Auctioning
Common term used for the sale of allowances, as opposed to allocating them for free. See also Allocation.

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Bali Action Plan
The document approved by consensus among the 187 countries at the UNFCCC COP in Bali on 15 December 2007. It sets an agenda for negotiators to find ways to reduce greenhouse gas emissions and help developing countries adapt to environmental changes by speeding up the transfer of technology and financial assistance. The negotiating process is to be concluded by 2009 and is expected to lead to a post-2012 international agreement on climate change. Also known as Bali road map.

Banking
The transfer of allowances or credits from one compliance period to the next. Parties to the Kyoto Protocol may bank as many AAUs they wish as long as they follow commitment period reserve rules, CERs corresponding to 2,5% of their targets, and ERUs corresponding to 2,5% of their targets,to use them in subsequent commitment periods. The EU ETS allows unlimited banking from the second compliance period (2008-12) onwards, but did not permit banking from the first to later periods. Also known as carry-over or hoarding.

Baseline and Baseline Scenario
The baseline represents forecasted emissions under a business-as-usual (BAU; see explanation below) scenario, often referred to as the 'baseline scenario', i.e. expected emissions if the emission reduction activities were not implemented.

Benchmarking
An allocation method in which allowances are distributed based on output (e.g. one allowance per MWh generated) or on intensity standards in the industry, based on best-performing companies.

Bubble
Entity where two or more emission sources (for example, countries) are treated as if they were a single emission source. The European Union constitutes a bubble under the Kyoto Protocol.

Bundle
Bundling signifies the bringing together of several CDM project activities, to form a single project to reduce CDM-related transaction costs.

Business As Usual Scenario (BAU)
A business as usual scenario is a policy neutral reference case of future emissions, i.e. projections of future emission levels in the absence of changes in current policies, economics and technology.

Borrowing
A mechanism under a cap and trade system that allows entities to use allowances designated for a future compliance period to meet current compliance period requirements.

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CAR, see Corrective Action Request

Carbon Credit Note
A fully underwritten obligation (in the form of a note or bond) to deliver a carbon credit (Certified Emission Reduction) to the purchaser at a specified future date.

California Air Resources Board (CARB)
Agency established by California's legislature in 1967 to attain and maintain healthy air quality, conduct research into the causes of and solutions to air pollution, and systematically attack the serious problem caused by motor vehicles. CARB is the chief implementing agency for Assembly Bill 32 (AB32).

California Climate Action Registry (CCAR)
A non-profit voluntary registry for greenhouse gas emissions in California and the official registry for AB32. The purpose of the Registry is to help companies and organisations with operations in the state to establish GHG emission baselines against which any future GHG emission reduction requirements may be applied.

Cap and Trade
A design for emissions trading systems under which total emissions are limited or 'capped'. Tradable emission allowances corresponding to the total allowed emission volume are allocated to participants for free or through auctioning. Contrasts with baseline-and-credit approaches where only deviations from a baseline are tradable. Examples are the EU ETS, RGGI, international emissions trading under the Kyoto Protocol and the proposed emissions trading scheme in Australia (Carbon Pollution Reduction Scheme).

Carbon Capture and Storage (CCS)
Process consisting of the separation of CO2 from industrial and energy-related sources, transport to a storage location and long-term isolation from the atmosphere. CO2 may be stored under ground in old oil and gas fields, non commercial coal fields and saline aquifers. It may also be injected into the ocean. Also known as carbon capture and geological storage (CCGS).

Carbon Dioxide Equivalent (CO2e)
Measurement unit used to indicate the global warming potential (GWP) of greenhouse gases. Carbon dioxide is the reference gas against which other greenhouse gases are measured. See Global Warming Potential for conversion rates.

Carbon Emission Factor (CEF)
Amount of CO2 released per unit of energy produced.

Carbon leakage
Carbon leakage occurs when production of goods is moved to countries with less strict climate policy (e.g. India and China) than the original country (e.g. EU).

Carbon Pollution Reduction Scheme (CPRS)
Name of the planned federal emissions trading scheme in Australia. Schedulesd to start on 1 July 2010.

Carbon Neutrality
The practice of purchasing and retiring emission credits or allowances corresponding to the amount of GHG emissions from for instance an activity, company or country.

Carbon Trading, see Emission Trading.

Carbon Offset, see Offsets.

Carbon Sink
Natural or human-made systems that absorb carbon dioxide from the atmosphere and store them. Forests are the most common form of sink, in addition to soils, peat, permafrost, ocean water and carbonate deposits in the deep ocean.

CCFE Chicago Climate Futures Exchange

CCS, see Carbon Capture and Storage.

Certification
A process by which a GHG reduction project is audited by a government agency or independent authority to determine that it meets established criteria. For instance, the act of approving emission reductions from a carbon project and issue emission reduction credits to the entity that owns the rights to the project credits.

Countries with economies in transition (EIT)
Fourteen Annex I countries that include some Central and East European countries and former republics of the Soviet Union that are in transition from centrally-planned economies to market-based economies.

