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Carbon Market Opportunities for Private Forest Landowners

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A number of technical terms and phrases are associated with carbon markets and with climate change policy. Some of the more frequently used terms are defined below.

Adaptation. Actions to adjust to and minimize the negative impacts of climate change on natural and social systems.

Additionality. Term used to designate that an emissions reduction represents an action that would not have occurred (under a business as usual “BAU” scenario), typically because of some financial or biological barrier, or both.

Allowances. Permits to emit GHGs, commonly measured in CO2 equivalents (CO2e); allowances can be allocated to companies and polluters based upon historical emission or production levels or auctioned in the market.

Baseline. The sequestration of carbon (in the case of forestry and agriculture) or emission of greenhouse gases (in the case of industry) that would occur without the contemplated policy intervention or project activity.

Base-year approach. A baseline measurement approach whereby the amount of carbon sequestered is measured as a net increase in carbon relative to the base year measurement.

Base-year. A historic datum (a specific year or an average over multiple years) against which a forest’s carbon gains (or a company’s emissions) are tracked over time. A base year is usually established by a regulatory body.

Carbon dioxide-equivalent (CO2e). The universal unit of measurement to indicate the global warming potential (GWP) of greenhouse gases, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate releasing (or avoiding releasing) different greenhouse gases against a common basis.

Carbon footprint. A term used to refer to the carbon dioxide emissions associated with a certain activity or suite of activities. The term has become rather common in recent years, and various “carbon footprint calculators” are available on the Web to help individuals determine the carbon-intensity of their lifestyle.

Carbon inventory. A list of carbon emission sources and their quantities.

Credit (carbon credit). Formally accredited offsets that can be traded in a regulatory or voluntary climate change program.

Ecosystem services. Ecological goods and services (functions and processes) that provide benefits and critical, life-sustaining support to natural and social systems. They are typically difficult to measure and quantify, and therefore are undervalued or not valued (monetarily) in traditional economic systems.

Emissions. The release of GHGs into the atmosphere.

GHG. Greenhouse gas.

GHG inventory. A list of greenhouse gas emission sources and their quantities.

Leakage. The shift in greenhouse gas (GHG) emissions from an area subject to regulation (e.g., cap-and-trade program) to an unregulated area, so reduction benefits are not obtained. This would happen, for example, if a GHG-emitting industry moved from a country with an emissions cap to a country without a cap.

Mitigation. Actions to reduce emissions and enhance sinks of GHGs, so as to reduce the impacts and effects of climate change.

Offset. A specific activity or set of activities that reduce, remove, or sequester GHG emissions from the atmosphere.

Offset (carbon offset). A greenhouse gas (GHG) offset is generated by the reduction, avoidance, or sequestration of GHG emissions from a specific project. Offsets are so named because they counteract or offset greenhouse gases that are emitted into the atmosphere; they are a compensating equivalent for reductions made at a specific source of emissions. Examples of offsets would include forestry and agricultural activities that absorb carbon dioxide, and reductions achieved by entities that are not regulated by a greenhouse gas control program.

Permanence. Carbon offsets should be permanent, meaning that the carbon that a project avoids emitting or sequesters should remain out of the atmosphere forever. With respect to forestry, the concern is frequently about lack of permenance—or reversibility—of the benefits of storage as the result of land conversion, forest degradation, or catastrophic events (such as insect outbreaks and wildfires). There are various mechanisms to account for the reversibility risks inherent to terrestrial sequestration projects; choice of mechanisms is often related to carbon accounting methodologies, their associated timeframes, and policy requirements.

“Real, Measurable, Verifiable, Additional.” Terms commonly used to confirm the validity and legitimacy of offsets (link to Offset in glossary). “Real” indicates that a reduction in GHG emission has taken place; “measurable” indicates that it can be quantified. “Verifiable” indicates that it can be registered and tracked. “Additional” indicates that it represents a scenario or action that is above and beyond what would have typically happened in a “business as usual” scenario.

 

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