Glossary of Terms
According to the Kyoto
Protocol, gas emission reductions generated
by Clean Development Mechanism and Joint
Implementation project activities must be
additional to those that otherwise would occur.
Additionality is established when there is a
positive difference between the emissions
that occur in the baseline scenario, and the
emissions that occur in the proposed project.
The process of establishing
and growing forests on bare or cultivated land,
which has not been forested in recent history.
The quantity of greenhouse gases that an Annex I
country can release in accordance with the Kyoto
Protocol, during the first commitment period of that
The emission of greenhouse gases
that would occur without the contemplated
policy intervention or project activity.
Combustible fuel composed
of a biological material, for example, wood or
wood by-products, rice husks, or cow dung.
The potential of greenhouse
gas emission reductions that a project is able
to generate and sell.
The World Banks Carbon Finance Unit.
Resources provided to projects
generating (or expected to generate)
greenhouse gas (or carbon) emission reductions
in the form of the purchase of such emission
Carbon Dioxide Equivalent (CO2e):
The universal unit of measurement used to
indicate the global warming potential of each
of the six greenhouse gases. Carbon dioxide—
a naturally occurring gas that is a byproduct
of burning fossil fuels and biomass, land-use
changes, and other industrial processes—
is the reference gas against which the other
greenhouse gases are measured.
Certified Emission Reductions (CERs):
A unit of greenhouse gas emission reductions
issued pursuant to the Clean Development
Mechanism of the Kyoto Protocol, and measured
in metric tons of carbon dioxide equivalent.
Clean Development Mechanism (CDM):
The mechanism provided by Article 12 of the
Kyoto Protocol, designed to assist developing
countries in achieving sustainable development
by permitting industrialized countries to finance
projects for reducing greenhouse gas emission
in developing countries and receive credit for
Conference of Parties (COP):
of parties to the United Nations Framework
Convention on Climate Change.
Emission Reductions (ERs):
reduction of release of greenhouse gases into
the atmosphere from a specified activity or over
a specified area, and a specified period of time.
Emission Reductions Purchase Agreement
Agreement which governs the
purchase and sale of emission reductions.
Emission Reduction Units (ERUs):
of emission reductions issued pursuant to Joint
Implementation. This unit is equal to one
metric ton of carbon dioxide equivalent.
Fund Management Committee (FMC):
PCF Committee comprising five members,
consisting of the Fund Manager and four
other members of the management of the
International Bank on Reconstruction and
Development (IBRD) selected by the President
of the IBRD. The Fund Management
Committee is responsible for overseeing the
operations of the Fund.
Fund Management Unit (FMU):
headed by the Fund Manager and responsible
for the day-to-day operations of the Fund.
Greenhouse gases (GHGs):
These are the
gases released by human activity that are
responsible for climate change and global
warming. The six gases listed in Annex A of
the Kyoto Protocol are carbon dioxide (CO2),
methane (CH4), and nitrous oxide (N20), as
well as hydrofluorocarbons (HFCs), perfluorocarbons
(PFCs), and sulfur hexafluoride (SF6).
High quality emission reductions:
Emission reductions of a sufficient quality so
that, in the opinion of the Trustee, at the time
a project is selected and designed, there will
be a strong likelihood, to the extent it can be
assessed, that PCF Participants may be able to
apply their share of emission reductions for the
purpose of satisfying the requirements of the
UNFCCC, relevant international agreements, or
applicable national legislation.
The country where an emission
reduction project is physically located.
Internal rate of return:
The annual return
that would make the present value of future
cash flows from an investment (including its
residual market value) equal the current market
price of the investment. In other words, the
discount rate at which an investment has zero
net present value.
Joint Implementation (JI):
provided by Article 6 of the Kyoto Protocol,
whereby a country included in Annex I of the
UNFCCC and the Kyoto Protocol may acquire
Emission Reduction Units when it helps to
finance projects that reduce net emissions in
another industrialized country (including countries
with economies in transition).
Adopted at the Third
Conference of the Parties to the United Nations
Convention on Climate Change held in Kyoto,
Japan in December 1997, the Kyoto Protocol
commits industrialized country signatories to
reduce their greenhouse gas (or “carbon”)
emissions by an average of 5.2% compared
with 1990 emissions, in the period 2008-2012.
Millennium Development Goals (MDGs):
Commit the international community to an
expanded vision of development, one that
vigorously promotes human development as
the key to sustaining social and economic
progress in all countries, and recognizes the
importance of creating a global partnership for
development. The goals have been commonly
accepted as a framework for measuring development
Monitoring Plan (MP):
A set of requirements for
monitoring and verification of emission reductions
achieved by a project.
Operational Entity (OE):
An independent entity,
accredited by the CDM Executive Board, which
validates CDM project activities, and verifies
and certifies emission reductions generated by
Project-Based Emission Reductions:
Emission reductions that occur from projects pursuant
to JI or CDM (as opposed to “emissions trading” or transfer of assigned amount units
under Article 17 of the Kyoto Protocol).
Project Concept Note (PCN):
A brief description
of a project prepared by the project
proponent entity or intermediary that is to
be presented for consideration by the PCF’s
Fund Management Committee and the
Project Design Document (PDD):
document required under the CDM
rules which will enable the Operational Entity
to determine whether the project (i) has been
approved by the parties involved in a project,
(ii) would result in reductions of greenhouse
gas emissions that are additional, (iii) has an
appropriate baseline and monitoring plan.
Project Idea Note (PIN):
A note prepared by
a project proponent regarding a project
proposed for PCF. The Project Idea
Note is set forth in a format provided by
the PCF and available on its website
This process increases the
capacity of the land to sequester carbon by
replanting forest biomass in areas where forests
have been previously harvested.
Registration: The formal acceptance by the
CDM Executive Board of a validated project as
a CDM project activity.
Sequestration refers to
capture of carbon dioxide in a manner that
prevents it from being released into the atmosphere
for a specified period of time.
United Nations Framework Convention
on Climate Change (UNFCCC):
legal framework adopted in June 1992
at the Rio Earth Summit to address climate
change. It commits the Parties to the UNFCCC
to stabilize human induced greenhouse gas
emissions at levels that would prevent
dangerous manmade interference with the
The assessment of a project’s
Project Design Document, which describes its
design, including its baseline and monitoring
plan, by an independent third party, before the
implementation of the project against the
requirements of the CDM.
Verified Emission Reductions (VERs):
A unit of greenhouse gas emission reductions that has been verified by an independent auditor, but that has not yet undergone the procedures and may not yet have met the requirements for verification, certification and issuance of CERs (in the case of the CDM) or ERUs (in the case of JI) under the Kyoto Protocol. Buyers of VERs assume all carbon-specific policy and regulatory risks (i.e. the risk that the VERs are not ultimately registered as CERs or ERUs). Buyers therefore tend to pay a discounted price for VERs, which takes the inherent regulatory risks into account.
A report prepared
by an Operational Entity, or by another
independent third party, pursuant to a
Verification, which reports the findings of the
Verification process, including the amount of
reductions in emission of greenhouse gases
that have been found to have been generated.