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Carbon Market Terminology Deciphered by ClimateCheck

| Monday April 14th, 2008 | 6 Comments

carbon-market.jpgUntil a few years ago the threat of unrestrained greenhouse gas emissions was still hotly debated in both the scientific and business communities. Now concepts such as “carbon footprint” are becoming household terms. In the new and constantly evolving field of carbon markets it is understandable that there is still confusion around the terms that define the industry. Even among some corporate greenhouse gas managers terms are being used inconsistently and even improperly. In conversation such errors can be excused, but when money is exchanged and contracts are signed the importance of proper and precise language takes on a new weight. Since we need to mitigate risk and potential conflict in our work to develop climate change solutions with our clients, we feel that it is important to educate the public, on the extensive vocabulary of the carbon markets. Therefore this week ClimatePULSE with ClimateCHECK we will be providing definitions for some of the most commonly used, and misused, terms in the carbon market.
Carbon Footprint: The term “footprint” is frequently used incorrectly to describe a GHG Inventory. This term actually refers to the amount of productive land (forest) required to sequester (remove) the equivalent amount of GHGs that a company emits. The term “footprint” was developed by Mathis Wackernagel of the Global Footprint Network as an aggregated measure of human impact on the earth as well as our level of resource consumption but it has been inaccurately used in various media and has become the layperson’s term for GHG inventory.


GHG Inventory: A GHG Inventory is the process of accounting for all GHG sources, sinks, and reservoirs within the defined boundary of a company or project. Most GHG inventories performed in the US are being done to the WRI/WBCSD GHG Protocol (Corporate Accounting and Reporting Standards-Corporate Standard).
Standard: A standard defines requirements that must be met or followed when developing a Corporate GHG Inventory (ISO 14064-1), Project-based GHG Accounting (ISO 14064-2), or a Verification Audit (ISO 14064-3).
Protocol: A protocol provides guidance on how you perform a corporate GHG inventory or GHG accounting of a project. An example is the the WRI/WBCSD GHG Protocol.
Verification: A verification is a third-party audit of a GHG inventory or of a GHG project. During the audit the verifier determines whether or not the GHG inventory or GHG project quantification was performed in accordance with the relevant protocols or standards and provides an opinion or statement that the GHG assertion(s) made in the reports are accurate to a reasonable level of assurance.
Registry: A registry is an organization where companies can declare the results of their GHG emissions. Registries incentivize early action because companies will receive recognition for their voluntary emissions reduction efforts under any future regulatory schemes. Registries are often used to track GHG emissions, GHG emission reductions or GHG removal enhancements by assigning them unique identifier. Registries can help demonstrate ownership, transparency integrity and support market transactions.
Exchange: An exchange provides a platform on which voluntary or regulated carbon credits can be bought and sold in order to meet emissions level obligations set by the voluntary program or by regulations.
There are many more terms, but this is an overview of the most important ones. If would like a specific GHG term defined please feel free to send us an email and we will address it in a future post.


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  1. April 16, 2008 at 21:33 pm PDT | Ed Hall writes:

    Are there other standards besides ISO standards out there? If so, what are they? I’ve heard of the Voluntary Carbon Standard a lot recently. Is this something different?
    -Ed

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  2. April 18, 2008 at 9:09 am PDT | dr cane toad writes:

    let’s say there’s a global pricing standard for carbon and it works. Then… Doesn’t tahr lead to markets for all emissions? Ghg and otherwise? And indeed therefore all waste? Would that bebthe goal or a beauticratic quagmire?

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  3. April 18, 2008 at 9:27 am PDT | Jason writes:

    dr cane toad,
    Neither a goal nor necessarily a quagmire. The limit of scientifically acceptable GHG emissions, which should be the primary factor behind a global cap, would be the biggest factor for a global carbon price. It would also have little to do with the scientifically acceptable limit for waste or other, non-GHG, emissions. Each of these would need to be established on their own and would subsequently have their own prices. Now, there could be a single exchange in which different commodities were traded with different prices for each. This is a good idea and certainly one that is being actively considered by several key stakeholders. It’s also worth noting here that GHG emissions are not the first type of emissions to be traded. First were the NOx and SOx emissions that cause acid rain. The GHG markets are modeled partially after those.

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  4. April 18, 2008 at 10:15 am PDT | Pablo writes:

    Ed, The VCS is a “standard and program for approval of credible voluntary offsets.” So they provide a framework for judging offsets that you or I might purchase from the voluntary market. This is different from ISO 14064 because ISO defines what needs to be done in a company or project-level inventory. Offset credits for most programs (CCX etc.) and for regulated markets are all based on the ISO standards, which ensures the highest quality inventory and emissions reductions data.

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  5. April 18, 2008 at 12:24 pm PDT | Pablo writes:

    Marc, VCS has adopted ISO 14064-2.

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  6. April 18, 2008 at 11:50 am PDT | Marc Reider writes:

    Doesn’t the VCS actually use ISO standards for it’s offsets?

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