CDM, see Clean Development Mechanism.

CDM EB, Clean Development Mechanism Executive Board.

CERs, see Certified Emission Reductions.

CER, see Carbon Emission Factor.

Certified Emission Reductions (CERs)
CERs are carbon credits generated through the CDM. It can be used to meet an Annex B Party’s emission commitment or as a unit of trade in GHG emissions trading systems.

CFI

Carbon Financial Instrument = 100 metric tons of equivalent CO2

CFTC

Commodities Futures Trading Commission

Clean Air Act (CAA)
A piece of United States federal legislation first passed in 1963 relating to the reduction of smog and air pollution in general. The Clean Air Act Amendments of 1990 proposed emissions trading, added provisions for addressing acid rain, ozone depletion and toxic air pollution, established a national permits program. The CAA provides grounds for the EPA to regulate GHG emissions.

Clean Development Mechanism (CDM)
The CDM is a mechanism for project-based emission reduction activities in developing countries (non-Annex B countries). Certified emission reductions (CERs) are generated from projects that lead to certifiable emissions reductions that would otherwise not occur.

Clean Development Mechanism Executive Board (CDM EB)
Body that registers validated project activities as CDM projects, issues certified emission reductions (CERs) to relevant projects participants, and manages series of technical panels and working groups meetings (see Methodologies Panel). The CDM EB is accountable to the Conference of the Parties to the Kyoto Protocol. The CDM EB meets six to seven times a year.

Clear Skies Act (Clear Skies Initiative)
Establishes in the United States federally enforceable emissions limits (or "caps") for three pollutants - SO2, NOx, and mercury for a period of 2008-2018. Clear Skies' NOx and SO2 requirements affect all fossil fuel-fired electric generators greater than 25 megawatts (MW) that sell electricity.

Climate Cent
Levy on all imports of petrol and diesel at a rate of 1.5 cents per litre introduced as a voluntary measure of the Swiss industry. This will generate around 100 million Swiss Francs annually, which will go towards closing the gap in CO2 emissions reductions.

Chicago Climate Exchange (CCX)
Voluntary cap-and-trade scheme that started trading in 2003. Members make a voluntary commitment to reduce GHG emissions. Among the members are companies from North America, municipalities, US states, universities. The CCX also certifies and trades offset credits under its own standard.

Chinese price floor
The Chinese DNA approves only CDM projects that are contracted above a defined price level. The price level required depends on the project type.

CITL, see Community Independent Transaction Log.

Climate Community and Biodiversity Standard (CCB Standard)
A certification standard for credits from land-use and forestry carbon mitigation projects. The standard rewards projects that simultaneously address climate change, support local communities and conserve biodiversity. The standard helps mitigating risk for investors and increases funding opportunities for project developers.

The Climate Registry (TCR)
A collaboration between states and provinces in the United States, Canada, and Mexico aimed at developing and managing a common GHG emissions reporting system. The registry supports various greenhouse gas emission reporting and reduction policies for its member states and reporting entities. TCR hopes to become the national standard under a US federal cap and trade scheme.

Climate Security Act (CSA)
Legislation proposed in the US Senate in October 2007 by Senators Lieberman and Warner. It failed to overcome a filibuster in the Senate in June 2008. The bill would introduce a federal cap-and-trade scheme from 2012 onwards and reduce GHG emissions by 70% below current levels by 2050.

Coal Mine Methane/Coalbed Methane
Coalbed methane is methane contained in coal seams, and is often referred to as virgin coalbed methane, or coal seam gas. Coal mine methane is the subset of coalbed methane that is released during the process of coal mining.

Commitment Period
The five-year Kyoto Protocol Commitment Period is scheduled to run from calendar year 2008 to calendar year-end 2012.

Commitment Period Reserve
To avoid "over-sell" and thus non-compliance with targets, Annex B Parties to the Kyoto Protocol must hold a minimum level, corresponding to 90% of assigned amount volume, of AAUs, CERs, ERUs and/or RMUs in a commitment period reserve that cannot be traded.

Compliance
The act, specific to cap-and trade schemes, of surrendering the required amount of allowances, or some combination of allowances and offsets, to cover an entity’s emissions. Achievement by a Party in meeting its quantified emission limitation and reduction commitments under the Kyoto Protocol.

COP, see Conference of the Parties.

Community Independent Transaction Log (CITL)
Registry recording the issue, transfer and cancellation of allowances within the European Union emissions trading scheme.

Conference of the Parties (COP)
The COP is the supreme body of the UNFCCC. It meets once a year to review the progress. COP-11 took place in Montreal, Canada in November/December 2005 and was also the first Meeting of the Parties to the Kyoto Protocol (MOP-1). COP-12 was held in Nairobi in November 2006 and COP-13 in December 2007 in Bali. COP-14 will be in Poznan, Poland in late 2008, while COP-15 takes place in Copenhagen, Denmark in late 2009.

