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Project validators and credit verifiers will need to be accredited if their professional services are to be used by project developers to secure Kyoto compliant carbon credits.

Accredited Independent Entity (AIE)

An accredited independent entity conducts the validation of the project design document for a Joint Implementation project. This role is similar to the Designate Operating Entity under the Clean Development Mechanism.
Adaptation fund

A fund generated by charging an adaptation levy on Clean Development Mechanism projects. The purpose of the fund is to help particularly vulnerable developing countries meet the costs of adapting to a changing climate.
Adaptation levy

A levy is applied to all Clean Development Mechanism projects except those in least developed countries (LDCs), to create the Adaptation Fund. It amounts to 2% of the certificates earned by a project activity. The fund will be used to assist LDCs to adapt to climate change.


For Joint Implementation and Clean Development Mechanism projects, emissions reductions must be additional to those that would otherwise occur. Additionality is when there is a positive difference between the emissions that occur in the baseline scenario, and the emissions associated with a proposed project.


An allowed, possibly tradable, right-to-emit in a country that has taken on an emissions cap under the Kyoto Protocol. The units for allowances are tonnes of CO2 equivalent.

Annex B countries

Annex B countries are defined in Annex B of the Kyoto Protocol. These are industrialised countries with greenhouse gas emissions limitations (which may nevertheless be a net increase in emissions) or a reduction commitment. The annex identifies those countries currently making a transition to a market economy. The only difference between the Annex I and Annex B countries, is that Turkey and Belarus are not Annex B countries.

Annex I countries

Annex I is an Annex in the United Nations Framework Convention on Climate Change. The Annex I countries are those which committed themselves as a group to reducing their emissions of the six greenhouses gases by at least 5% below 1990 levels over the period between 2008 and 2012. Specific targets vary from country to country.

Article 12 projects

Article 12 is one of the articles in the Kyoto Protocol. It defines Clean Development Mechanism projects and eligibility criteria.

Article 6 projects

Article 6 is one of the articles in the Kyoto Protocol. It defines Joint Implementation projects and eligibility criteria.

Assigned amount

The assigned amount is the emission allowance assigned under the Kyoto Protocol for the man-made emissions of greenhouse gases which an industrialised country (Annex I party) is permitted to emit over a certain commitment period.



A maximum limit of 2.5% of a country's assigned amount (target) has been set for banking credits for future use in the next commitment period, for both Emission Reduction Units from Joint Implementation projects and Certified Emission Reductions from Clean Development Mechanism projects. Assigned Amount Units from emissions trading can be carried forward without restriction, whereas Removal Units assigned to removal of CO2 by sinks cannot be banked at all.


The baseline is the emission of greenhouse gases that would occur without the intended project activity or policy intervention. It therefore represents the emissions associated with a business-as-usual scenario. The additional emission reductions that a project contributes can only be determined once the baseline has been assessed. Various approaches can be taken to determine the baseline, but the approach must be justified as part of the project validation process.

Bilateral CDM

A bilateral CDM project is the standard form of the CDM project, involving an investor, a developed country and a host developing country.


A bubble is when emissions are grouped together for different countries, and the target applies to the group.



Capacity building

This is the process of ensuring that those people in a country have the necessary skills and knowledge to understand the Kyoto Protocol and enable its implementation (i.e. through hosting projects).

Carbon sinks

Carbon sinks are the ecosystems, principally forests and oceans, which remove carbon dioxide from the atmosphere by absorbing and storing it, thereby offsetting carbon dioxide emissions.

CDM Executive Board

The CDM Executive Board approves CDM projects, certifies operational entities and will issue carbon credits for CDM projects.

CDM Project Cycle

This refers to the different stages a project activity must undergo before it may be issued with certified emissions reductions (CERs) by the CDM EB. Stages include the Conception of the Project Idea, through to Developing the Project Design Document, Validation, Registration, Monitoring and Verification, and CER Issuance.


