Development Mechanism (CDM) The CDM is a mechanism established by Article 12 of the Kyoto Protocol for project-based emission reduction activities in developing countries. The CDM is designed to meet two main objectives: to address the sustainable development needs of the host country, and to increase the opportunities available to Parties to meet their reduction commitments. 
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 over comparable time periods (Source: UNFCCC) 
Climate Feedback An atmospheric, oceanic, terrestrial or other process that is activated by the direct climate change induced by changes in radiative forcing. Climate feedbacks may increase (positive feedback) or diminish (negative feedback) the magnitude of the direct climate change.
Climate Lag The delay that occurs in climate change as a result of some factor that changes only very slowly. For example, the effects of releasing more carbon dioxide into the atmosphere may not be known for some time because a large fraction is dissolved in the ocean and only released to the atmosphere many years later.
Coal Bed Methane Recovery  

A Coal Bed Methane emission reduction project captures methane released from coal bed seams during the mining process for flaring or energy use.

Cogeneration The process by which two different and useful forms of energy are produced at the same time. For example, while boiling water to generate electricity, the leftover steam can be sold for industrial processes or space heating.
Commitment Period The five year Kyoto Protocol Commitment Period is scheduled to run from calendar year 2008 to calendar year 2012 inclusive. 
Conference of Parties (COP) The COP is the supreme body of the United Nations Framework Convention on Climate Change (UNFCCC). The role of the COP, which consists of more than 170 nations that ratified or acceded to the Framework Convention on Climate Change, is to promote and review the implementation of the convention. 
Countries with Economies in Transition (EIT) The Central and East European countries, Russia, and the former republics of the Soviet Union that are in transition from centrally-planned economies to market-based economies. 


The term 'Credits' are used in a number of contexts, most commonly in relation to emission reductions that have been achieved in excess of the required amount for:

> Joint Implementation, also known as Emission Reduction Units (ERUs) or
> Clean Development Mechanism projects, specifically known as Certified Emission Reductions (CERs)

Credit For Early Action Within the Kyoto Protocol, Annex B governments can not receive credits before the first commitment period (2008-12) towards their emission obligation, except under the Clean Development Mechanism. However some governments have suggested giving credit for early action taken before 2008 with the intent to stimulate investment in their emission abatement projects.


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Deforestation The process of removing forested areas. Examples include cutting or burning to provide land for agricultural purposes, residential or industrial building sites, roads etc., or harvesting the trees for building materials or fuel. 
Developed Countries Industrialised countries (identified in Annex I and Annex B of the Kyoto Protocol). 
Developing Countries Countries in the process of industrialisation which have constrained resources to address their economic and environmental problems. Developing countries also referred to as Less Developed Countries (LDC). 
Direct Emissions Emissions that are produced by a source controlled by a company. Examples include operations within a company-owned factory or gasoline burned in a company car. See also "indirect emissions."