Conference of the parties serving as the meeting of the parties to the Protocol (CMP)
The highest decision-making body of the Kyoto Protocol. Also known as COP/MOP.

Corrective Action Request (CAR)
A request raised by the Designated Operational Entity (DOE) during the validation process, in the case where a mistake has been made, the CDM requirements have not been met or there is a risk the emissions cannot be monitored or calculated. The DOE can also raise a Corrective Action Request during verification, if it finds non-conformities with monitoring requirements, mistakes in the emissions reductions calculations, or if Forward Action Requests raised during validation have not been resolved. All Corrective Action Requests have to be resolved before the DOE recommends the project activity for registration or issuance.

CPRS
see Carbon Pollution Reduction Scheme.

Credit Limit
Limit on the use of CERs/ERUs for compliance by the companies under the EU ETS or other cap-and-trade systems. In the EU ETS, iIt is expressed as a maximum share of the total allocation.

Crediting Period
The crediting period is the duration for which a project generates carbon credits. The crediting period shall not extend beyond the operational lifetime of the project. For CDM projects crediting period continues either a 7-year period, which can be renewed twice to make a total of 21 years, or a one-off 10-year period; for JI projects crediting period overlaps with the first commitment period under the Kyoto Protocol (2008-2012).

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Designated National Authority (DNA)
The official body representing the government of the host country for CDM/JI projects. For JI host countries, the national authority approves the projects and issues the emission reduction units (ERUs). For CDM host countries, the designated national authority issues a non-objection letter necessary for the project approval, if it agrees that a project is in line with its sustainable development objectives. The DNA also issues the Letter of Approval (LoA) needed for the registration of a CDM project. A project will need both a host country approval as well as investor country approval.

Designated Operational Entity (DOE), see also Accredited Independent Entity (AIE).
A domestic legal entity or an international organization accredited and designated by the CDM EB. The DOE validates and requests registration of a proposed CDM projects activity as well as verifies emission reductions of a registered CDM project activity.

Determination and Verification Manual (DVM),
Document being considered by the JISC (Joint Implementation Supervisory Committee), which would serve as a practical reference for independent entities operating under the JI mechanism.

Domestic Project
In the JI context, project developed in the absence of another Annex 1 Party participant.

Double Counting
Potential problem with JI projects in sectors covered by the EU ETS. See also JI reserve.

Downstream Cap
A "downstream" cap and trade system is one in which where the entities emitting carbon dioxide are required to surrender allowances (also see: upstream cap).

DVM
see Determination and Verification Manual.

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EIA
Energy Information Admistration

Environmental Impact Assessment (EIA)
This is an assessment of the possible impact, both positive and negative, that a proposed project may have on the natural environment. This procedure ensures that environmental consequences of projects are identified before authorisation is given. The rules for an Environmental Impact Assessment vary from country to country. The EU has established a mix of mandatory and discretionary procedures to assess environmental impacts, which are set out in the EIA Directive.ree allocation (grandfathering) will be phased out towards 2020.

Early Crediting
Early credits have been given to CDM projects whose start date was between 1 Jan 2000 (the starting point for CDM) and 18 November 2004 (when the first project was registered), as long as they submitted their project documentation within end March 2007. The reason for this was the wish to give projects in developing countries a kickstart (see Prompt-start CDM). A CDM project activity that has already started can still be registered if it can prove it took CDM into account when starting, but it will only receive CERs from the date it is registered. Afforestation/reforestation projects starting 2000 onwards can accrue tCERs/lCERs from the project start date as long as their start date is identical with the crediting period start date.

ECX

European Climate Exchange

EIT, see Countries with Economies in Transition.

Eligibility Requirements
Conditions for being able to trade AAUs and ERUs under Article 17 of the Kyoto Protocol. There are six eligibility requirements for participating in emissions trading for Annex I Parties: (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 of the submission of its report on calculation of its assigned amount.

Emission Reduction Unit (ERU)
Permits achieved through a Joint Implementation project.

ERPA

Emissions Reduction Purchase Agreement

Emissions to Cap (E-t-C)
Emissions-to-cap (E-t-C) , also called Gap-to-cap, is calculated by subtracting the seasonally adjusted cap from emissions (actual or forecasted). This metric gives an indication of whether the market (for a specific period) is producing more or less than the seasonally adjusted cap for that same period. More specifically, if not taking CERs into account, a positive (negative) E-t-C means that the market is fundamentally short (long), suggesting a buy (sell) signal.

Emission Reduction Purchase Agreement (ERPA)
Binding purchase agreement signed between buyer of CERs or ERUs - or other emission reduction credits - and seller. See primary market.

Emissions Reductions (ERs)
Emissions reductions generated by a project that have not undergone a validation/verification process, but are contracted for purchase.

ERU, see Emission Reduction Unit.

E-Tag, see NERC E-Tag

European Union Allowances (EUA)
The tradable unit under the EU ETS. Each allowance equals 1 tonne of CO2. EUAs are bankable from Phase 2 to Phase 3 of the EU ETS.

