AA and AAU

see Assigned Amount and Assigned Amount Units.

Activities Implemented Jointly (AIJ)

AIJ is a pilot program to test project-based mechanisms for emissions reductions.


Under the Kyoto Protocol, certificates from JI and the CDM (see explanations below) will be awarded only to project-based activities where emissions reductions are “additional to those that otherwise would occur”. The issue has to be elaborated further by the Parties to the Kyoto Protocol, and on the basis of practical experiences.

Afforestation and Reforestation Projects

Afforestation and reforestation (A/R) projects imply to establish forest on land that has not been forested for a period of at least 50 years (afforestation) or on non-forested land (reforestation) through planting, seeding and/or the promotion of natural seed sources.


see Activities Implemented Jointly.


Allocation of emissions permits or allowances among greenhouse gas emitters to establish an emission trading market. The division of permits/allowances can be done through grandfathering method and permit auctioning.


A commodity giving its holder the right to emit a certain quantity of GHG.

Annex B Countries

Annex B countries are the 39 emissions-capped countries listed in Annex B of the Kyoto Protocol.

Annex I Countries

Annex I countries are the 36 countries and economies in transition listed in Annex I of the UNFCCC. Belarus and Turkey are listed in Annex I but not Annex B; and Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not Annex I. In practice, however, Annex I of the UNFCCC and Annex B of the Kyoto Protocol are often used interchangeably.

Annex II Countries

Annex II of the UNFCCC includes all original OECD member countries plus the European Union.

Assigned Amount (AA) and Assigned Amount Units (AAUs)

The assigned amount is the total amount of greenhouse gas that each Annex B country is allowed to emit during the first commitment period (see explanation below) of the Kyoto Protocol. An Assigned Amount Unit (AAU) is a tradable unit of 1 tCO2e.

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“A hypothetical scenario for what GHG emissions, removals or storage would have been in the absence of the GHG project or project activity.”

Base Year

“A historic datum (a specific year or an average over multiple years) against which a company’s emissions are tracked over time.”

Base Year Emission Recalculation

“Recalculation of emissions in the base year to reflect a change in the structure of the company, or to reflect a change in the accounting methodology used. This ensures data consistency over time, i.e., comparisons of like with like over time.”

see Business As Usual Scenario.


A bubble is a regulatory concept whereby two or more emission sources are treated as if they were a single emission source.

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. Cap and Trade
A Cap and Trade system is an emissions trading system, where total emissions are limited or ‘capped’. The Kyoto Protocol is a cap and trade system in the sense that emissions from Annex B countries are capped and that excess permits might be traded. However, normally cap and trade systems will not include mechanisms such as the CDM, which will allow for more permits to enter the system, i.e. beyond the cap.

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category-based expectancies

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Carbon Credit

Carbon credits are a key component of national and international emissions trading schemes that have been implemented to mitigate global warming. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions and letting the market assign a monetary value to any shortfall through trading. Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price.

Carbon Dioxide Equivalent (CO2e)

This is a 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.

Carbon Footprint
The total set of greenhouse gas emissions caused by an individual or organization, event or product. It should be expressed in carbon dioxide equivalent (CO2e) Carbon Trust.

Carbon Market Forecaster

This computer model provides the foundation for the estimation of the present value of carbon permits. Carbon Market Forecaster uses input data from a large number of sources: historical trends, various top-down models, bottom-up studies, expert group surveys and forecasts. The model is highly flexible and is updated continuously.

Carbon Neutral

Commonly accepted terminology for something having net zero emissions (for example, an organization or product). As the organization or product will typically have caused some greenhouse gas emissions, it is usually necessary to use carbon offsets to achieve neutrality. Carbon offsets are emissions reductions that have been made elsewherer and which are then sold to the entity that seeks to reduce its impact. In order to become carbon neutral it is important to have a very accurate calculation of the amount of emissions which need to be offset – requiring calculation of carbon footprint. Carbon Trust.

Carbon Tax

Environmental tax on emissions of greenhouse gas


see Clean Development Mechanism.


see Clean Development Mechanism Executive Board.


The certification process is the phase of a CDM or JI project when permits are issued on the basis of calculated emissions reductions and verification, possibly by a third party.

Certified Emission Reductions (CERs)

CERs are permits generated through the CDM.

Clean Development Mechanism (CDM)

The CDM is a mechanism for project-based emission reduction activities in developing countries. Certificates will be generated through the CDM from projects that lead to certifiable emissions reductions that would otherwise not occur.

Clean Development Mechanism (CDM) Executive Board (EB)

The CDM EB is accountable to the Conference of the Parties to the Kyoto Protocol (see below). It registers validated project activities as CDM projects.

