| AAU |
An Assigned Amount Unit (AAU) is a
tradable unit of 1 tCO2e. The
assigned amount is the total amount
of greenhouse gas that each Annex B
country is allowed to emit during the
first commitment period of the Kyoto
Protocol. New Zealand's Assigned
Amount 309 mtCO2e.
|
| Annex B |
The Annex to the Kyoto Protocol that
lists the developed countries that
have obligations under the Kyoto
Protocol.
|
| Arbitrage |
The simultaneous purchase and sale
of similar commodities in different
markets to take advantage of price
discrepancy without taking a risk.
|
| Cap and Trade |
A cap and trade system is an
emissions trading system, where total
emissions are limited or 'capped'. The
Kyoto Protocol is a cap and trade
system in the sense that emissions
from Annex B countries are capped
and that excess permits might be
traded.
|
| CDM |
The CDM is a mechanism for project-
based emission reduction activities in
developing countries. Certificates will
be generated through the CDM from
projects that lead to certifiable
emissions reductions that would
otherwise not occur.
|
| CER |
CERs are permits generated through
the CDM.
|
| CH4 |
Methane, a greenhouse gas.
|
| CCP |
A central counterparty is a financial
institution that acts as an intermediary
between security market participants.
This reduces the amount of
counterparty risk that market
participants are exposed to. The
seller of a security sells to the central
counter party. The central
counterparty simultaneously sells to
the buyer. This means that if one
party defaults then the central
counterparty will absorb the loss. This
eliminates both the risk of direct
financial loss though a default and
the risk of indirect loss through having
to unwind a trade.
|
| CO2 |
Carbon Dioxide, a greenhouse gas.
|
| CO2e |
This is a measurement unit used to
indicate the global warming potential
(GWP) of greenhouse gases. Carbon
dioxide is the reference gas against
which other greenhouse gases are
measured.
|
| Commitment Period |
The five-year Kyoto Protocol
Commitment Period is scheduled to
run from calendar year 2008 to
calendar year-end 2012.
|
| Commitment Period Reserve |
To avoid "over-sell" and thus non-
compliance with targets, Annex I
Parties to hold a minimum level of
AAUs, CERs, ERUs and/or RMUs in a
commitment period reserve that
cannot be traded.
|
| COP |
Conference of the Parties (COP). The
COP is the supreme body of the
UNFCCC. The last conference (COP
-12) was held in Bali in December
2007. The next one is due in
December 2008.
|
| ERU |
Emission Reduction Units, permits
achieved through a Joint
Implementation project.
|
| EUA |
European Union Allowances, EU
Allowances, the tradable unit under
the EU ETS. Equals 1 tonne of CO2
|
| EU ETS |
European Union Emissions Trading
Scheme, the trading Scheme within
the European Union. The first
compliance phase is from 2005 to
2007, while the second compliance
phase continues from 2008 to 2012.
|
| Expiry Date |
Options on futures generally expire
on a specific date during the month
preceding the futures contract
delivery month. For example, an
option on a March futures contract
expires in February but is referred to
as a March option because its
exercise would result in a March
futures contract position.
|
| Fungible |
The possibility to exchange different
types of reduction credits achieved
under different mechanisms (e.g.
ERUs on AAUs etc.). Broadly,
securities (like cash) are fungible,
and the more fungible a commodity
is, the more liquidity possibilities
exist.
|
| Futures Contract |
A legally binding agreement to buy or
sell a commodity or financial
instrument sometime in the future.
Futures contracts are standardised
according to the quality, quantity, and
delivery time and location for each
commodity. The only variable is price,
which is discovered on exchange.
|
| GHG |
Greenhouse gas, namely trace gases
that control energy flows in the
Earth's atmosphere by absorbing
infra-red radiation. Some GHGs occur
naturally in the atmosphere, while
others result from human activities.
There are six GHGs covered under
the Kyoto Protocol - carbon dioxide
(CO2), methane (CH4), nitrous oxide
(N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulphur
hexafluoride (SF6). CO2 is the most
important GHG released by human
activities.
|
| GWP |
The global warming potential is the
impact a greenhouse gas (GHG) has
to global warming. By definition, CO2
is used as reference case, hence it
always has the GWP of 1. GWP
changes with time, and the IPCC has
suggested using 100-year GWP for
comparison purposes based on
estimates of one hundred year
contributions to global warming in the
earth's atmosphere for the first
commitment period.
|
| Hedging |
The practice of offsetting the price risk
inherent in any cash market position
by taking an equal but opposite
position in the futures market.
