Glossary

AAUs

Assigned Amount Units are Kyoto trading units allocated to member countries as their annual emissions quota. The baseline for each country's quota is their total greenhouse gas emissions for the whole of 1990. If they go over their quota they pay a prohibitive fine, OR buy leftover units from countries that succeeded in staying under their limit, OR buy project based credits (see CDM, right).

The disparaging term 'hot air credits' refers to the excess AAUs that certain countries have for sale (e.g. ex Soviet Bloc countries). Post 1990 the latter collapsed economically and their factories shut down - hence their emissions 'reductions' were the accidental result of idleness and nothing to do with any successful efforts towards becoming 'cleaner and greener' (which is the whole aim of the AAU system). No-one will buy these discredited 'hot air' units. (But see 'CER', 'CDM' and 'Greened'.)

Additionality

Additionality is the Kyoto test to prove there is a genuine, new environmental benefit arising from the carbon finance that goes into a project. E.g: Let's say a landowner is just about to plant some trees on his land when he suddenly hears about a company looking to do voluntary forestry offsets. He offers to host their project and planting goes ahead with the help of that project's carbon finance. Well that scheme is flawed - it does NOT pass the 'additionality' test. Also, it must be demonstrated that any scheme's carbon money has transformed an unviable enterprise into a viable one.

Afforestation

Afforestation involves converting land to forest or woodland (in this case a 'forest' must meet certain standards) . In Kyoto terms 'afforestation' would refer only to ecologically sound woodlands, i.e. not monocultural plantations. (The land might once in its distant past have been native forest; or it could be grassland or recently felled commercial forest.)

Article 2.1 (Kyoto Protocol on Forestry)

Article 2.1 (Kyoto Protocol on Forestry) refers to the 'protection and enhancement of sinks and reservoirs of greenhouse gases' and the 'promotion of sustainable forest management practices, afforestation and reforestation'. Kyoto is strongly committed to trees.

Cap and trade schemes

If those in power want to reduce any unpleasant activity (e.g. pollution) they can legislate, i.e. 'command and control' - but this can be economically ruinous. Alternatively they can say to offenders (like the five EU heavy industries forced by law to participate in the EUETS): 'Here is your finite pool of allowed units of emission, sort out amongst yourselves who uses what, but as a group you must stay under the limit'. That's how a 'cap and trade' scheme works.

Carbon calculations

When CO2 is converted to carbon by trees it's difficult to accurately measure the quanitity and the same applies in any greenhouse gas scheme. But emissions avoidance or capture have to be measured somehow, and many models exist. In the absence of precision, it is better to underestimate. (See the UNFCCC website.)

Carbon credits

These are units of CO2 emissions which governments and organisations buy, sell and swap either because they are being forced to stay within legal emissions limits or because they want to voluntarily compensate for their legal emissions by doing a 'green' project. Carbon credits are used by signatories to the UN's Kyoto Protocol through Kyoto Emissions Trading Schemes. There are many different types of carbon trading units (e.g. AAUs, CERs, voluntary offsets such as Forest Carbon schemes, EU Allowances). All compliance credits are Kyoto accredited.

Carbon dioxide (CO2)

Carbon dioxide (CO2) is one of the 'greenhouse' gases. It's a necessary element of the natural world, but dangerous in the quantities mankind has released into the atmosphere in the last century through the burning of fossil fuels and large scale deforestation. Too much CO2 makes a glasshouse - it lets the sun's heat in but won't let it out again (hence known as the 'Greenhouse Effect').

Carbon markets

Carbon Markets is a general term for the global buying and selling of carbon credits. Trade of credits can be via an exchange, where prices and volumes traded are visible (like a stock exchange, e.g. the Chicago Climate Exchange), or via private deals (known as over the counter - OTC - trade), where the price and volume may only be known to the parties to the trade.

Carbon sinks

These are reservoirs of carbon stored via natural processes (photosynthesis in the case of forests).

The largest global carbon sinks are the oceans, with forests also playing a significant role.

Certified Emissions Reduction (CER)

Once the cheap and easy changes are made (e.g. switching from coal to gas) a country is stuck: new nuclear power stations (contentious anyway!) are prohibitively expensive - as are enough windmills to make a difference. But the CDM also allows a country to do pro-environment projects abroad, e.g. once the UK is full of energy-saving lightbulbs they can fill Soweto with them too - the benefit to the planet is the same and the UK stays within its quota.

But schemes abroad can't all be properly measured or monitored: our unfamiliarity with local conditions can make it difficult to be certain of (a) additionality and (b) to verify that the benefits being claimed are, in reality, being realised.