Certified Emission Reductions (CER)

This is the basic unit of the Clean Development Mechanism. One CER represents the successful emissions reduction equivalent to one tonne of carbon dioxide equivalent (tCO2e).

Clean Development Mechanism

The Clean Development Mechanism is when a project undertaken in a developing country generates reductions in greenhouse gas emissions, it contributes to the host country's sustainable development, and it accrues emission reduction credits. These credits - Certified Emission Reductions (CERs)- can be used to contribute to the emission reduction commitments of industrialised countries. Article 12 of the Kyoto Protocol defines CDM. (See also bilateral, multilateral and unilateral CDM).

Commitment Period

The time period (2008-2012) during which industrialised countries will restrict emissions to the set level agreed upon in the Kyoto Protocol

Conference of the Parties (COP)

The COP is an annual conference of between countries which are Party to the UNFCCC. Delegates meet to decide on how the commitments made in the Climate Change Convention are implemented e.g. the design of the CDM to mitigate climate change.

Crediting periods

The crediting period is the time period for which credits will be awarded without the need for a review of the project's baseline assumptions. Crediting periods can be either 7 years, renewed twice, i.e. 21 years in total, or a single period of 10 years.


These are assigned for emissions reductions. There are four types of Kyoto credit - Assigned Amount Units, Certified Emission Reductions, Emission Reduction Units, and Removal Units. The former are allocated to countries that have Kyoto Protocol targets, and the latter three types are generated through different types of projects.




Designated Focal Point (DFP)

This is the equivalent of the CDM DNA, but for JI projects, and is in fact often the same body

Designated National Authority

The DNA is the official body representing the Government which takes part in the arrangement of CDM/JI projects. For JI host countries, the DNA approves the projects and issues the emission reduction units.

Designated Operational Entity

A Designated Operational Entity is an independent body accredited by the CDM Executive Board (CDM EB) that either validates a project proposal and recommends it for registration by the CDM EB, or verifies the monitoring data and recommends to the CDM EB the amount of carbon credits that should be issued.



Economies in Transition (EIT)

These refer to countries which are in the process of re-structuring their economies towards a more market-oriented system. Countries include the former Soviet Union and Eastern Europe.


The countries, or parties, which wish to use the Kyoto mechanisms will have to fulfil certain requirements to be eligible. These were determined at the Marrakesh meeting in November 2001 (CoP 7).

Emissions Reduction Purchase Agreement (ERPA)

This is a legally binding document signed between the Seller and Buyer of carbon credits, at an arranged price for a specified volume over a period of time. The ERPA may be based on standard formats such as that designed by IETA, the International Emissions Trading Association.


Emissions Reduction Unit (ERU)

This is the basic unit of Joint Implementation projects. One ERU represents the successful emissions reduction equivalent to one tonne of carbon dioxide equivalent (tCO2e).


Emissions Trading

A system allowing the trade of emission reduction credits, to facilitate compliance with emissions allowances at least cost.


Environmental Additionality

Environmental additionality is demonstrated if a project results in reductions in the emissions of greenhouse gases, compared to a "business-as-usual" or baseline case.


EU Allowance

European Allowance Units are issued to installations which have a cap on their emissions under the EU Emissions Trading Scheme (EU ETS). An installation must hold and surrender EU allowances and/or project based carbon credits equal to its monitored carbon dioxide emissions by the annual EU ETS reconciliation date. EU allowances are also the main unit which will be traded in the EU ETS. One EU allowance = 1 t CO2e.

European Union Emissions Trading Scheme (EU ETS)

The EU ETS is a cap-and-trade system which allows participants from eligible countries to trade European Union Allowances. The EU ETS runs for eight years, from 2005 to 2007, and 2008 to 2012 to match the first Kyoto Commitment Period.

Executive Board

See CDM Executive Board.



Financial Additionality

Financial additionality is demonstrated if a project calls upon additional funds, rather than diverting funds already destined for the host country in the form of Official Development Assistance.