EU ETS, see European Union Emissions Trading Scheme.

European Union Emissions Trading Scheme (EU ETS)
Trading Scheme within the European Union, which was launched on January 1, 2005. The scheme is based on Directive 2003/87/EC, which entered into force on 25 October 2003. The Phase I (2005 - 2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II (2008-2012) links the ETS to other countries participating in the Kyoto trading system. In Phase III, the share of auctioning will increase. In 2013 at least 50 percent of the total amount of allowances will be auctioned, and this share will increase, as free allocation (grandfathering) will be phased out towards 2020.

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FAR
see Forward Action Request.

Forward Action Request (FAR)
A request raised by the DOE during validation, which indentifies issues related to project implementation that require review during the first verification of the project activity. The DOE must report on the FARs in the validation report. If the issues raised in the FAR have not been resolved at the first verification, the DOE must rmake a Corrective Action Request.

Flexible mechanisms
Under the Kyoto Protocol, a collective term for International Emissions Trading, the Clean Development Mechanism and Joint Implementation.

Fuel Switching
The process of moving from a higher carbon content fuel, such as coal, to a lower carbon content fuel, such as natural gas, in power generation and industrial process for purposes of reducing carbon emissions.

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G77, see Group of 77.

GIS, see Green Investment Scheme.

Global Environment Facility (GEF)A global partnership among 178 countries, international institutions, non-governmental organizations (NGOs), and the private sector to address global environmental issues while financing national sustainable development initiatives.

Global Warming Potential (GWP)
The global warming potential is the impact a greenhouse gas (GHG) has on global warming. By definition, CO2 is used as reference case, hence it always has the GWP of 1. GWP changes with time, and the IPCC has suggested using 100-year GWP for comparison purposes. Below is a list of 100-year GWPs used in the Kyoto Protocol for the six Kyoto gases:

See also Carbon Dioxide Equivalent.

Global Warming Solutions Act of 2006
The California law that sets up the first enforceable state-wide program in the U.S. to cap all greenhouse gas emissions from major industries. The law requires that by 2020 the state's greenhouse gas emissions be reduced to 1990 levels. Also known as Assembly Bill 32 or AB32.

Gold Standard
Initiated by WWF, SSN and Helio International, the Gold Standard for CDM projects offers project developers a tool with which they can ensure that CDM, JI and VER projects have real environmental benefits and, in so doing, give confidence to host countries and the public that projects represent new and additional investments in sustainable energy services. Eligible project types are renewable energy and energy efficiency.

Grandfathering, see also Allocation.
Method for allocation of emissions credits/allowances to companies or other legal entities, usually free of charge, on the basis of their historic emissions. Grandfathering has been the main allocation method in Phase I1 and I2I of EU ETS.

Grazing Land Management
The system of practices on land used for livestock production aimed at manipulating the amount and type of vegetation and livestock produced.

Green-E
A program developed and run by the Center for Resource Solution dedicated to certify and verify renewable energy projects and GHG emission reductions in the retail market.

Green Tag, see Renewable Energy Certificate.

Greenhouse gases (GHGs)
Greenhouse gases (GHGs) are trace gases that control energy flows in the Earth's atmosphere by absorbing infra-red radiation. Some GHGs occur naturally in the atmosphere, while others result from human activities. There are six GHGs covered under the Kyoto Protocol - carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). CO2 is the most important GHG released by human activities.

Green Investment Scheme (GIS)
By implementing Green Investment Schemes (GIS), the seller governments of Assigned Amount Units (AAUs) demonstrate that the proceeds from these sales are invested in environmentally beneficial activities, a process also called the "greening" of AAUs.
There are two major concepts of greening – "hard" and "soft", although both definitions are relative. Hard greening is usually defined as investing in projects aiming directly at GHG emission reductions. Soft greening stands for activities leading to environmental benefits not directly connected to GHG emission reductions measures
See also Hot Air.

Group of 77 and China (G77/China)
G77/China is the developing country-group in the climate negotiations, consisting of more than 130 developing countries.

GWP, see Global Warming Potential.

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Host Country
A host country is the country where a JI or CDM project is physically located. A project has to be approved by the host country to receive CERs or ERUs.

Hot Air
Excess permits (AAUs) that have occurred due to economic collapse or declined production for reasons not directly related to intentional efforts to curb emissions. Russia and Ukraine in particular have significant hot air volumes.

HFC-23 (Trifluoromethane)
About 98% of HFC-23 emissions are created as a byproduct in the production of HCFC-22 and generally are vented to the atmosphere. HCFC-22 is used mostly as the refrigerant for stationary refrigeration and air conditioning.

Hydrofluorocarbons, or HFCs
One of the six greenhouse gases, controlled in the Kyoto Protocol. Are produced commercially and are largely used in refrigeration and insulating foam.

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IET, see International Emissions Trading.

