The tradable unit under the EU ETS. Each allowance equals 1 tonne of CO2. EUAs are bankable from Phase 2 to Phase 3 of the EU ETS.

Trading Scheme within the European Union, which was launched on January 1, 2005. The scheme is based on Directive 2003/87/EC, which entered into force on 25 October 2003. The Phase I (2005 - 2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II (2008-2012) links the ETS to other countries participating in the Kyoto trading system. In Phase III, the share of auctioning will increase. In 2013 at least 50 percent of the total amount of allowances will be auctioned, and this share will increase, as free allocation (grandfathering) will be phased out towards 2020.

Permits achieved through a Joint Implementation project.

A unit relating to land use, land use change and forestry activities and is equal to one metric tonne of CO2 equivalent. RMUs cannot be banked for use in any subsequent commitment period, but can be converted into Assigned Amount Units (AAUs) within a national registry.

An informal group of industrialised countries that do not belong to the EU but occasionally acts as an negotiating bloc on specific issues. The group was formed after the adoption of the Kyoto Protocol, and consists of Japan, USA, Canada, Australia, Norway, New Zealand, Iceland, the Russian Federation and Ukraine. It has evolved from the JUSSCANNZ (see above).

Legally defined unit (EUAs, AAUs, RGAs, NZUs and others) that entitles the holder to emit one tonne of CO2e or another quantity of greenhouses gases. Also known as emission allowance or emission permit. See also European Union Allowance (EUA).

The Kyoto Protocol originated at COP-3 to the UNFCCC in Kyoto, Japan, December 1997. It specifies emission obligations for the Annex B countries and defines the three so-called Kyoto flexible mechanisms: JI, CDM and emissions trading. It entered into force on 16 February 2005.

There is a simplified process for small scale CDM projects that will generate less emissions reductions. They are defined as: renewable energy projects under 15 MW, energy efficiency projects that reduce energy consumption by up to 60 GWh per year; or project activities which emit less than 60 kilotonnes CO2 equivalent per year.

Database of all tradable credits under the Kyoto Protocol and the application that verifies all international transactions and their compliance with Kyoto rules and policies.

The CDM is a mechanism for project-based emission reduction activities in developing countries (non-Annex B countries). Certified emission reductions (CERs) are generated from projects that lead to certifiable emissions reductions that would otherwise not occur.

Entity where two or more emission sources (for example, countries) are treated as if they were a single emission source. The European Union constitutes a bubble under the Kyoto Protocol.

CERs are carbon credits generated through the CDM. It can be used to meet an Annex B Party’s emission commitment or as a unit of trade in GHG emissions trading systems.

A design for emissions trading systems under which total emissions are limited or 'capped'. Tradable emission allowances corresponding to the total allowed emission volume are allocated to participants for free or through auctioning. Contrasts with baseline-and-credit approaches where only deviations from a baseline are tradable. Examples are the EU ETS, RGGI, international emissions trading under the Kyoto Protocol and the proposed emissions trading scheme in Australia (Carbon Pollution Reduction Scheme).

Joint Implementation is one of the three flexible mechanisms under the Kyoto Protocol, for transfer of emissions permits from one Annex B country to another. JI generates ERUs on the basis of emission reduction projects leading to quantifiable emissions reductions.

Annex B countries are the 39 emissions-capped countries listed in Annex B of the Kyoto Protocol. In practice, Annex I of the UNFCCC (see below) and Annex B of the Kyoto Protocol are often used interchangeably.

Include the industrialised OECD countries and countries with economies in transition listed in Annex I of the UNFCCC. Belarus and Turkey are listed in Annex I but not in Annex B; and Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not in Annex I. In practice, however, Annex I of the UNFCCC and Annex B of the Kyoto Protocol are often used interchangeably.

Annex II of the UNFCCC includes all original OECD member countries, but not the countries with economies in transition. Annex II countries are required to provide financial resources enabling developing countries to undertake emissions reductions.

Countries that have ratified or acceded to the UNFCCC, but not included in Annex I and have no emission reduction targets. Annex I is an Annex in the UNFCCC listing those countries that are signatories to the Convention and committed to emission reductions.

The assigned amount is the total volume of greenhouse gases that each Annex B country is allowed to emit during the first commitment period (see explanation below) of the Kyoto Protocol. An Assigned Amount Unit (AAU) is a tradable unit of 1 tonne CO2e.