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Early Action The action of reducing emissions, investing in Clean Development Mechanism projects, Joint Implementation or trading emissions before the start for the Kyoto Commitment Period.  
Early Crediting Article 12 within the Kyoto Protocol, indicates that 'early crediting' will be given for Clean Development Mechanism projects undertaken between 2000 and 2008 as opposed to credit for other emission reductions which will begin in 2008. (This is distinct from "Credit for Early Action" programs). 
Emission Pollutant released into either air or waterways from industrial processes, households or transportation vehicles.
Emission Allowance Emission allowances are the total emissions allowed to be released by an emission source (often a net emitting firm) within a given period of time. Emission Allowance are created by a regulating entity and distributed to emitters by grant, auction or a combination of the two.
Emission Inventory Emission Inventory is an archive of historical emissions. An emission inventory can begin once systems boundaries are defined.
Emission Leakage Emission Leakage or 'Leakage' refers to emission reductions in one location being offset by an increase in emissions in another location. For example, emissions could be reduced in an Annex I nation by moving an emissions intensive industry to a non-Annex I nation. Thus lowering emissions in the Annex I nation and increasing emissions in the non-Annex I nation.
Emission Offset See Offset.
Emission Permit See Permit.
Emission Reduction Unit (ERU) Under the Kyoto Protocol, a specified amount of greenhouse gas emissions reductions achieved through a Joint Implementation project.
Emission Reporting Boundaries (or 'System Boundaries') Are the scope of emission sources included in an emission inventory or forecast for a particular firm. This scope can be defined according to jurisdictional reporting requirements or it can be broader which may allow greater opportunities for reductions. For example, national requirements may only require a business to report on emissions from the production cycle but the firm's own internal reporting boundaries may include emissions from waste etc.
Emission Targets Emission targets are emission limits imposed on emitters by a regulatory body.
Emission Taxes Surcharge or levy placed on emissions sources, usually on a per tonne basis. Emission taxes are designed to provide incentives to firms and households to reduce their emissions as a means to control pollution (carbon tax is a subset of an emissions tax).
Emissions Cap (or Cap) A regulatory device that sets a ceiling on emissions that can be released into the atmosphere within a designated timeframe. Within the Kyoto Protocol Annex B countries agreed to caps on emissions within the 2008-2012 timeframe in reference to 1990 emissions levels. Caps are effectively the same as 'Allowances' however caps more often refer to national emission limitations and allowances to individual emitters.
Emissions Credit Under a cap-and-trade emissions trading system, an allowance received by an organization for avoided emissions that may be sold or traded to another organization, allowing the second organization to exceed its emissions level.
Emissions factor A unique value for scaling emissions to activity data in terms of a standard rate of emissions per unit of activity (e.g. tonnes of carbon dioxide emitted per litre of fossil fuel consumed).
Emissions Forecast An emission forecast refers to the forecasts of emissions produced by an emitter for its internal management purposes. Forecasts are hypothetical and incorporate knowledge about the firm's future operational, regulatory and economic impacts to determine emission projections. This process is to baseline forecasting except that baselines are used to quantify emission reductions and are subject to far more scrutiny.
Emissions intensity A level or amount of emissions per some unit of economic output, such as GDP, sales revenue or goods produced.
Emissions Trading Emissions Trading is a general term used for the three Kyoto Protocol flexibility mechanisms. It is a market-based system that allows firms the flexibility to select cost-effective solutions to achieve established environmental goals. With emissions trading, firms can meet established emission goals by: (a) reducing emissions from a discrete emissions unit; (b) reducing emissions from another place within the facility; (c) securing emission reductions from another facility, or (d) securing emission reductions from the marketplace. Emissions trading encourages compliance and financial managers to pursue cost-effective emission reduction strategies and provides incentives to emitters to develop the means by which emissions can inexpensively be reduced.
Enhanced Greenhouse Effect The natural greenhouse effect has been enhanced by anthropogenic emissions of greenhouse gases. Increased concentrations of carbon dioxide, methane, and nitrous oxide, CFCs, HFCs, PFCs, SF6, NF3, and other photochemically important gases caused by human activities such as fossil fuel consumption and adding waste to landfills, trap more infra-red radiation, thereby exerting a warming influence on the climate. See Climate Change and Global Warming.
Environmental Additionality See Additionality.
Equivalent CO2 The concentration of CO2 that would cause the same amount of radiative forcing as a given mixture of CO2 and other greenhouse gasses.
EUA European Allowance - unit of trade in European Union Emissions Trading Scheme ( EU ETS)
EU Bubble Under the Kyoto Protocol, the individual countries that comprise the European Union have aggregated their emissions and accepted an aggregated emissions reduction target. This has been reallocated back to the individual countries to allow differentiation of national reduction programs. The arrangement allows the target to be shared among all countries within the bubble.
EU ETS European Union Emissions Trading Scheme


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Financial Additionality See Additionality.
Flexibility Mechanisms The Kyoto Protocol has provisions that allow for flexibility in how, where and when emissions reductions are made via three mechanisms: the Clean Development Mechanism, International Emission Trading and Joint Implementation. These mechanisms have been established to increase flexibility and hence reduce the costs of reducing emissions.
Fluorocarbons Carbon-fluorine compounds that often contain other elements such as hydrogen, chlorine or bromine. Common fluorocarbons include chlorofluorocarbons and related compounds (also know as ozone depleting substances), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs).
Forcing Mechanism A process that alters the energy balance of the climate system, i.e. changes the relative balance between incoming solar radiation and outgoing infrared radiation from Earth. Such mechanisms include changes in solar irradiance, volcanic eruptions, and enhancement of the natural greenhouse effect by emission of carbon dioxide. See also Radiative Forcing.
Forest Sequestration

Sequestration includes afforestation which increases land's sequestration rates as it is the process of establishing a forest on land not previously forested and reforestation which increases the capacity of the land to sequester carbon by replanting forest biomass in areas where forests were recently harvested.