Flexible mechanisms

This refers to the CDM and JI mechanisms, as well as International Emissions Trading envisioned with the operationalisation of the International Transaction Log.

Foreign Direct Investment

External finance invested in companies in a host country.


Fungibility is the concept that the different types of reduction credits accruing under each mechanism are all equivalent.





Hot Air

Hot air is the term used to describe the part of an industrialized country's assigned amount that is likely to be surplus to its needs without the country making additional efforts.



Independent Entity

An independent entity is a body which validates the baseline setting approach and calculations for a JI project. Independent entities are accredited by the JI Supervisory Committee.


The term "installation" is used to describe a site which has a cap on its carbon dioxide emissions, as part of the EU Emissions Trading Scheme.


Investment Additionality

Investment additionality is demonstrated if the project would not be commercially viable without the revenue the project generates in terms of emission reduction credits. Whilst initially proposed as one of the project eligibility criteria, this is no longer a requirement.





JI Supervisory Committee

The JI Supervisory Committee, a body which will be set up after entry into force of the Kyoto Protocol, will be the overseeing body for second track JI projects. It will have a similar role to that of the CDM Executive Board for CDM projects: accrediting validators; approving projects; accrediting verifiers; and overseeing the host country issue of ERUs.

Joint Implementation

Industrialised countries can contribute to their greenhouse gas emission reductions targets by investing in emissions reduction projects in other industrialised (Annex-I) countries and receiving credits called Emission Reduction Units (ERUs). This is advantageous if mitigation costs are lower than those for national action. Joint Implementation (JI) is defined in Article 6 of the Kyoto Protocol.




Kyoto Mechanisms

There are three Kyoto Mechanisms which can assist a country to achieve its emissions target, in addition to domestic action. These are Emissions Trading, Joint Implementation and the Clean Development Mechanism.


Kyoto Protocol

The agreement reached in Kyoto in 1997 committing developed countries and countries making the transition to a market economy (Annex I countries) to achieve quantified targets for decreasing their emissions of greenhouse gases.


Kyoto Signatory

A signatory to the Kyoto Protocol is a country which signed to signify its intent to reduce its greenhouse gas emissions.

Kyoto surprise

This phrase was used to describe the CDM in: Estrada-Oyuela, R. 1998, "First approaches and unanswered questions" in Issues and Options: the Clean Development Mechanism, ed. J. Goldemberg, UNDP, New York, pp. 23.




Leakage is the indirect effect of emission reduction policies or activities that lead to a rise in emissions elsewhere (e.g. fossil fuel substitution leads to a decline in fuel prices and a rise in fuel use elsewhere). For land use change and forestry activities, leakage can be defined as the unexpected loss of estimated net carbon sequestered. For CDM/JI projects, leakage can be a result of unforeseen circumstances, improperly defined baseline, improperly defined project lifetime or project boundaries, and inappropriate project design.


Legal Entity Trading

Countries may authorize companies to take part in international emissions trading, if the trading will comply with international rules. These stipulate that trading may not happen if the authorizing country fails to meet the eligibility requirements.


Letter of Credit

This is an obligation to pay by a third party, as a guarantee of confirmed funds. A Letter of Credit may be used to improve the credit-worthiness of an entity with no or low credit ratings.



There is a maximum limit on the amount of international emissions trading which can take place, such that any transfers must not cause the country's commitment period reserve to fall below 90% of its assigned amount, or five times its latest inventory, whichever is the lowest.


Linking Directive

The "linking directive" is the name given to the EU directive that permits companies to use CDM and JI carbon credits for compliance with their targets under the EU Emissions Trading Scheme. Formally, the linking directive is not a directive in its own right, but an amendment to the EU ETS directive



Marginal Abatement Costs

Marginal abatement costs are the investment costs required to bring about savings in greenhouse gas emissions. On the whole, the marginal abatement costs will be considerably lower in developing countries than in developed countries, because of their less technologically advanced state.