Commitment Period

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


see Conference of the Parties


Conference of Parties (COP)

The COP is the supreme body of the United Nations Framework Convention on Climate Change (UNFCCC). The Sixth Conference of the Parties under the UN Framework Convention on Climate Change (COP-6)took place in The Hague 13-24 November 2000. The negotiations in The Hague did not yield decisions on rules for the flexible mechanisms, due to disputes between the EU and the USA on how to account for activities related to so-called carbon sinks. COP6 was therefore formally not ended before agreement was reached at the second part of the conference (COP-6bis) in Bonn, Germany, in July 2001. COP-7 was held 29 October-9 November, 2001, in Marrakech, Morocco. COP-8 was held in New Dehli, India, in October/November 2002, while COP-9 took place in December 2003 in Milan, Italy. COP-10 is scheduled for December 2004 in Buenos Aires, Argentina.

Countries with Economies in Transition (EIT)

Countries that are in the transition from a planned economy to a market-based economy, i.e. the Central and East European countries, Russia, and the former republics of the Soviet Union.

Corporate Social Responsibility

A concept which corporate entities also consider interest of society by taking proactive attitude to extend beyond requirement by given legislation.

Crediting Period

“The crediting period is the duration when 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). The JI projects starting as of 2000 may be eligible as JI projects if they meet the requirements of the JI guidelines. The end of the crediting period
can be after 2012 subject to the approval by the host Party.” EIT
see Countries with Economies in Transition.

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Emission Factor

“A factor allowing GHG emissions to be estimated from a unit of available activity data (e.g. tonnes of fuel consumed, tonnes of product produced) and absolute GHG emissions.”

Emission Reduction Unit (ERU)

Permits achieved through a Joint Implementation project.

Emissions to Cap (E-C):

Emissions-to-cap (E-C) 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-C means that the market is fundamentally short (long), suggesting a buy (sell) signal.

Emissions Trading

Emissions Trading allows for transfer of AAUs across international borders. However, it is a general term often used for the three Kyoto mechanisms: JI, CDM and emissions trading.


see Emission Reduction Unit.


see European Union Emissions Trading System Financial additionality
CDM projects have to be financially additional, which means that the projects that Annex I countries support within the framework of the CDM should not be financed by official development aid, but that additional funding is to be made available for such projects.

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see Group of 77.

GHGForecast 2.1

This computer model provides the foundation for the estimation of the present value of carbon permits. GHGForecast 2.1 uses input data from a large number of sources: historical trends, various top-down models, bottom-up studies, expert group surveys and forecasts. The model is highly flexible and is updated continuously.

Global Warming Potential (GWP)

The global warming potential is the impact a greenhouse gas (GHG) has to 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:
Carbon dioxide (CO2) GWP: 1
Methane (CH4) GWP: 21
Nitrous oxide (N2O) GWP: 310
Hydrofluorcarbons (HFCs) GWP: 150 – 11 700
Perfluorcarbons (PFCs) GWP: 6500 – 9 200
Sulphur hexafluoride (SF6) GWP: 23 900


Method for allocation of emissions, where permits are allocated, usually free of charge, to emitters and firms on the basis of historical emissions.

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.

GHG Capture

Collection of GHG emissions from a GHG source for storage in a sink.

GHG Credit

“GHG offsets can be converted into GHG credits when used to meet an externally imposed target. A GHG credit is a convertible and transferable instrument usually bestowed by a GHG program.”

GHG Offset

“Offsets are discrete GHG reductions used to compensate for (i.e., offset) GHG emissions elsewhere, for example to meet a voluntary or mandatory GHG target or cap. Offsets are calculated relative to a baseline that represents a hypothetical scenario for what emissions would have been in the absence of the mitigation project that generates the offsets. To avoid double counting, the reduction giving rise to the offset must occur at sources or sinks not included in the target or cap for which it is used.”

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.


see Carbon Dioxide Equivalent. Host Country
A host country is the country where a JI or CDM project is physically located.

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Hot Air

Excess permits that have occurred due to economic collapse or declined production for reasons not directly related to intentional efforts to curb emissions. International Emissions Trading (IET) see Emissions Trading.

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Intergovernmental Panel on Climate Change (IPCC)

IPCC was established by World Meteorological Organisation (WMO) and the United Nations Environmental Programme (UNEP) in 1988 to assess scientific, technical and socio- economic information relevant for the understanding of climate change, its potential impacts and options for adaptation and mitigation. It is open to all Members of the UN and of WMO ( JI
see Joint Implementation.