Forward Contract (or Spot Forward) Purchase or sale of a specific quantity of reductions, offsets, or allowances at the current or spot price, with delivery and settlement scheduled for a specified future date. Since most CO2 trades include a stream of reductions occurring during the Kyoto Commitment Period (2008-2012), forward settlement is more common than immediate settlement
Forward Market A forward market deals in forward contracts which are agreements to buy or sell an asset at a certain time in the future for a certain price. They generally constitute a private agreement between two entities including a mutually agreed delivery date.
Forward Settlement Purchase or sale of a specific quantity of reductions, offsets or allowances at the current or spot price, with delivery and settlement scheduled for a specified future date.
Framework Convention See United Nations Framework Convention on Climate Change.
Framework Convention on Climate Change (FCCC) The landmark international treaty unveiled at the United Nations Conference on Environment and Development (UNCED, also known as the "Rio Summit"), in June 1992. The FCCC commits signatory countries to stabilize anthropogenic (i.e. human-induced) greenhouse gas emissions to 'levels that would prevent dangerous anthropogenic interference with the climate system'. The FCCC also requires that all signatory parties develop and update national inventories of anthropogenic emissions of all greenhouse gases not otherwise controlled by the Montreal Protocol. Out of 155 countries that have ratified this accord, the U.S. was the first industrialized nation to do so.
Fuel Switching

Fuel switching is the substitution of conventional and existing technologies for more efficient and less carbon-intensive fuel technologies including repowering, upgrading instrumentation, controls, and/or equipment, more efficient utilisation of fuel and fuel switching.

Fugitive Emissions Unintended gas leaks from the processing, transmission and/or transportation of fossil fuels.
Futures Contract Futures Contract is technically and functionally different from a Forward Contract. It is an agreement to buy or sell a specific amount of a commodity or financial instrument at a certain time in the future for a particular price. The price is established between the buyer and seller on a commodity exchange via a standardised contract defined by the exchange. Futures Contracts typically have a range of delivery dates and are marked to market daily. Most Futures Contracts close out their position before maturity, either through an offsetting transaction or by selling the futures contract ie. a Futures Contract is tradable in its own right. Futures Contracts are highly defined instruments usually based upon a strong cash market for the underlying commodity. At this stage, a greenhouse gas emissions futures market does not exist, most transactions are forward contracts.


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GHG See "greenhouse gas"
GHG protocols Generally accepted sets of rules for measuring greenhouse gas emissions.
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) The GWP is an index that compares the relative potential of the 7 greenhouse gases to contribute to global warming i.e. the additional heat/energy which is retained in the Earth's ecosystem through the release of this gas into the atmosphere. The additional heat/energy impact of all other greenhouse gases are compared with the impacts of carbon dioxide (CO2) and referred to in terms of a CO2 equivalent (CO2e) i.e. Carbon dioxide has been designated a GWP of 1, Methane has a GWP of 21.
Grandfathering Method for issuing emission permits to emitters and firms in a domestic emission trading scheme according to their historical emissions. This method of allocation may be combined with Auctioning.
Greenhouse Effect The impact of human activities that cause certain gases to be released and trapped in to the Earth's atmosphere. They then absorb the sun's energy and cause the earth to warm at a faster rate than usual. It is named after the phenomena of glass trapping heat in a greenhouse.
Greenhouse Gas (GHG) The greenhouse gases in most contexts are the seven gases regulated under the Kyoto Protocol, determined to be the main contributors to the Greenhouse Effect: carbon dioxide [CO2], water vapour, methane [CH4], chlorofluorocarbons (CFCs), nitrous oxide [N2O], hydrofluorocarbons [HFCs], perfluorocarbons [PFCs], and sulphur hexafluoride [SF6].
Greenhouse Gas Reduction or Emission Reduction A reduction in emissions recognised to contribute to climate change. Greenhouse Gas reductions are often measured in tonnes of carbon-dioxide-equivalent, which is calculated according to the GWP of a gas.
Gross Domestic Product The value of all goods and services produced or consumed within a nation's borders.


