--- A ---

AAU Assigned Amount Unit
An AAU is equal to one tonne of carbon dioxide equivalent. Each country is given an assigned amount that it must meet, equivalent to its 1990 level of emissions minus the reduction target. Greened AAUs are those AAUs bought on the premise that the money invested will be invested in emission reduction projects. This allows side-tracking CDM procedures perceived difficult and lengthy and e.g. avoids dealing with additionality issues. It is also a form of bilateral agreement that some see has a huge potential in reducing emissions. Transactions of Greened AAUs are only possible between countries with a Kyoto reduction obligation. The Gold Standard PDD can be used in the project development procedure for Greened AAU-projects as well.

Adaptation Fund
Two percent of the price of a CER is deducted by the Executive Board and held in a communal fund to finance climate change adaptation projects in developing countries.

Additionality
A CDM project must offer further reductions on top of other emission reductions projects planned. If the project, e.g. a factory, would have been built in any case, then this factory is not additional. It does not matter if the factory helps reduce emissions because it would have existed without the CDM aspect. The project must be developed with the CDM in mind. If it would not go ahead without the CDM aspect, then it is additional. A project will only be accredited and credits will only be issued for projects that are proven to be additional. Both the CDM EB and the Gold Standard provide tools to assess whether or not a project is additional. The Gold Standard's tool is very similar to that of the CDM EB.

Allocation
The number of credits or allowances that is held by an entity for a compliance year.

Annex I/B countries
These are industrialised countries that have commitments to reduce greenhouse gas emissions under the UNFCCC and the Kyoto Protocol.

--- B ---

Baseline
The baseline is the amount of greenhouse gas emissions that would be produced without the CDM project, also known as the ‘Business as usual' scenario It is the basis that is compared with the proposed figures for a CDM project to calculate the emissions reductions that will be achieved, and helps to determine additionality. Choosing a baseline methodology is crucial for the development of a project, and a conservative approach should be used to make sure the project is not claiming non-additional credits. The respective methodologies are reviewed by the Meth Panel. The UNFCCC-site on CDM provides an updated list of methodologies approved and under consideration.

--- C ---

Cap and Trade
A Cap and Trade system is an emissions trading system, where total emissions are limited. When excess reduction credits are generated, these may be sold at profit.

CDM Clean Development Mechanism
The Clean Development Mechanism (CDM) oversees emission reductions in projects carried out in developing nations. It is designed to stimulate sustainable development in host countries while allowing Annex I country actors to meet their reduction obligations in a cost-effective way. Certified Emission Reduction units (CERs) generated under the CDM will only be recognised when the reductions of greenhouse gas emissions arise from a project that is additional Contribution to Sustainable Development is measured against the host country's sustainable development strategy. Consequently, the host country needs to approve CDM project. Also, a CDM project needs to be validated against the UNFCCCs requirements and in ultima ratio it also needs to be registered by the CDM EB. Achievement of forecasted reductions is ensured through appropriate Monitoring and Verification measures (M&V). CDM projects could start generating CERs for the 1st commitment period from 2008-2012 in 2000.

Certified Emission Reduction (CER)
A CER is a carbon credit generated by a CDM project and is equal to one tonne of CO2 equivalent (CO2e).

CO2e Carbon dioxide equivalent
the conventional unit for reporting greenhouse gas emissions. Of the other gases covered by the Kyoto Protocol and often targeted in CDM projects: one unit of methane (CH4) equals XX CO2e, one unit of nitrogenous oxide (N2O) xx CO2e and one unit of hydrofluorocarbon-23 (HFC-23) xx CO2e.

Crediting period
The crediting period is the duration when a project generates carbon credits. This is either a 7-year period, which can be renewed twice to make a total of 21 years, or a one-off 10-year period. If the former is chosen thebaseline must be renewed after every 7-year period. The crediting period is in most cases not the same as the project lifetime.