IFCCC

International Framework on the Convention on Climate Change

Integrated Pollution Prevention and Control (IPCC) Directive
IPCC Directive based on minimising pollution from various industrial sources throughout the European Union. Operators of industrial installations covered by Annex I of the IPPC Directive are required to obtain an authorisation (environmental permit) from the authorities in the EU countries. About 50.000 installations are covered by the IPPC Directive in the EU.

IPCCC

Intergovernmental Panel on the Convention of Climate Change

International Emissions Trading (IET)
International emissions trading, one of the three flexible mechanisms under the Kyoto Protocol, allows for transfer of AAUs across international borders or emission allowances between companies covered by a cap-and-trade scheme. See emissions trading.

International Organization for Standardization (ISO)
The world's largest developer and publisher of International Standards. The ISO is composed of a network of the national standards institutes of 157 countries, with a Central Secretariat in Geneva, Switzerland. In March 2006, ISO launched the ISO 14064:2006 standards for GHG accounting and verification.

International Transaction Log (ITL)
Database of all tradable credits under the Kyoto Protocol and the application that verifies all international transactions and their compliance with Kyoto rules and policies.

ISO 14064

Issuance
Issuance refers to the instruction by the CDM Executive Board to the CDM registry administrator to issue a specified quantity of CERs for a project activity into the pending account of the Executive Board in the CDM registry.

Internal Abatement
In emissions trading terminology, the act of reducing one’s own emissions for compliance purposes, e.g. through technology upgrades and fuel switching, as opposed to buying allowances/offsets or scaling down production.

Inventory
Country report, under the Kyoto Protocol, on anthropogenic GHG emissions and removals delivered on a regular basis according to the IPCC guidelines.

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Joint Implementation (JI)
Joint Implementation is one of the three flexible mechanisms under the Kyoto Protocol, for transfer of emissions permits from one Annex B country to another. JI generates ERUs on the basis of emission reduction projects leading to quantifiable emissions reductions.

Joint Implementation Supervisory Committee (JISC)
Joint Implementation Supervisory Committee (JISC) supervises the verification of ERUs generated by JI projects following the verification procedure under the JISC.

JUSSCANNZ Group
Active group during the Kyoto Protocol negotiations (JUSSCANNZ is an acronym for Japan, the USA, Switzerland, Canada, Australia, Norway and New Zealand). Later on, the Umbrella Group (see below) was derived from the JUSSCANNZ Group.

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Kyoto gases
The six greenhouse gases (GHG) included in the Kyoto Protocol. See Global warming potential.

Kyoto Protocol
The Kyoto Protocol originated at COP-3 to the UNFCCC in Kyoto, Japan, December 1997. It specifies emission obligations for the Annex B countries and defines the three so-called Kyoto flexible mechanisms: JI, CDM and emissions trading. It entered into force on 16 February 2005.

Kyoto Mechanisms, see Flexible Mechanisms

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Linking Directive (LD)
LD formally is not a directive on its own but rather an amendment to the EU Emissions Trading Directive 2003/87/EC that permits companies to use carbon credits from CDM/JI projects for compliance with their targets under the EU ETS. It provides provisions relating to project approval processes and authorisation to participate in the flexible mechanisms, and contains additional provisions relating to the establishment of the national emissions inventory.

Land Use, Land Use Change and Forestry (LULUCF)
The land-use, land-use change and forestry (LULUCF) sector was included under the Kyoto Protocol to take into consideration certain human-induced activities that remove greenhouse gases from the atmosphere, also known as carbon "sinks". The following activities referred to in Article 3, paragraphs 3 and 4 of the Kyoto Protocol, as defined in paragraph 1 of the annex to decision 16/CMP.1: afforestation, reforestation, deforestation (the direct human-induced conversion of forested land to non-forested land), revegetation, forest management, cropland management, grazing land management.

Letter of Approval (LoA)
The letter provides formal approval of the project as a JI or CDM project by the Parties involved.

Letter of Endorsement (LoE)
The letter means confirmation to the project sponsor of the preparedness of the host country to endorse the further development of the project in question.

Letter of 'No Objection' (LoNo)
The Letter may be requested on the basis of a Project Identification Note (PIN) in order to gain assurance from the host country to issue the Letter of Endorsement (LoE).

Long-term Certified Emission Reductions (lCERs), see also Temporary Certified Emission Reductions (tCERs).
Credits issued for an afforestation or reforestation project activity that expires at the end of its crediting period. lCERs are issued for the net anthropogenic greenhouse gas removals by sinks achieved by the project activity during each verification period.

LULUCF, Land Use, Land Use Change and Forestry.

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MAC, see Marginal Abatement Cost; Market Advisory Committee.

MtCO2e

Millions of metric tonnes of CO2 equivalent

Market Advisory Committee
Entity set up by the California Air Resources Board (CARB) to recommend designs for a greenhouse gas cap-and-trade scheme in the state.