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Halocarbons Chemicals consisting of carbon, sometimes hydrogen, and either chlorine, fluorine bromine or iodine.
Halons These man-made substances (also known as bromofluorocarbons) are chlorofluorocarbons that contain bromine. See also Chlorofluorocarbons and Related Compounds.
Host Country The country where an emissions reduction project is physically located.
Hot Air Reductions of greenhouse gases that have occurred due to economic collapse or declined production for reasons not directly related to intentional efforts to curb emissions.
Hydrofluorocarbons (HFCs) These chemicals (along with perfluorocarbons) were introduced as alternatives to ozone depleting substances in serving many industrial, commercial, and personal needs. HFCs are emitted as by-products of industrial processes and are also used in manufacturing. They do not significantly deplete the stratospheric ozone layer, but they are powerful greenhouse gases with global warming potentials ranging from 140 (HFC-152a) to 12,100 (HFC-23).


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Immediate Settlement Immediate Settlement of Spot trades are trades where the settlement date (delivery of the commodity) occurs at a specified time shortly after the trade date. Payment terms and quantity are fixed at trade date. Immediate settlement trades are infrequent in today's greenhouse gas emissions market.
Indirect Emissions Emissions that result from a company activity, but are produced by a source external to the company. One common example is use of electricity provided by a commercial utility. The company uses the electricity to run lights or office equipment, but the electric utility is producing the power and the emissions.
Intergovernmental Panel on Climate Change (IPCC) The IPCC neither conducts original research nor monitors climate-related data, but its periodic assessment reports and technical papers play a very important role in the creation of climate change policies worldwide. The IPCC was instrumental in establishing the Intergovernmental Negotiating Committee for the United Nations Framework Convention on Climate Change (UNFCCC or the Convention) in 1992. 
International Emissions Trading (IET) IET is a flexibility mechanism of the Kyoto Protocol which allows the trade of Assigned Amount Units (AAUs) among Annex B countries. It is expected that this activity will be delegated by national governments to entities within their jurisdictions so that international trading between entities will occur. This will adjust each nations 'pool' of AAUs.


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Joint Implementation (JI) Joint Implementation refers to emission reduction projects jointly implemented by entities within different industrial nations JI is an extension of the concept developed in the Activities Implemented Jointly pilot that ends in 2000.
JUSSCANNZ The JUSSCANNZ is a group of non-European Union industrialised nations in the Kyoto Protocol negotiations including Japan, United States, Switzerland, Canada, Australia, Norway and New Zealand. Iceland, Mexico and the Republic of Korea.


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Kyoto Commitment Period (or Compliance Period) The Kyoto commitment period is the period in which Annex B countries have committed to reduce their collective emissions of greenhouse gases by an average of 5.2%. There are currently no emissions targets after the commitment period specified in the Kyoto Protocol from 2008 to 2012. These targets, if the United Nations Framework Convention on Climate Change (UNFCCC or the Convention) process continues in its present form, will be negotiated closer to the expiration of the first commitment period. It is expected that the current model of five-year periods of commitment will be maintained. Major questions regarding future commitment periods include the level of allowed emissions among capped (Annex I) countries and the extent to which additional countries take on caps (that is, developing country participation).
Kyoto Forests A Kyoto forest is a forest planted after January 1, 1990. Article 3 of the Kyoto Protocol states that only carbon sequestered from these forests during the commitment period of 2008-2012 will gain credit
Kyoto Lands Land areas covered by activities of Article 3.3. of the Kyoto Protocol as well as any additional activities agreed under Article 3.4.
Kyoto Mechanisms (or Flexibility Mechanisms) The Kyoto Mechanisms (commonly referred to as Emissions Trading) allow for the creation and transfer of emissions permits between countries. Based on economic market principals, they are designed to minimise the cost of reducing global greenhouse emissions and include: Joint Implementation (Article 6), the Clean Development Mechanisms (Article 12), and International Emissions Trading (Article 17).
Kyoto Protocol The Kyoto Protocol originated at the 3rd COP to the United Nations Convention on Climate Change held in Kyoto, Japan in December 1997. It specifies the level of emission reductions, the deadlines and methodologies that signatory countries (i.e. countries who have signed the Kyoto Protocol) are to achieve.


