As the carbon industry develops, so does the jargon surrounding it. This section explains some of the main terms now in common use.

Additionality
If a project is additional, it means that it would not have gone ahead in the absence of carbon finance. There are a number of criteria that are used to assess additionality, including
Is the project financially viable without carbon funding?
Is the project required by legislation in the country?
Is the project common practice?

Annex 1 Countries
These are the industrialised countries that have targets to reach under the Kyoto Protocol.

Biomass Energy
As trees and plants grow, they absorb CO₂ from the atmosphere; in many places around the world this biomass is burnt to provide energy. If the biomass is cut and cannot or does not re-grow, then it is being harvested unsustainably and may be described as non-renewable. If this is the case the CO₂ released in combustion makes a net addition to concentrations in the atmosphere. However, if the plants grown for energy are replanted, then the process is renewable - the plants absorb CO₂ one year, it is released again when it is burnt, absorbed again the following year and so on.

Carbon Funding or Finance
Is where an investor pays a project developer in return for ownership of the emissions reductions achieved by that project over a certain time period. Funding may be provided as capital at the start of a project, as income over its life or as a mixture of the two.

Certified Emission Reductions (CERs)
CERs are issued by the CDM Executive Board once a project has been validated and the emission reductions themselves have been verified. They can then be used by governments towards their Kyoto targets or by companies to trade in the EU Emissions Trading Scheme. The purchasing company surrenders the CERs to government as part of the company's emissions target.

Clean Development Mechanism (CDM)
The CDM allows Annex 1 countries that have targets under the Kyoto Protocol to make emission reductions overseas in non-Kyoto countries and count those reductions towards their own legal commitments. A CDM project is issued with Certified Emission Reductions, which may then be traded.

Clear Skies
This was a scheme offered by the UK government to give grants to householders and non-profit organisations towards the cost of installing small-scale renewable energy devices. The scheme has now closed and been replace by the Low Carbon Buildings Programme (see below).

Climate Change Levy
This is a business tax on the use of energy which was introduced in 2001. It applies to electricity, gas, coal and LPG but not to fuels such as oil, diesel and petrol, which are already taxed under the Hydrocarbon Fuels Act. Large users of energy are given an 80% reduction in their Climate Change Levy bill, see Climate Change Levy Agreements.

Climate Change Levy Agreements
Users of large amounts of energy are given an 80% reduction in their Climate Change Levy bill in return for achieving improvements in energy efficiency. These are negotiated at sector level (i.e. paper, steel, glass-making) and the representative trade association for each sector decides the level of energy efficiency each of its members must achieve.

EU Emissions Trading Scheme
The EUETS started in January 2005. The main participants in the scheme are large industrial users of energy who are allocated a maximum emissions cap by the government. Companies that reduce emissions below this cap may sell emission reductions to those who have exceeded their targets thereby ensuring that emission reductions are made in a cost effective manner across the economy.

Global Warming Potential (GWP)
The GWP is used to compare the abilities of different greenhouse gases to trap heat in the atmosphere. GWPs are based on the radiative efficiency (heat-absorbing ability) of each gas relative to that of carbon dioxide (CO₂), as well as the decay rate of each gas (the amount removed from the atmosphere over a given number of years) relative to that of CO₂. The GWP provides a construct for converting emissions of various gases into a common measure, which allows climate analysts to aggregate the radiative impacts of various greenhouse gases into a uniform measure denominated in carbon or carbon dioxide equivalents.

Gold Standard
This is awarded to CDM and voluntary projects that have higher sustainable development credentials than required by the CDM rules. The Gold Standard (GS) was set up by a group of environmental NGOs who wanted to encourage developers to run high quality projects. The GS board run a GS VER accreditation scheme for the voluntary market.

Greenhouse Gases
Greenhouse gases (GHGs) are those that contribute to the 'greenhouse effect', trapping heat from the sun in the earth's atmosphere. Carbon dioxide is the main greenhouse gas, but there are a number of others including methane (CH4) and Nitrous Oxide (N2O).

Joint Implementation
In essence Joint Implementation (JI) is similar to the CDM approach except that the project is run in another Annex 1 country that has a target under the Kyoto Protocol.

Kyoto Protocol
Following the original Earth Summit in Rio de Janeiro in 1992 the United Nations Framework Convention on Climate Change (UNFCCC) was introduced and has now been ratified by over 140 countries. In 1997, at the fourth Conference of the Parties to the Convention, (often referred to as 'COP 4'), the Kyoto Protocol was signed. This laid out the targets for the industrialised countries to reduce their greenhouse gas emissions.

The Kyoto Protocol was ratified by the required number of countries in February 2005 and came into force. This means that in the five years between 2008 and 2012 the UK has to reduce its greenhouse gas emissions, on average, to 12.5% below what they were in 1990. Each country has a different target, but the total emission reductions amount to 5.7% below 1990 levels.

Low Carbon Buildings Programme
Superceding the 'Clear Skies' grant scheme, the LCBP will "provide grants for microgeneration technologies to householders, community organisations, schools, the public and not for profit sector and private businesses." You can find out more on their website: http://www.lowcarbonbuildings.org.uk

The Carbon Trust
Is a not for profit company set up by the UK Government in 2001. Its purpose is to advise businesses on how to reduce the amount of energy they use. The Carbon Trust works with both large and small companies. For more information visit the Carbon Trust website.

UK Emissions Trading Scheme
In 2002 33 companies voluntarily took on a legally binding obligation to reduce their emissions and began trading under this DEFRA scheme. Companies with Climate Change Levy Agreements can also buy and sell credits in the scheme to help them achieve their targets.

United Nations Framework Convention on Climate Change (UNFCCC)
See Kyoto Protocol.

Radiative Forcing Index
Radiative Forcing is the change in radiation received at the surface of the earth due to the emission of greenhouse gas(es). The Radiative Forcing Index equates this to the effect of a similar quantity of CO₂.

RFI is usually used in relation to aviation. It is similar to GWP, except that it is not integrated over time. The two are often used interchangeably but it is incorrect to do so.

Sequestration
Carbon sequestration is the process where carbon dioxide is absorbed from the atmosphere by growing plants. Reforestation projects can be a source of carbon offsets, but at ClimateCare we prefer to invest in projects that prevent CO₂ being released in the first place.

Verified Emission Reductions (VERs)
Also referred to as Voluntary Emission Reductions. This is a unit of emission reductions that has been verified by an independent auditor to a recognised standard.


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Please let us know if there are other words you'd like to see included in the ClimateCare jargon buster: mail@jpmorganclimatecare.com.