Carbon market glossary

carbon market glossary

Carbon market glossary is a comprehensive guide aims to demystify the complex world of carbon markets by providing clear and concise definitions of key terms and concepts related to carbon trading, carbon offsetting, emissions reductions, and more. Whether you are an environmental enthusiast, a climate project initiator, an investor, or simply curious about sustainable practices, this glossary is your gateway to understanding the language and mechanisms that underpin the global efforts to combat climate change.

Baseline scenario is a reference case for the project activity. It is a hypothetical description of what would
have most likely occurred in the absence of any considerations about climate change mitigation. (2.8 of GHG Protocol for project acconting)

Carbon credit is a tradable intangible instrument that is issued by a carbon-credit program,
representing the reduction, avoidance or removal of one metric ton of CO2e, calculated as the
difference in emissions from a baseline scenario to a project scenario.

Carbon standards both certify carbon projects and programs and facilitate the trade of carbon credits. Standards issue one credit for each metric ton of GHG emissions avoided, reduced, or removed, which are measured in tons of carbon dioxide equivalents (tCO2e)

Climate project, also referred to as a carbon offset project, is an initiative or a series of actions undertaken with the explicit aim to reduce, avoid, or remove greenhouse gas (GHG) emissions in the atmosphere. These projects aim to combat climate change by contributing towards achieving global carbon neutrality.

Compliance Carbon Market (CCM), also called “cap-and-trade” or “Emission Trading Scheme (ETS)” markets is set by “cap-and-trade” regulations. In these markets, carbon emission allowances for domestic firms and sectors are issued by governmental organisations. These allowances mandate the maximum amount of carbon that holders are permitted to emit.

Decentralized Autonomous Organization (DAO) is an organization deployed as smart contracts on existing blockchains. It establishes governance rules, enabling members to vote for the organization’s future using their individual wallets. DAOs have specific goals, labor resources, and assets, mirroring cooperatives that operate remotely via online platforms. The degree of decentralization or anonymity varies among DAOs, with some adhering to a centralized system powered by smart contracts.

Nature-based solutions are actions to protect, sustainably manage, or restore natural ecosystems, that address societal challenges such as climate change, human health, food and water security, and disaster risk reduction effectively and adaptively, simultaneously providing human well-being and biodiversity benefits.

Validation is the systematic, independent, and documented process for the evaluation of the reasonableness of the assumptions, limitations, and methods that support a statement about future (ex-ante) GHG and Co-Benefits outcomes.

Verification is the process when a third party verify their quantification of GHG reductions (1.4.6 of GHG Protocol for project acconting).

Voluntary Carbon Market (VCM) is a decentralized market where private actors voluntarily buy and sell carbon credits that represent certified removals or reductions of greenhouse gases (GHGs) in the atmosphere.

The Integrity Council for the Voluntary Carbon Market (Integrity Council or ICVCM) is an independent governance body for the voluntary carbon market (VCM). Its mandate is:

1) to establish, host, and curate a set of Core Carbon Principles (CCPs)

2) to provide governance and oversight over standard setting organizations on adherence to CCPs as well as on market infrastructure and participant eligibility

3) to help to coordinate and manage interlinkages between individual bodies; define a roadmap for the responsible growth of the Voluntary Carbon Market