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Land Conservation

Land conservation prevents the release of carbon into the atmosphere, which occurs when lands come into production, by preventing production (eg. agriculture) from occurring.


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Marginal Abatement Cost (MAC) The cost of reducing emissions by one tonne of CO2e. An aggregation of these costs against total tonnes abated creates a firm's marginal abatement cost curve. The lower the MAC curve, the more effective the firm's emission reduction strategies

JI/IET - Joint Implementation and International Emission Trading.

CDM - Clean Development Mechanism

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 (e.g. cows and sheep).
Methane Recovery

Is the capture and re-use of methane emissions either through cost-effective management methods or through power generations. Methane Recovery projects include:

> Animal Waste Methane
> Coal Bed Methane
> Deep Methane Injection
> Landfill/Biomass Capture

Metric Tonne Common international measurement for the quantity of greenhouse gas emissions. A metric ton is equal to 2205 lbs or 1.1 short tons.
Monitoring Monitoring relates to the regular measurement, assessment and recording of emissions and emission reductions by an emitting firm or an emission reduction project. For example, emitting firms may monitor the actual level of emissions reduction achieved as a result of internal abatement programs.


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National self determination Self determination is the process of a nation (or a firm) deciding their own framework for emission control, measurement and monitoring methodologies, without reference to the wishes of any other nation, firm or agency.
Nitrogen Oxides (NOx) Gases consisting of one molecule of nitrogen and varying numbers of oxygen molecules. Nitrogen oxides are produced in the emissions of vehicle exhausts and from power stations. In the atmosphere, nitrogen oxides can contribute to formation of photochemical ozone (smog), can impair visibility, and have health consequences; they are thus considered pollutants.
Nitrous Oxide (N2O) Greenhouse gas with a Global Warming Potential of 310. Results from the burning fossil fuels and the manufacture of fertiliser.
Non-Annex B Countries Countries not included in Annex B of the Kyoto Protocol. Non-Annex B countries do not currently have binding emission reduction targets.
Non-Annex I Countries Countries not included in Annex I of the United Nations Framework Convention on Climate Change UNFCCC. Non-Annex I countries do not currently have binding emission reduction targets.
NZ ETS New Zealand Emissions Trading Scheme
NZU New Zealand Unit - Domestic emission unit traded in New Zealand Emissions Trading Scheme (NZ ETS). 


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Offer Price at which the owner of an emission reduction, credit, or allowance is willing to sell (a.k.a. Ask)
Offset Ratio The amount of emissions that must be secured relative to the on-site emission increase. In US domestic emission trading programs, new sources must offset their emissions at a greater than 1:1 ratio, especially if the offsetting emission reductions are derived from an off-site source.

One Offset is an emissions reduction that a pollution source has achieved in excess of permitted levels and or required reductions. The excess amount is the credit and can be sold on the market.

Options Options are contracts that give the option buyer the right but not the obligation to enter into a specific transaction purchase (a Call) or sale (Put) up to a certain date. The price (Strike Price), quantity and terms of delivery are locked in at the trade date. The expiration or exercise date (Strike Dates) is also locked in at that time, that is the date after which the option buyer's rights to enter into the transaction terminate. The option seller must live by the decision of the buyer, and is paid a premium for selling the optionality or flexibility to the buyer.

Option buyers may be either the buyers or seller of the underlying commodity. If they wish to buy the commodity they purchase a Call option ie. that is the right but not the obligation to purchase the commodity at the specified terms. If they wish to guarantee the sale of the commodity they purchase a put option ie. right but not the obligation to enter into a sale of the commodity at specified terms.

Ozone (O3) Ozone consists of three atoms of oxygen bonded together in contrast to normal atmospheric oxygen which consists of two atoms of oxygen. Ozone is an important greenhouse gas found in both the stratosphere (about 90% of the total atmospheric loading) and the troposphere (about 10%). Ozone has other effects beyond acting as a greenhouse gas. In the stratosphere, ozone provides a protective layer shielding the Earth from ultraviolet radiation and subsequent harmful health effect on humans and the environment. In the troposphere, oxygen molecules in ozone combine with other chemicals and gases (oxidization) to cause smog.


