Period during which a carbon offset project generates carbon credits. It is a minimum of seven years and may be renewed.
An offset project is considered additional if it cannot take place without the offsetting mechanism. There are two main types of additionality: financial and environmental. The first is proven when the project cannot be funded without the sale of carbon credits. The second is proven when the CO2 savings could not have been achieved without the project.
AFOLU stands for Agriculture, Forestry and Other Land Use. It refers to all carbon offsetting activities relating to agriculture, forestry or land use.
Annex I is the annex to the UNFCCC listing the industrialized countries (OECD) and transitional economies that have committed to reduce their GHG emissions over the Kyoto Protocol compliance period. These countries are known as “Annex I countries”.
Annex B to the UNFCCC lists the quantified individual reduction targets of the Annex I countries.
The GHG emission reductions of offset projects are calculated in relation to a baseline. The baseline scenario corresponds to the quantity of GHG that would have been emitted in the absence of the project activities.
A carbon asset represents all the financial assets backed by GHG emissions (carbon quotas and credits) that the entity has in its possession and is able to use.
On the carbon markets, one carbon credit represents one tonne of CO2 equivalent which was not emitted because of a project implemented in a given area. There are two types of carbon credit: ex-ante credits which correspond to emissions that are going to be avoided and ex-post credits which correspond to savings that have already been made.
Carbon finance covers all transactions involving carbon assets. It concerns the regulated markets and voluntary markets.
Carbon offsetting consists of purchasing carbon credits to fund a project that helps to avoid GHG emissions. One carbon credit corresponds to one tonne of GHG avoided as a result of the project in relation to a baseline scenario.
Certification is the phase preceding the generation of carbon credits. An independent auditor will certify, after verification, that the project has indeed been able to avoid GHG emissions. Under the CDM, it’s the DOE which certifies GHG emission reductions.
CER (Certified Emissions Reduction)
A Certified Emissions Reduction is a carbon credit generated by a Clean Development Mechanism (CDM) project. It may be purchased voluntarily by a business or individual.
Clean Development Mechanism (CDM)
The CDM is one of the two project mechanisms under the Kyoto Protocol. This mechanism authorizes industrialized countries listed in Annex I to fund projects that help to avoid GHG emissions in a developing country. In exchange, the investor receives as many carbon credits as the number of tonnes CO2–equivalent he has avoided. These carbon credits are CERUs (Certified Emission Reduction Units). The executive board of the CDM registers the projects and issues the CERUs.
Conference of the Parties (COP)
The COPs – Conferences of the Parties – are held once a year in connection with international climate negotiations. The term COP is often followed by a figure corresponding to the serial number of the conference. For example, COP18 refers to the 18th Conference of the Parties held in Doha in 2012.
CO2 equivalent (CO2eq)
Some GHGs warm the climate more than others (see GWP). In order to compare different gases, scientists have decided to use a standard measurement for which the benchmark is CO2. The CO2 equivalent is the measurement unit taking account of GHGs as a whole.
The Designated National Authority is a government body whose main role is to validate CDM projects on the territory for which it is responsible. In an industrialized country, the DNA is the focal point for quota management. In France, the designated national authority is the Directorate of Energy and Climate (DGEC) which comes under the Ministry of Energy, Sustainable Development and Environment (MEDDE).
DOE (Designated operational entity)
A Designated Operational Entity (DOE), is an independent entity accredited by the UNFCCC to validate offset projects under the CDM framework.
This is a project implemented on national territory involving emission reductions that generate carbon credits. In France, this mechanism has been put in place by the French government and is based on the Joint Implementation Mechanism (JIM) under the Kyoto Protocol.
A double counting situation arises when the same GHG emission reduction is allocated twice. The quantity of GHG not emitted is then counted on two occasions.
Emissions quota (AAU)
An emissions quota, or Assigned Amount Unit, corresponds to the right to emit one tonne of carbon equivalent. AAUs are allocated to the entities in the six industrial sectors obliged to cap their emissions under the Kyoto Protocol.
ETS (Emission Trading System)
Launched in 2005 in connection with ratification of the Kyoto Protocol by the EU, the ETS (or EU ETS for European Union Emission Trading System) is a mechanism for trading GHG emission rights. It is a kind of carbon stock market that hosts transactions in emissions quotas between companies and countries subject to a cap on their emissions.
The Kyoto Protocol developed three mechanisms known as “flexibility mechanisms”, which were designed to reduce the costs arising from the emission reductions imposed on the Annex I countries and therefore to facilitate implementation of the protocol. These are the quota trading system, Clean Development Mechanism (CDM) and Joint Implementation Mechanism (JIM).
Forest carbon refers to carbon stored in biomass. Trees are carbon sinks which, during their growth period, store a certain quantity of CO2. The quantity of carbon stored by a tree depends on its age and species.
GHG stands for “greenhouse gas”. Greenhouse gases are those which block infrared light from the sun reflected off the Earth’s surface. Some of these gases are present naturally in the atmosphere but their atmospheric build-up can be increased by human activities. The problem today is the excess build-up of GHGs in the atmosphere.
Global Warming Potential (GWP)
As each greenhouse gas warms the climate to a greater or lesser extent, the term global warming potential is used. The GHGs listed in the Kyoto Protocol (CO2, CH4, N2O , SF6, PFC, HFC) do not have the same GWP. The GWP of CO2 is 1, CH4 has a GWP of 28 and HFC 11,000. A constantly increasing figure. The latest IPCC estimate for methane is GWP 28.
The Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 by the World Meteorological Organization (WMO) and the United Nations Development Programme (UNDP). The IPCC publishes reports based on the published work of thousands of researchers, which analyse global trends and forecasts in respect of climate change.
Joint Implementation Mechanism (JIM)
The JIM is one of the two project mechanisms under the Kyoto Protocol. This mechanism authorizes Annex I countries to fund projects that help to avoid GHG emissions in another Annex I country. In exchange, the investor receives as many carbon credits as the number of tonnes CO2–equivalent he has avoided. These carbon credits are ERUs (Emission Reduction Units).
The Kyoto Protocol, which was signed in 1997 and came into force in 2001, is the first global agreement to set quantified targets for GHG emission reductions. It set up three flexibility mechanisms designed to facilitate the achievement of the reduction targets of the Annex I countries.
The methodology is the method used to calculate the GHG savings achieved through the project. In particular, it specifies the quantities of GHG that would have been emitted in the baseline scenario, the calculation of emission reductions permitted by the activity and/or the project monitoring methods. A project developer may use an existing methodology or develop another and seek to have it approved by a third party.
This refers to the monitoring system for offset projects. Monitoring of a carbon project covers all the systems used to measure and verify GHG emission reductions. The project owner has responsibility for implementing the project monitoring system, according to the method selected and presented in the PDD.
This is a project in which activities prevent the emission of quantities of GHGs compared to a baseline scenario. The project generates as many carbon credits as the number of tonnes CO2 equivalent avoided.
Permanence guarantees that the CO2 savings generated by a carbon project will be long term and not confined to a single year.
Programme of activities ( PoA )
The PoA is a programme included under the CDM. It consists of the co-ordinated implementation of programmes aimed at reducing GHG emissions in developing countries and the least developed countries. Co-ordinating various programmes helps to reduce the risks and costs of registering projects and thus to encourage investors to target small-scale projects, specifically in the least developed countries.
Project Design Document (PDD)
This is the technical document for all offset projects, its ‘control panel’. It contains the essential, detailed project information: methodology for calculating CO2 savings, expected socio-economic impacts, system for monitoring activities, governance, etc. Once validated by an auditor, it must be made public.
The project developer is the entity implementing the project on the host territory. It carries out the project throughout the project cycle (PIN, PDD, validation and verification). The project developer is not necessarily the project owner.
Project Idea Note (PIN)
This approximately 5-page concept note presents the broad lines of the intended project. Coming before the PDD, it is the initial official document enabling the project implementation process to be launched.
The term project mechanism refers to the two flexibility mechanisms under the Kyoto Protocol based on implementation of offset projects (CDM and JIM).
The project owner is the organization which has taken the initiative for the project, steers it through its various stages and is responsible for it. The project owner also owns the carbon credits. The project owner may delegate its implementation to a project developer.
A kind of bank account, a registry is an accounting and monitoring system for carbon credits and quotas from their initial allocation through to their retirement or transfer. The registry ensures traceability of the carbon assets and helps to verify that the latter have not been transferred more than once.
Also known as the compliance market, the regulated market is subject to obligations arising from the Kyoto Protocol. Only countries required to meet reduction targets can operate on this market where two types of carbon assets can be found: emissions quotas and carbon credits.
Action consisting of cancelling a carbon credit from a registry.
In the field of carbon offsetting, the term “sequestration” is often used to refer to biological sequestration. Biological sequestration means holding carbon in a natural reservoir (also known as a carbon sink), e.g. forests, soils or oceans. Natural sequestration in carbon sinks must not be confused with carbon capture and storage (CCS), which is a technological process used to extract the CO2 emitted into the atmosphere and store it in a natural or chemical reservoir.
Carbon standards were established with a view to ensuring the quality of carbon credits. Initially associated with the CERUs of CDM projects, they quickly became essential to the carbon credits circulating on the voluntary market. Each standard has its own certification criteria. Most are based on the requirements of Kyoto Protocol certification.
Transfer of credits
Transfer of credits corresponds to a type of sale of carbon credits whereby ownership is transferred from the seller’s registry to the buyer’s registry. A credit may be transferred several times.
The United Nations Framework Convention on Climate Change, adopted at the Earth Summit in Rio de Janeiro in 1992, is the first international framework for limiting climate change that is common to the 197 signatory countries.
Uniqueness refers to the single sale of carbon credits. Ensuring the uniqueness of credits is one of the fundamental criteria for the environmental integrity of carbon offsetting.
The term validation most often refers to validation of the PDD or project document. It is done by an independent auditor to ensure an objective review of the project.
Verification is the “inspection” phase preceding certification of emission reductions. It consists of checking that the emission reductions are indeed real and in accordance with the project’s monitoring plan. It is done by an independent auditor to ensure an objective review of the project.
Verified Emissions Reduction (VER) Unit
A VER (Verified Emission Reduction) corresponds to a carbon credit generated on a project according to a voluntary market standard. VER credits are only intended for the voluntary market.
Voluntary carbon offsetting
Voluntary offsetting enables parties (businesses, individuals, etc.) not subject to a statutory or legal requirement to reduce their CO2 emissions to purchase carbon credits on a voluntary basis.
Alongside the regulated market, there were other parties keen voluntarily to offset their GHG emissions. All transactions between those parties constitute the voluntary market.