Clean Development Mechanism (CDM)

There aren't enough AAUs (see above) to go around (this forces countries to be as green as possible). The prohibitive fines set for exceeding the quota is to stop countries buying their way out of emissions reductions and Kyoto's CDM offers an alternative in the form of the CER

Climate change

Increasing concentrations of 'greenhouse' gases in the atmosphere (so-called because, like a greenhouse, they allow heat in but stop some of it from leaving) are causing increases in global average temperatures - leading to what are expected to be catastrophic global consequences if avoiding action is not taken. The IPCC (the UN Intergovernmental Panel on Climate Change) say that the current state of global warming will cannot be altered by any means or manner available to man until at least 2050 despite our best efforts - a sobering thought.

Deforestation

Cutting down trees in an unsustainable manner (i.e. in an unplanned and unmanaged way, with no thought to replacement).

EUETS (European Union Emissions Trading Scheme)

This is the EU's cap-and-trade carbon emissions permits market. It now runs on 5 year cycles parallel to Kyoto Commitment Periods, with companies in heavy emissions areas required by law to submit credits equal to their emissions at the end of the period - or face heavy fines. Industries currently covered are power stations, oil refineries and factories making cement, glass, lime, bricks, ceramics, and pulp. Under discussion for future inclusion are aluminium and ammonia producers, petrochemicals, aviation and shipping.

Forestry Commission

The government department (within DEFRA) responsible for the protection and expansion of Britain's woodlands.

Forestry offsets

Refers to the act of financing tree-planting or the preservation of trees set to be felled (e.g. rainforests) to balance CO2 emissions arising from commercial activity. Also know as forestry carbon capture, woodland carbon capture, woodland carbon offsetting.

Global warming

Increasing concentrations of 'greenhouse' gases in the atmosphere (so-called because, like a greenhouse, they allow heat in but stop some of it from leaving) are causing increases in global average temperatures - leading to what are expected to be catastrophic global consequences if avoiding action is not taken. The IPCC (the UN Intergovernmental Panel on Climate Change) say that the current state of global warming will cannot be altered by any means or manner available to man until at least 2050 despite our best efforts - a sobering thought.

Greened AAUs

This is the act of making an unacceptable 'Hot Air' AAU (see 'AAUs', left) acceptable by using funds
raised from the sale of the credits for green projects. It is the responsibility of the country selling the 'hot air' credits to demonstrate that the money was used in either a 'hard' project (e.g. measurable carbon reductions through tree planting) or a 'soft' project (e.g. education programmes about energy saving). Forest Carbon is currently involved in developing a 'hard greened' AAU project in Romania.

Greenhouse gases

There are six identified in the Kyoto Protocol:  carbon dioxide (the largest amount), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. All have a 'global warming potential' (GWP) ratio  designed to make trading in greenhouse gas credits easier by converting them into a CO2 equivalent.

Hot Air credits

Assigned amount units are Kyoto trading units allocated to member countries as their annual emissions quota. The baseline for each country's quota is their total greenhouse gas emissions for the whole of 1990. If they go over their quota they pay a prohibitive fine, OR buy leftover units from countries that succeeded in staying under their limit, OR buy project based credits (see CDM, right).
     The disparaging term 'hot air credits' refers to the excess AAUs that certain countries have for sale (e.g. ex Soviet Bloc countries). Post 1990 the latter collapsed economically and their factories shut down - hence their emissions 'reductions' were the accidental  result of idleness and nothing to do with any successful efforts towards becoming  'cleaner and greener' (which is the whole aim of the AAU system). No-one will buy these discredited 'hot air' units. (But see 'CER',  'CDM' and 'Greened'.)

Kyoto Protocol

The Kyoto Protocol was adopted in Kyoto, Japan, on 11th December 1997 and entered into force on 16th February 2005. 183 Parties of the Convention have ratified the Protocol to date. The signatories to the Protocol meet once a year (at the COP - Conference of the Parties) to debate and refine its rules and regulations. (Specific rules are referred to by their decision number and by the meeting where they were made.) Most of the detailed rules for the implementation of the Protocol were adopted at COP 7 in Marrakesh in 2001.