Hedgers use the futures markets to
protect their business from adverse
price changes.
|
| HFCs |
Hydrofluorocarbons, greenhouse
gases.
|
| Hot Air |
Excess permits that have occurred
due to economic collapse or declined
production for reasons not directly
related to intentional efforts to curb
emissions e.g. Russia and the
Ukraine have a lot of hot air.
|
| ICERs |
Long-term Certified Emission
Reductions (lCERs), see also tCERs.
Credits issued for an afforestation or
reforestation project activity that
expires at the end of its crediting
period. lCERs are issued for the net
anthropogenic greenhouse gas
removals by sinks achieved by the
project activity during each
verification period.
|
| IPCC |
Intergovernmental Panel on Climate
Change established by World
Meteorological Organisation (WMO)
and the United Nations
Environmental Programme (UNEP) in
1988 to assess scientific, technical
and socio- economic information
relevant for the understanding of
climate change, its potential impacts
and options for adaptation and
mitigation. It is open to all Members of
the UN and of WMO.
|
| ITL |
The United Nations international
transactions log and validation
process. All Kyoto countries need to
have registries that are conformed to
the ITL before they can participate in
international emissions trading.
|
| JI |
Joint Implementation is a mechanism
for transfer of emissions permits from
one Annex B country to another. JI
generates ERUs on the basis of
emission reduction projects leading
to quantifiable emissions reductions.
|
| Kyoto Protocol |
The Kyoto Protocol originated at
COP-3 to the UNFCCC in Kyoto,
Japan, December 1997. It specifies
emission obligations for the Annex B
countries and defines the three so-
called Kyoto mechanisms: JI, CDM
and emissions trading. It entered into
force on 16 February 2005.
|
| Market Maker |
A trader who is continually prepared
to make a two-way price to purchase
or sell for a commodity.
|
| mtCO2e |
A million tonnes of CO2e or Carbon
Dioxide equivalent, namely a
measurement unit used to indicate
the global warming potential (GWP)
of greenhouse gases. Carbon dioxide
is the reference gas against which
other greenhouse gases are
measured.
|
| NAP |
National Allocation Plan, the
allocation of emission allowances at
the national level to individual sites
under European Union Emission
Trading Scheme.
|
| N2O |
Nitrous Oxide, a greenhouse gas.
|
| NGA |
The Negotiated Greenhouse
Agreement (NGA) policy, intended to
implement the old carbon tax regime.
This involved a full or partial
exemption from the proposed
emissions charge through NGA,
because the international
competitiveness of some New
Zealand firms or industry groupings
could be at risk from the emissions
charge during the first commitment
period of the Kyoto Protocol.
|
| Option |
A contract that conveys the right, but
not the obligation, to buy or sell a
particular item at a certain price for a
limited time. Only the seller of the
option is obligated to perform.
|
| OTC |
Over the Counter, a market where
products such as stocks, foreign
currencies, and other cash items are
bought and sold by telephone and
other means of communications.
|
| Permit |
Permits are often used for denoting
the tradable units under the Kyoto
Protocol, i.e. AAUs, ERU or CERs.
|
| PFCs |
Perfluorocarbons, greenhouse gases.
|
| PRE |
The Projects to Reduce Emissions
programme initiated in New Zealand
from 2003-2004. This was a Joint
Implementation scheme taking the
form of a competitive tender process
that would award emissions units to
companies who undertook
investment in large projects that
would reduce greenhouse gas
emissions over the first commitment
period of the Kyoto Protocol, 2008 -
2012, relative to their business as
usual plans. In return the companies
would be awarded Kyoto units, which
could be traded, thereby adding to
the financial value of a project.
|
| RGGI |
The Regional Greenhouse Gas
Initiative is a cooperative effort by
Northeastern and Mid-Atlantic states
of the United States of America to
reduce carbon dioxide emissions
establishing of a regional cap-and-
trade program initially covering
carbon dioxide emissions from power
plants in the region.
|
| SF6 |
Sulphur hexafluoride, greenhouse
gases.
|
| Sinks |
Carbon "sinks" refers to the removal
of greenhouse gases (GHGs) from
the atmosphere through land
management and forestry activities
that may be subtracted from a
country's allowable level of
emissions.
|
| Spot Market |
Also called a cash market, a market in
which commodities are bought and
sold for cash and delivered
immediately.
|
| tCERs |
Temporary Certified Emission
Reductions (tCERs), see also
(lCERs).
Credits issued for an afforestation or
reforestation project activity under the
CDM that expires at the end of the
commitment period following the one
during which it was issued. tCERs are
issued for the net anthropogenic
greenhouse gas removals by sinks
achieved by the project activity since
the project start date.
|
| UNFCCC |
The United Nations Framework
Convention on Climate Change.
|
| Volume |
The number of purchases or sales of
a commodity futures contract made
during a specific period of time, often
the total transactions for one day.
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