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Cap and Trade

A policy under which a regulatory or international body sets a limit (cap) on the amount of pollution (e.g., greenhouse gases) that can be emitted during a certain period by certain entities. Depending on the regulatory authority, these entities might represent industrial sectors or a group of nations. The cap is divided into permits for the right to emit a part of the capped pollution. The permits have transferable titles (ownership), which allows for exchange of permits. (Not to be confused with offsetting. See carbon offset.)


A chemical element found in many greenhouse gases. Carbon dioxide (CO2) accounts for about 80% of the total greenhouse gas (GHG) mix; methane (also carbon-based) is another significant GHG component.

Carbon Capture and Sequestration

Carbon capture and sequestration (CCS) is a set of technologies that can greatly reduce carbon dioxide emissions from new and existing coal- and gas-fired power plants, industrial processes and other stationary sources of carbon dioxide (CO2). It is a three-step process that includes capture of carbon dioxide from power plants or industrial sources; transport of the captured and compressed carbon dioxide (usually in pipelines); and underground injection and geologic sequestration (permanent storage) of that carbon dioxide in rock formations that contain tiny openings or pores that trap and hold the gas.

Carbon Credit

Represents the right to emit one tonne of carbon dioxide. Carbon credits can be exchanged between an offset project owner and a company or other entity that requires a credit to offset its emissions. Carbon credits also can be bought and sold on the international market at the current market price. (See carbon offset.)

Carbon Cycle

All parts (reservoirs) and fluxes of carbon. The cycle is usually thought of as four main reservoirs of carbon interconnected by pathways of exchange. The reservoirs are the atmosphere, terrestrial biosphere (land—and usually includes freshwater systems), oceans, and sediments (which include fossil fuels). The annual movements of carbon—the carbon exchanges between reservoirs—occur because of various chemical, physical, geological and biological processes. The ocean contains the largest pool of carbon near the surface of the Earth, but most of that pool is not involved with rapid exchange with the atmosphere. 

Carbon Dioxide (CO2)

A naturally occurring gas that is also produced as a byproduct of burning fossil fuels and biomass as well as by land-use changes and other industrial processes. It is the principal human-caused greenhouse gas that affects the Earth’s radiative balance. It is the reference gas against which other greenhouse gases are measured and, therefore, has a global warming potential (GWP) of 1.

Carbon Dioxide Equivalent

A metric measure used to compare the emissions from various greenhouse gases, based upon their global warming potential (GWP). Carbon dioxide equivalents are commonly expressed as “million metric tons of carbon dioxide equivalents” (MMTCO2e ). The carbon dioxide equivalent of a gas is derived by multiplying the metric tons of the gas by the associated GWP.

MMTCO2e = (million metric tons of a gas) x (GWP of the gas)

Carbon Finance

Investments in GHG emission reduction projects and the creation of financial instruments that are tradeable on the carbon market.

Carbon Footprint

The total amount of greenhouse gases that are emitted into the atmosphere each year by a person, family, building, organization or company. A person’s carbon footprint includes greenhouse gas (GHG) emissions from fuel that an individual burns, such as by heating a home or riding in a car. It also includes greenhouse gases that come from producing the goods or services that the individual uses, including emissions from power plants that make electricity, factories that make products, and landfills where waste is sent.

Carbon Offset

An instrument designed to allow the continuing release of carbon in one place in exchange for reducing the carbon release in another place. Carbon offsets are measured and credits are given for the amount that is reduced. One carbon credit represents the reduction of one metric ton (tonne) of carbon dioxide or its carbon dioxide equivalent (CO2e) in other greenhouse gases. Carbon offsets are issued by various bodies. Some are only accepted in voluntary markets. Only those issued by the Kyoto Protocol are accepted in the EU emissions trading system (EUETS).

Carbon Trading

The sale and purchase of greenhouse gas or carbon accounting tokens (permits and credits), including transactions and securities based on these tokens.

Chlorofluorocarbons (CFCs)

Gases covered under the 1987 Montreal Protocol, used for refrigeration, air conditioning, packaging, insulation, solvents or aerosol propellants. Since they are not destroyed in the lower atmosphere, CFCs drift into the upper atmosphere where, given suitable conditions, they break down the ozone layer. CFCs are greenhouse gases and considered ozone depleting substances (ODSs). As such, they are being replaced by other compounds: hydrochlorofluorocarbons, an interim replacement for CFCs that are also covered under the Montreal Protocol, and hydrofluorocarbons (weak ODSs), which are covered under the Kyoto Protocol


In a narrow sense, climate is usually defined as the “average weather” or, more rigorously, as the statistical description in terms of the mean and variability of relevant quantities—most often of surface variables such as temperature, precipitation and wind—over a period of time ranging from months to thousands of years. The classical period is three decades, as defined by the World Meteorological Organization (WMO). In a wider sense, climate is the state, including a statistical description, of the climate system.

Climate Change

Climate change refers to any significant change in the measures of climate that lasts for an extended period of time. In other words, climate change includes major changes in temperature, precipitation or wind patterns, among others, that occur over several decades or longer.


The benefits of policies that are implemented for various reasons at the same time, including climate change mitigation, acknowledging that most policies designed to address greenhouse gas mitigation also have other, at least equally important, rationales (e.g., related to objectives of development, sustainability and equity).

Coalbed Methane

Coalbed methane is methane contained in coal seams. It is often referred to as virgin coalbed methane or coal seam gas.