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Joint Implementation (JI)

Joint Implementation is a mechanism 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. 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 mechanisms: JI, CDM and emissions trading. LULUCF
see Land Use, Land Use Change and Forestry.

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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”. While Article 3.3 is limited to afforestation, reforestation and deforestation, Article 3.4 states that additional human-induced activities in the agricultural soils and LULUCF categories may be added by Annex I Parties to offset their emission targets.


Decrease or increase of greenhouse gas-related benefits outside the boundaries set for defining a project’s net greenhouse gas impacts that result from project activities.

Life Cycle Analysis

“Assessment of the sum of a product’s effects (e.g. GHG emissions) at each step in its life cycle, including resource extraction, production, use and waste disposal.” MAC see Marginal Abatement Cost.

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Marginal Abatement Cost (MAC)

The marginal abatement cost is the cost of reducing emissions with one additional unit. Aggregated marginal costs over a number of projects or activities define the marginal abatement cost curve.

Memorandum of Understanding (MoU)

A 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 are often used as a basis for CDM/JI projects. National Authorities and Designated National Authorities
The national authority is the official body representing the Government which takes part in the arrangement of CDM/JI projects. For JI host countries, the national authority approves the projects and issues the emission reduction units. For CDM host countries, the designated national authority issues a non-objection letter necessary for the project approval.

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Non-Annex I countries

Annex I is an Annex in the UNFCCC listing those countries that are signatories to the Convention and committed to emission reductions. The Non-Annex I countries are developing countries, and they have no emission reduction targets. Permit
Permits are often used for denoting the tradable units under the Kyoto Protocol, i.e. AAUs, ERU or CERs.

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Project Design Document (PDD)

Document completed by project developers in order to register their project under the CDM. (Link: Project Design Document (PDD)).

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Defines the operational boundaries in relation to indirect and direct GHG emissions.

Scope 1

Direct GHG emissions occur from sources that are owned or controlled by the company, for example,
emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.; emissions from chemical production in owned or controlled process equipment.

Scope 2

Scope 2 accounts for GHG emissions from the generation of purchased electricity2 consumed by the company. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organizational boundary of the company.

Scope 3

Scope 3 is an optional reporting category that allows for the treatment of all other indirect emissions. Scope 3 emissions are a consequence of the activities of the company, but occur from sources not owned or controlled by the company.


Carbon “sinks” refers to the removal of greenhouse gases (GHGs) from the atmosphere through land management and forestry activities that may be subtracted from a countries allowable level of emissions.

Small scale CDM projects

There is a simplified process for small scale CDM projects which 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 15 GWh per year; or project activities which emit less than 15 kilotonnes CO2 equivalent per year.

Subsidiary Body for Implementation (SBI)

The SBI advices and assists the COP in matters relating to implementation of the UNFCCC and in preparing its decisions. Click here for the SBI’s documents.

Subsidiary Body for Scientific and Technological Advice (SBSTA)

The SBSTA advices 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 very closely with the Intergovermental Panel on Climate Change (IPCC).


Supplementarity is requirement in the Kyoto Protocol stating that emissions trading should be a supplement to domestic action. It reflects the request of the European Union to limit the use of the Kyoto Protocol flexibility mechanisms. It is still not determined how supplementary should be interpreted.

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Target Base Year

The base year used for defining a GHG target, e.g. to reduce CO2 emissions 25% below the target base year levels by the target base year 2000 by the year 2010. GHGprotocol guideline.

Target Boundary

“The Boundary that defines which GHG’s, geographic operations, sources and activities are covered by the target.” GHGprotocol guideline

Target Commitment Period

“The period of time during which emissions performance is actually measured against the target. It ends with the target completion date.” GHGprotocol guideline

Target Completion Date

“The date that defines the end of the target commitment period and determines whether the target is relatively short- or long-term.” GHGprotocol guideline

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Umbrella group
The Umbrella group is an informal group of industrialized countries that do not belong to the EU. The group was formed after the adoption of the Kyoto Protocol, and consists of Japan, USA, Canada, Australia, Norway, New Zealand, Iceland, Russia and Ukraine.

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”. Validation The process of independent evaluation of a CDM project by an accredited Independent Entity according to requirements to CDM projects.

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An independent assessment of the reliability (considering completeness and accuracy) of a GHG inventory.

VERs (Verified Emission Reductions)

VERs are generated by small scale projects, which are assessed and verified by third party organisations rather than through the UNFCCC.

Voluntary Market

Voluntary markets for emissions reductions cover those buyers and sellers of Verified Emission Reductions (VERs), which seek to manage their emission exposure for non-regulatory purposes.

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