Marginal Abatement Cost (MAC)
The cost of reducing emissions by one additional unit. Aggregated marginal costs over a number of projects or activities define the marginal abatement cost curve.

Marrakesh Accords
Agreement reached under the UNFCCC on modalities and procedures of the international climate change policy regime developed at the seventh Conference of the Parties. The Marrakesh Accords cover significant principles for technology transfer, accounting, flexible mechanisms implementation etc.

Memorandum of Understanding (MoU)
An MoU is an agreement between two parties that aims to formally recognise a joint desire to ultimately conclude an agreement or to achieve goals jointly. It may or may not have legal backing of sanction, depending upon how it is constructed. MoUs between host and investor country are often used as a basis for CDM/JI projects.

Methodologies Panel (Meth Panel)
The Methodologies Panel was established to develop recommendations to the Executive Board on guidelines for methodologies for baselines and monitoring plans and prepare recommendations on submitted proposals for new baseline and monitoring methodologies.

Meeting of Parties (MOP), see CPM.

Midwestern Greenhouse Gas Reduction Accord (MGA)
A regional agreement by governors of the states in the US Midwest and one Canadian province to establish a multi-sector cap and trade program to reduce greenhouse gas emissions.
Members: Illinois, Iowa, Kansas, Manitoba, Michigan, Minnesota, and Wisconsin.
Observers: Indiana, Ohio, and South Dakota.

Monitoring
Monitoring refers to the collection and archiving of all relevant data necessary for determining the baseline, measuring anthropogenic emissions by sources of greenhouse gases (GHG) within the project boundary of a project activity and leakage, as applicable.

Monitoring Plan
A monitoring plan provides information on the collection and analysis of all data relevant to the calculation of emission reductions from a project. The full requirements for the monitoring plan are set out in 3/CMP.1, Annex, paragraph 53. The monitoring plan must be included in the Project Design Document (PDD).

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National Allocation Plan (NAP)
Plan from a Member State for how to distribute EU allowances across installations taking part in the EU ETS in that given country.

National Authority, see Designated National Authority or Focal Point.

National Communication
A report submitted in accordance with the UNFCCC and the Kyoto Protocol by which a Party informs other Parties of activities implemented to address climate change.

New Entrant Reserve
In the EU ETS, this is the amount of allowances the countries have set aside for new installations ("new entrants") or expansions at existing installations.

New South Wales Greenhouse Gas Abatement Scheme (NSW GGAS)
Emissions trading scheme in the Australian state of New South Wales. Operational since 1 Jan, 2003, NSW GGAS operates on a benchmarkbaseline-and-credit principle. The NSW GGAS establishes annual GHG reduction targets, and requires individual electricity retailers and other parties who buy or sell electricity in NSW to meet mandatory benchmarks based on the size of their share of the electricity market, or buy domestic offset credits for overshooting emissions.

NSW GGAS, see New South Wales Greenhouse Gas Abatement Scheme.

Non-Annex I countries
Countries that have ratified or acceded to the UNFCCC, but not included in Annex I and have no emission reduction targets. Annex I is an Annex in the UNFCCC listing those countries that are signatories to the Convention and committed to emission reductions.

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Ocean Sequestration, see Carbon capture and storage.

Official Development Assistance (ODA)
A category of development aid which flows from members of the OECD's Development Assistance Committee (developed countries) to countries on the Part I List of Aid Recipients (developing countries). The Conference of the Parties (COP) has decided that projects funded by official development assistance are not eligible under the CDM. Hence, in the Project Design Document, project participants must disclose information on any public funding for their CDM project activity.

Offset credits or offsets
Emission reduction credits from project-based activities that can be used to meet compliance or corporate objectives as a supplement or alternative to reducing one’s own emissions. In a cap-and-trade scheme, offsets may be used instead of allowances, sometimes up to a limit (see credit limit). CERs and ERUs are types of offset credits

Over the Counter (OTC) market
Trades arranged by brokers, as opposed to trades on exchanges or bilateral (direct) trades.

Operational Entity
An independent entity, accredited by the CDM Executive Board, which validates CDM project activities, verifies and certified emission reductions generated by such projects.

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Pavley Bill
Also known as California Law AB 1493, it was the first law in the US to address the greenhouse gases emitted in auto exhaust. The law mandates a 30 percent reduction in motor vehicle emissions by 2016, starting with model year 2009. AB 1943 has been challenged legally by a number of industries, including the Association of Automobile Manufacturers; the issue is still tied up in the courts.

Permit, see Allowance.

Programme of Activities (PoA)
A voluntary action, implementing a policy, measure or stated goal, managed by a public or private entity, and which results in emission reductions or removals that are additional. A PoA can last for 28 years. Subactivities – or CDM programme activities (CPAs) – can be added at any time during this period. Often referred to as programmatic CDM.
Link: CDM-PoA-DD: http://cdm.unfccc.int/EB/033/eb33_repan41.pdf

Project Idea Note (PIN)
This is a short form of project description (about 6 pages) that provides such basic information about the project as type, size and location of the project; estimation of the anticipated total amount of Greenhouse Gas (GHG), reduction compared to the "business-as-usual" scenario, etc.

