Environmental Terms

Carbon offsets

The principle behind offsetting is that the carbon emissions generated through one activity, such as driving or flying, are calculated and then a third party is paid for an initiative that reduces CO2 in the atmosphere by a similar amount.

Additionality

For any offset project to have a balancing value it must be originated for the purposes of creating additional carbon savings or storage. It cannot be a saving or storage of emissions created in a business as usual activity and sold retrospectively. This means that existing savings being created by a project that would have been created by an individual or organization in the course of their every day activities cannot be sold retrospectively as an offset. Funds for offset projects must be channelled into additional/new projects that will save or store carbon dioxide. They must be able to demonstrate that their activity is an additional carbon benefit..

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. If, however, the plants grown for energy are replanted, then the process is carbon neutral - the plants absorb CO2 one year, it is released again when it is burnt, absorbed again the following year and so on. Under this scenario the biomass is renewable energy.

Carbon Funding

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 Emissions Reductions (CERs)

CERs are issued by the CDM Executive Board once a project has been validated and the emissions reductions themselves have been verified. They can then be used by governments towards reaching 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 emissions reductions overseas in non Kyoto countries and count those reductions towards their own legal commitments. A CDM project is issued with Certified Emissions Reductions, which may then be traded.

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.

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 number of permits by the government. Companies that reduce emissions below this cap may sell emissions reductions to those who have exceeded their targets thereby ensuring that emissions reductions are made in a cost effective manner across the economy.

Global Warming

The term global warming refers to the rise of global temperatures caused by increased amounts of greenhouse gases in the atmosphere. As the sun’s energy enters the Earth’s atmosphere, these greenhouse gases block heat reflected from the Earth’s surface, which would normally travel back into space. The result is an increase in global temperatures. As the amount of greenhouse gases increase in the atmosphere, the Earth’s surface becomes warmer.

There are many greenhouse gases and the most abundant is carbon dioxide, which accounts for approximately 85% of all greenhouse gases. Carbon dioxide is formed when fossil fuels, like gasoline or diesel are burned. The continued accumulation of carbon dioxide in the atmosphere will result in a warmer atmosphere resulting in warmer winters, inundated coastal areas, droughts in arid areas, flooding in wet areas, lost habitat and species extinction, increased intensities of extreme weather events such as hurricanes, decreased productivity of agricultural land and more CO2

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 was set up by a group of environmental NGOs who wanted to encourage developers to run high quality projects.

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).

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 emissions reductions amount to 5.7% below 1990 levels.

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.

VERs

These offsets range from well audited to poorly defined emissions savings/storage. At the most regulated end of the market VERs are certified offsets in waiting, at the least regulated end of the market they can be theatrical and fail to fully offset the emissions they have been designed to balance. To ensure that the future carbon savings are realized all offset projects need to be verifiable and have long-term viability