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Perfluorocarbons (PFCs) A group of human-made chemicals composed of carbon and fluorine only: CF4 and C2F6. These chemicals, specifically CF4 and C2F6, (along with hydrofluorocarbons) were introduced as alternatives to the ozone depleting substances. In addition, they are emitted as by-products of industrial processes and are also used in manufacturing. PFCs do not harm the stratospheric ozone layer, but they are powerful greenhouse gases: CF4 has a global warming potential (GWP) of 6,300 and C2F6 has a GWP of 12,500.
Permit Permits are certificates of operation that allow the holder to operate a facility provided they do not exceed a specified rate (eg. kilograms/tonnes per day). Permits are often designated as an upper limit. Because few systems operate at 100% of capacity at all times actual emissions are usually a fraction of the theoretical upper limit of allowed emissions. However, as new permits become harder to obtain, existing operations are motivated to increase their level of operations under their existing permits (eg. adding a second shift thereby legally increasing the overall quantity of emissions).
Polluter Pays Principle that pollution (specifically greenhouse gas emissions) creating entities should pay compensation to third parties for pollution damages. This equates to polluters paying for the environmental externalities created by pollution.
Precautionary Approach The approach promoted under the Framework Convention of Climate Change to help achieve stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous interference with the climate system.
Precautionary Principal In reference to the Kyoto Protocol, the idea that action to forestall large-scale, irreversible damage from climate change is warranted even though the risks of climate change are not yet fully understood.
Precession The tendency of the Earth's axis to wobble in space over a period of 23,000 years. The Earth's precession is one of the factors that results in the planet receiving different amounts of solar energy over extended periods of time.
Pre-commitment Period Is the period prior to the first Kyoto Commitment Period. This is an important time for the development of the Kyoto Protocol operational framework and to determine the involvement of signatories to the Kyoto Protocol.
Primary Energy Energy embodied in natural resources (e.g. coal, crude oil, sunlight, uranium) that has not undergone any anthropogenic conversions or transformations.
Primary Market The exchange of emission reductions, offsets or allowances between buyer and seller where the seller is the originator of the supply. The exchange of greenhouse gas emission reductions is currently conducted only in the primary market (vs. the secondary market).
Protocol A protocol is linked to an existing convention. It is a separate, additional agreement that must be signed and ratified by the Parties to the convention. Protocols are a way of strengthening a convention by adding new, more detailed commitments. See Kyoto Protocol



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Radiative Damping An imposed positive radiative forcing (q.v.) on the Earth-atmosphere system (e.g. through the addition of greenhouse gases) that represents an energy surplus. The temperature of the surface and lower atmosphere will then increase and in turn increase the amount of infrared radiation being emitted into space, thus establishing a new energy balance. The amount that emissions of infrared radiation to space increases for a given increase in temperature is known as the rediative damping.
Radiative Forcing A change in the balance between incoming solar radiation and outgoing infra-red radiation. Without any radiative forcing, solar radiation coming to the Earth would continue to be approximately equal to the infra-red radiation emitted from the Earth. The addition of greenhouse gases traps and increased fraction of the infra-red radiation, reradiating it back toward the surface and creating a warming influence (i.e. positive radiative forcing because incoming solar radiation will exceed outgoing infra-red radiation).
Reference Year The reference year is the benchmark year on which emission reduction targets are established. The Kyoto protocol uses 1990 as the reference year against which Annex I nations are required to control their emissions.
Reforestation The Revised 1996 IPCC Inventory Guidelines defines reforestation as the planting of forests on land which has historically contained forest but which has been used for another purpose since last being covered by forest.
Regeneration Renewal of forest or tree crop by natural or artificial means.
Registration Process of registering emission reduction data with a third party registry.


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SBI Subsidiary Body for Implementation.
Secretariat (UNFCCC) Staffed by international civil servants and responsible for servicing the COP and ensuring its smooth operation, the secretariat makes arrangements for meetings, compiles and prepares reports, and co-ordinates with other relevant international bodies. The Climate Change secretariat is institutionally linked to the United Nations. (source: UNFCCC)
Secondary Market The exchange of emission reductions, offsets or allowances between buyer and seller where the seller is not the originator of the supply. The exchange of greenhouse gas emission reductions currently involves only the primary market.
Seller A legally recognised entity (individual, corporation, not-for-profit organisation, government, etc.) who sells reductions, credits or allowances to another legally recognised entity through a sale, lease, trade or other means of transfer.
Sequestration See Carbon Sequestration.
Sink A reservoir that uptakes a pollutant from another part of its cycle. Soil and trees tend to act as natural sinks for carbon. See also Carbon Sinks
Soil Conservation & Land Management

Current farming practices incorporate the tillage of land in preparation for planting. Soil has organic carbon stored below its surface, and tilling the soil exposes the carbon to microbial breakdown that releases CO2 into the atmosphere. Instituting a no till/low till land management program can result in a net sequestration of soil carbon. Additional GHG reductions occur due to decreased fertiliser and on-the-farm energy use.