Perfluorocarbons or PFCs
One of the six GHG controlled by the Kyoto Protocol. PFCs are a by-product of aluminium smelting and are replacement for CFCs in manufacturing semiconductors.

Public Comment Period, see Validation.

Price Cap
A cap set on the price of traded emissions allowances. Also known as a safety valve.

Primary transaction
A transaction where the seller is the original owner (or issuer) of the carbon asset. A commonly used acronym for primary CER is "pCER."

Pre-Certified Emission Reductions (pre-CERs)
A unit of GHG emission reductions that has been verified by an independent auditor but has not yet undergone the procedures and may not yet have met the requirements for registration, verification, certification and issuance of CERs or ERUs.

Prompt-start CDM
The agreement that CDM projects starting 1 Jan 2000 or later can obtain CERs (as opposed to JI projects, whose crediting period could not start until the Kyoto period started 1 Jan 2008).

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REC

Reduced emissions from deforestation and degradation (REDD)
Reducing emissions from deforestation and [land] degradation. Mitigation action that seeks to preserve existing carbon stocks in forests (typically tropical rainforests), peat lands etc. The approach would be additional to project-based efforts such as the CDM. Issues to be solved are permanence, leakage, monitoring and baselines.

Regional Greenhouse Gas Initiative (RGGI)
A regional cap and trade system that currently includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. In addition, the District of Columbia, Pennsylvania, the Eastern Canadian Provinces, and New Brunswick are observers in the process. The scheme covers CO2 emissions from power plants in the region, and requires a 10 percent reduction in these emissions by 2018. The first three-year compliance period started on 1 January 2009.

Registration
Registration is the formal acceptance by the Executive Board of a validated project activity as a project activity. Registration is the prerequisite for the verification, certification and issuance of credits related to that project activity.

Removal Units (RMUs)
A unit relating to land use, land use change and forestry activities and is equal to one metric tonne of CO2 equivalent. RMUs cannot be banked for use in any subsequent commitment period, but can be converted into Assigned Amount Units (AAUs) within a national registry.

Revegetation
A direct human-induced activity to increase carbon stocks on sites through the establishment of vegetation that covers a minimum area of 0.05 hectares and does not meet the definitions of afforestation and reforestation.

Regional Greenhouse Allowance (RGA)
Tradable unit under the Regional Greenhouse Gas Initiative, corresponds to 1 short ton (0.907 metric tonne).

RGGI
see Regional Greenhouse Gas Initiative.

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Secondary Transaction
A transaction where the seller is not the original owner (or issuer) of the carbon asset. A commonly used acronym for secondary CERs is "sCER."

Secondary Market
The secondary market signifies the second transaction or trading of Certified Emissions Reductions (CERs) related to CDM projects or Emission Reduction Units (ERUs) from JI projects.

Sinks
The removal of greenhouse gases (GHGs) from the atmosphere through land management and forestry activities that may be subtracted from a country's allowable level of emissions.

Small scale CDM projects
There is a simplified process for small scale CDM projects that will generate less emissions reductions. They are defined as: renewable energy projects under 15 MW, energy efficiency projects that reduce energy consumption by up to 60 GWh per year; or project activities which emit less than 60 kilotonnes CO2 equivalent per year.

Subsidiary Body for Implementation (SBI)
Body advising and assisting the COP in matters relating to implementation of the UNFCCC and in preparing its decisions.

Subsidiary Body for Scientific and Technological Advice (SBSTA)
Body advising the COP on scientific and technical matters. It provides a link between the scientific information from experts and the policy-oriented needs of the COP. The SBSTA works closely with the Intergovernmental Panel on Climate Change (IPCC).

Supplementarity
Supplementarity is a provision in the Kyoto Protocol stating that emissions trading should be a supplement to domestic action. This provision is the basis for the European Union’s limitation on the imports of CERs and ERUs.

Sulfur Hexafloride or SF6
One of six GHGs curbed under the Kyoto Protocol. It is mostly used in the heavy industry to insulate high-voltage equipment and assist in the manufacturing of cable-cooling systems.

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Temporary Certified Emission Reductions (tCERs), see also Long-term Certified Emission Reductions (lCERs).
Credits issued for an afforestation or reforestation project activity under the CDM that expires at the end of the commitment period following the one during which it was issued. tCERs are issued for the net anthropogenic greenhouse gas removals by sinks achieved by the project activity since the project start date.

Terrestrial Sequestration
Removal of carbon dioxide from the atmosphere or the prevention of carbon dioxide emissions from leaving terrestrial ecosystems. Sequestration can be enhanced in such ways as reducing the decomposition of organic matter; increase of photosynthetic carbon fixation of different types of vegetation; creating energy offsets using biomass for fuels.

TCR, see The Climate Registry.