Maximum Crediting Time

The maximum crediting time is the maximum period over which credits can accrue to the project.


Meeting of the Parties (MOP)

MOP refers to the Meeting of the Parties to the Protocol, which is an annual conference between countries which are parties to the Kyoto Protocol.



CDM and JI projects must follow approved methodologies for setting out the baseline, monitoring and verification processes. The list of approved methodologies is continuously growing, and project proponents may submit new methodologies for approval (within the context of an undertaken project) to the CDM EB.



Monitoring is the exercise carried out to measure key data and enable the reduction in greenhouse gas emissions to be determined.


Multilateral CDM

A multilateral CDM project involves the investor country, a host country and third party provision of the finance.



National Authority

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 reductions units.

National Focal Point

The National Focal Point (NFP) in countries that have signed the UNFCCC is the first point of contact within the government for communications regarding the UNFCCC.


Non-Annex 1 countries

Annex 1 is an Annex in the United Nations Framework Convention on Climate Change listing those countries which are signatories to the Convention and committed to emission reductions. The Non-Annex 1 countries are developing countries, and they have no emission reduction targets.

No-Regrets Mitigation Options

No-regrets Mitigation Options are measures whose benefits equal or exceed their costs. They are sometimes known as "measures worth doing anyway".



Off-take contract

This refers to an arrangement whereby the Buyer agrees to buy all carbon credits generated by the project activity, without penalty to the Seller for under-performance compared to estimated CER generation. This arrangement is legally binding within the ERPA.


Overseas Development Aid (ODA)

This refers to monetary aid earmarked and channeled by industrialized countries to developing countries, to assist in the development of political, social and economic infrastructure.



 Phase I

When used in the context of the Kyoto Protocol, Phase 1 refers to the time period 2008-2012, the first commitment period.

Project Design Document (PDD)

This is a standard template document designed by the CDM Executive Board. It is used to describe the project activity and comprises several sections, including emissions reductions calculations, environmental impact, and stakeholder comments.





Project activities are submitted to the CDM Executive Board for registration after successful validation. Registration is accompanies by a fee for administrative costs to the CDM EB; this fee is dependent on the scale of the project.



Share of Proceeds

A Share of Proceeds (SOP) will be deducted from CER revenues by the CDM Executive Board. This SOP will be used to cover administrative costs incurred by the EB, and to fund adaptation measures in vulnerable countries.


Small Island Developing States.

This refers to Pacific, Carribean, Atlantic, Indian Ocean, Mediterranean and African island nations, connected within the Small Island Developing States network (SIDSnet).


Sustainable development

There are many definitions of sustainable development, but in the context of the CDM, sustainable development is determined by the host country government. The three main pillars of sustainable development are social, environmental and economic impacts. Assessment of these impacts from project activities varies across countries, from a high-level overview to detailed requirements across several indicators.




Technological Additionality

The technologies employed in the project should be the best available technology for the host nation.

Track 1

ERUs from JI projects may be generated via the Track 1 simplified procedure, where the host country is able to verify the ERUs and issue ERUs appropriately. Track 1 requires host countries to have clear processes in place for approving JI projects, monitoring project performance and verifying ERUs generated, compared to the baseline. Host countries must also have a national system to track their greenhouse gas inventory and Assigned Amount Units (AAUs)

Track 2

ERUs from JI projects may be generated via the Track 2 procedure if the host country is party to the Kyoto Protocol but only fulfils the requirements of having a national registry and an Assigned Amount. ERUs may then only be verified using the procedure set out by the JISC procedure, known as Track 2.



United Nations Framework for Climate Change Convention (UNFCCC)

The United Nations Framework Convention on Climate Change was signed at the 1992 Earth Summit in Rio de Janeiro. It is an international treaty tasked with considering ways of addressing global warming, and in 1997, was amended to include the Kyoto Protocol. More information can be found in the following link : unfccc.int/essential_background/convention/items/2627.php