Spot See Immediate Settlement.
Subsidiary Body for Implementation (SBI) The role of the SBI is to develop recommendations to assist the Conference of Parties in assessing and reviewing the implementation of the Climate Convention.
Subsidiary Body for Scientific and Technology Advice (SBSTA) SBSTA is a link between the policy-orientated needs of the COP and the scientific, technical and technological assessments and information provided by various external groups, like the Intergovernmental Panel on Climate Change (IPCC).
Sulphate Aerosol Particulate matter that consists of compounds of sulphur formed by the interaction of sulphur dioxide and sulphur trioxide with other compounds in the atmosphere. Sulphate aerosols are injected into the atmosphere from the combustion of fossil fuels and the eruption of volcanoes like Mt. Pinatubo. Recent theory suggests that sulphate aerosols may lower the earth's temperature by reflecting away solar radiation (negative radiative forcing). Global Climate Models which incorporate the effects of sulphate aerosols more accurately predict global temperature variations.
Sulphur Hexafluoride (SF6) Very powerful greenhouse gas used primarily in electrical transmission and distribution systems. SF6 has a global warming potential of 24,900.
Supplementarity A Kyoto Protocol requirement that adequate domestic energy and other policies exist to ensure the achievement of long-term emission reduction goals. The supplementary rule is still open to interpretation however it reflects the request of the European Union to limit the use of the Kyoto Protocol flexibility mechanisms.


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Tradable Emission Permits A permit is an authorisation allowing an emitter to emit a specified number of tonnes of emission. Once those tonnes have been emitted, the permit expires. The total number of permits in any tradable market equals the desired level of emissions sought by the regulating authorities. Tradable permits allow emitters to determine the most economic manner to cover their emissions—by buying permits to cover emissions, taking actions to reduce emissions and selling excess permits or a combination of those activities.
Trade A transaction where a buyer and seller exchange a recognised commodity.


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United Nations Framework Convention on Climate Change (UNFCCC) The UNFCCC was established in June 1992 at the Rio Earth Summit. Its primary objective is the "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (man-made) interference with the climate system. Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner." The UNFCCC is the governing body for international negotiations.


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Verification Verification is often undertaken during a due diligence process in a buy/sell transaction. It provides independent assurance that actual or expected emission reductions have been/will be achieved from an emission reduction project during a specified period. The level of assurance provided will depend on the procedures undertaken by the independent verifier, the scope of which is usually agreed by the transacting parties and may include: assurance as to compliance with Kyoto/national regime requirements (however this will only be possible when such requirements are clearly defined), adequacy of measuring and monitoring systems for emission reduction credits, reviewing the operations of the underlying emission reductions project etc.
Volatile Organic Compounds (VOC) Any one of several organic compounds which are released to the atmosphere by plants or through vaporization of oil products, and which are chemically reactive and are involved in the chemistry of tropospheric ozone production. Methane, while strictly falling within the definition of a VOC, is usually considered separately.
Voluntary Commitment Actions taken by an entity that reduce emissions outside of regulatory requirements. During the Kyoto Protocol negotiations, a draft article on voluntary commitments would have permitted developing countries to take on voluntary, legally binding emission reduction targets, but was dropped from the final Protocol text.


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Water Vapour The most abundant greenhouse gas, it is the water present in the atmosphere in gaseous form. Water vapour is an important part of the natural greenhouse effect. While humans are not significantly increasing its concentration, it contributes to the enhanced greenhouse effect because the warming influence of greenhouse gases leads to a positive water vapour feedback. In addition to its role as a natural greenhouse gas, water vapour plays an important role in regulating the temperature of the planet because clouds form when excess water vapour in the atmosphere condenses to form ice and water droplets and precipitation.

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