Track 1 and Track 2 JI Projects
To host Track 1 (fast-track) JI projects, a country has to meet the following criteria: a) be a Party to the Kyoto Protocol; b) calculated assigned amount; c) establish national registry; d) submit the annually required inventory; e) establish system for the estimation of emissions and sinks; and f) submit additional information on the assigned amount.
If host country meets all criteria, it is free to implement JI projects under Track 1: apply its own criteria and approve the project and emission reductions according to its own rules. In case a host country meets only a)-c) criteria mentioned above, it is eligible for Track 2 JI projects. Second track JI more closely resembles the CDM. Projects must be examined and the emissions reduced or sequestered verified by an independent entity before any transfer of ERUs can occur.

TREC

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Umbrella group
An informal group of industrialised countries that do not belong to the EU but occasionally acts as an negotiating bloc on specific issues. The group was formed after the adoption of the Kyoto Protocol, and consists of Japan, USA, Canada, Australia, Norway, New Zealand, Iceland, the Russian Federation and Ukraine. It has evolved from the JUSSCANNZ (see above).

United Nations Framework Convention on Climate Change (UNFCCC)
The UNFCCC was established 1992 at the Rio Earth Summit. It is the overall framework guiding the international climate negotiations. Its main objective is "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (man-made) interference with the climate system".

UK Emissions Trading Scheme
Voluntary domestic emissions trading scheme running from March 2002 to the end of 2007.

Upstream Cap
An "upstream" cap and trade system is one in which the entities supplying or importing carbon-rich fuels into the market would be required to surrender allowances (see also: downstream Cap). The proposed Australian Carbon Pollution Reduction Scheme uses an upstream approach for transportation and some other emission categories.

Unilateral CDM project
CDM project that does not include an Annex 1 project participant.

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Validation, see also Determination and Public Comment Period.
The process of independent evaluation of a CDM project by an designated operational entity according to requirements to CDM projects.

Validation and Verification Manual
mandatory guidance for the DOEs in undertaking their validation and verification work. Agreed by the CDM Executive Board at its 44th meeting in November 2008.

Verification, see also Determination.
The process of formal confirmation by a recognized independent third party that inventories and carbon reduction claimed by participants in carbon trading schemes are in conformity with reality and established rules. Under the CDM, verification is performed by designated operational entities (DOEs).

Verified Emission Reductions (VERs)
VERs are generated by carbon reduction projects that are assessed and verified by third party organisations rather than through the UNFCCC.

Voluntary carbon market
The sum of all transaction of carbon credits in non-compliance markets. The generation of non-compliance credits — or voluntary offset credit supply — comprises the reduction of GHG emissions for the purpose of selling them to voluntary end users and not to compliance buyers. Voluntary markets for emissions reductions include generation and transaction of carbon credits in non-compliance markets. The voluntary market permits the use of credits such as verified emission reductions (VERs), non-verified emission reductions (ERs) and prospective emission reductions (PERs), as well as the non-compliance use of CERs, ERUs, EUAs and other credits and allowances generated for the compliance market.

Voluntary standard
Any standard that aims to ensure the quality of carbon credits in the voluntary carbon market. It sets various requirements for project developers, such as third-party verification and measures to avoid double counting of carbon offsets, e.g. the use of registries.

VVM
see Validation and Verification Manual.

Voluntary Carbon Standards (VCS)
VCS is a certification standard for offset credits in the voluntary market. The standard provides for for project-level quantification, monitoring, and reporting, validation, and verification of greenhouse gas emission reductions or removals. The VCS is an initiative of the World Business Council for Sustainable Development, International Emissions Trading Association, The Climate Group, and the World Economic Forum.

VCU Voluntary Carbon Unit

Voluntary Offset Standard or VOS
VOS was launched in June 2007 and is based on the existing standards promoted by the UNFCCC, bringing voluntary market to the level of the regulated and standardized procedures of the compliance market. VOS endorses the existing gold standard methodology.

Voluntary Gold Standard
A voluntary standard, launched in May 2006 by WWF-UK and endorsed by 45 environmental NGOs. It is a simplified version of the CDM Gold Standard and is only available for projects in developing countries.

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World Business Council on Sustainable Development (WBCSD)

Western Climate Initiative (WCI)
Regional initiative launched in February 2007 by states and provinces along the western rim of the United States, Canada, and Mexico. The initiative, which is based on the combined goals of the participants’ individual states, looks to develop a mulit-sector cap-and-trade system covering 90 percent of the emissions from the partner jurisdictions. The proposed target is to reduce greenhouse gas emissions by 15 percent below 2005 levels by 2020.
Members: Arizona, British Columbia, California, Manitoba, Montana, New Mexico, Ontario, Oregon, Quebec, Utah, Washington...
Observers: Alaska, Colorado, Idaho, Kansas, Nevada, Wyoming, Saskatchewan, and the Mexican states of Baja California, Chihuahua, Coahuila, Nuevo Leon, Sonora and Tamaulipas.