Kyoto Protocol mechanisms

The United Nations' Kyoto Protocol has three mechanisms:(1) international emissions trading (buying and selling AAUs); (2) CDM; (3) Joint Implementation. The Protocol is in a constant state of development - members meet once a year and forestry is on the agenda every time (see left, Article 2.1). The Protocol sets out a stringent regulatory framework for forestry and other offsets (e.g. 'additionality' and 'permanence').
     With international emissions trading, the UN decides on a finite amount of greenhouse gas it will allow countries to emit into the world's atmosphere over a 5 year period (the first one started January 2008).
    When each government (or the EU)  gets their Kyoto allocation they in turn dish them out (in accordance with their own specific stipulations) to their own industries.  If anyone goes over the 'cap' or limit they: (a) face a massive fine OR (b) they can buy the leftover units from members - locally or globally -  who managed to stay below their allotted limits OR (c) they can do CDM projects (see left).
     Kyoto has set the total volume of allocated emissions deliberately and considerably lower than the level at which the world's industries have been operating to date. (The figure they use is based on the country's 1990 emissions, less about 8%). The purpose of this 'squeeze' is to force emitters to make the huge efforts and changes necessary (in terms of sustainability, renewability, energy saving, etc.) to save the environment from ruination.

Non-Kyoto schemes

Although the USA hasn't yet signed up to Kyoto, California (along with other states, e.g. Oregon) has its own stringent cap-and-trade scheme; and nine northeastern US states are signed up to the RGGI (Regional Greenhouse Gas Initiative). In Australia, New South Wales has set up its own cap- and-trade scheme; the global list of countries, states, private organisations, cities, etc. who are 'doing it for themselves' is long and growing. The imperative is there - these voluntary initiatives take place both in the absence of any mandatory schemes and in addition to existing ones.

Offsets

Their purpose is to provide appropriate, directed financial compensation for acts that cause damage to the environment - such as sending too much greenhouse gas into the atmosphere. It could involve planting trees or paying for green schemes, like wind farms, i.e. mitigating envionmentally harmful commercial activity through paying for some equivalent positive activity elsewhere (e.g. abroad). Generally this will take place when it is either (a) impossible to avoid the harmful activity, or (b) where it is cheaper to pay for the positive action elsewhere than it is to reduce activity locally.

Permanence

The principle of 'permanence' is embedded in the Kyoto Protocol. When carbon offset projects avoid or remove carbon emissions this must be 'permanently' done. If the carbon dioxide that is captured and offset against a company's emissions is later released for any reason then there has been no long term benefit to the environment - the original emissions are back in the atmosphere and the 'offset' no longer exists. Schemes must demonstrate 'permanence'.

Politics

Governments, other groups, and individuals disagree on many issues related to climate change and when they do agree on a point (e.g.'decimating the world's rain forests is a Bad Thing') there's endless debate about how to deal with it. The Kyoto Protocol is surrounded by 'geopolitics': India and China, two of our dirtiest emitters, won't sign up: the west, they argue, had its own industrial revolution and got wealthy on cheap fossil fuel so it's their turn now. Changes are coming but the USA wouldn't sign either - because China wouldn't... (But see also 'Non-Kyoto' schemes')

Again, although CDMs or AAUs are theoretically ingenious strategies (e.g. a heavy emitter in the UK 'pays his dues' by financing a new hydro-electric scheme in China), critics say they won't work because 'additionality' and other standards are hard to prove.

Non-voluntary forestry offsets are welcomed by America but not by the EU. For fun, just type the following into your search bar:  "arguments about climate change".    

Forest Carbon is engaged in the forestry offsets debate and below are downloads of our responses to some public consultations:

April 2007 DEFRA: Code of best practice for voluntary carbon offsetting in the UK.

January 2007 UK Parliament Environmental Audit Committee: Voluntary Offset Market Inquiry.

December 2010 DEFRA: Consultation on changes to Greenhouse Gas Reporting Guidance. 

 

Reforestation

The term reforestation involves planting trees to replace ones recently (i.e. within 50 years) lost.

Sequestration

The act of storing something - in the case of trees this is carbon dioxide absorbed from the atmosphere via photosynthesis and stored as carbon.

UK Woodland Assurance Standard

This is the UK's best practice forestry certification scheme. UKWAS certified woodlands meet all forestry requirements under UK law, are sustainably managed and make a significant contribution to maintaining and enhancing biodiversity.

UK Woodland Carbon Code

The need for a UK certification mechanism to assure the quality of carbon-related UK woodland schemes has long been recognised. To this end the Forestry Commission and other experts, including Forest Carbon, have developed and launched the Woodland Carbon Code .
What you can find in our glossary...

We've tried to cover all the bases here, but environmental economics and carbon markets can be complicated and if there's anything you don't understand then please get in touch.