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Allowances are usually distributed by regulatory bodies as permits to emit a specified amount of greenhouse gases. These permits are issued as part of a cap-and-trade program. Participants who limit emissions below their permitted level can sell unused allowances to participants who exceed their levels.


An emissions trading system that sets limits, or caps, on total emissions. Participants are granted emissions allowances. Participants can sell their unused (surplus) allowances to other participants who can’t reduce their emissions as cost effectively.

Carbon Dioxide Capture and Storage (CCS)

A process that separates CO2 from industrial and energy-related sources. The CO2 is then stored in long-term isolation from the atmosphere.

Carbon Offset

Carbon offsets represent a specific, project-based reduction in emissions of greenhouse gases. Emissions levels resulting from the project are compared to what would have happened in a business-as-usual scenario. Any difference can then be verified against a standard to create a Verified Emission Reduction (VER). VERs are often used by companies to offset their own emissions, hence the name carbon offsets.

Certified Emission Reduction (CER)

Units that represent 1 metric ton of CO2 or CO2 equivalent that are removed from the atmosphere by emission-reduction projects. CERs are certified by the United Nation’s Executive Board and are used by companies and countries in Europe to meet Kyoto Protocol commitments.

Chicago Climate Futures Exchange (CCFE)

A derivatives exchange that offers standardized and cleared futures and options contracts on emission allowances and other environmental commodities. The CCFE is a subsidiary of the Chicago Climate Exchange.

Environmental attributes

The environmental benefits associated with the generation of one megawatt hour of electricity from a renewable generation facility. Environmental attributes of renewable energy facilities include reduced or avoided emissions, infinite fuel supply, power supply diversity etc. Environmental attributes are sometimes referred to as Renewable Energy Credits (RECs).

Emissions Trading

Allows for the sale and purchase of emission allowances between companies covered by a cap-and-trade program. Transactions provide a pathway for compliance with an environmental objective (the cap) at the lowest possible cost.

Greenhouse Gases (GHG)

The most common greenhouse gases include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Collectively these gases are measured in terms of CO2 equivalents or CO2e.

Green Power Marketers

Energy providers that provide some sort of “green power” option to their consumers – these are often backed up with the purchase of renewable energy credits.

Nitrogen Oxides (NOx)

NOx is produced during fuel combustion process. These emissions contribute to the production of ground level ozone and smog.

Renewable Energy Credits (RECs)

A renewable energy facility, such as a wind farm, delivers electricity into the power grid. Customers can acquire the environmental attributes associated with this renewable energy without buying the intermittent power. These attributes are encapsulated into a REC. One REC is issued for each megawatt-hour (MWh) of renewable electricity produced and put onto the grid.

Renewable Portfolio Standards (RPS)

Renewable Portfolio Standards are state policies requiring affected electricity providers to include a specified amount of renewable energy as part of its portfolio of generating fuels. RPS vary by state and no two states have enacted the same RPS standards.

Renewable Resources

Sources of electricity, such as solar electric, wind, geothermal, biomass and hydroelectric. A resource is called renewable if it can be naturally replenished. In general, renewables have lower environmental impacts than non-renewables.

Regional Greenhouse Gas Initiative (RGGI)

Pronounced “Reggie,” RGGI is a mandatory, market-based effort of 10 Northeastern and Mid-Atlantic states to cap and then reduce CO2 emissions from the power sector 10% by 2019. Participating states will sell emission allowances and invest proceeds in energy efficiency, renewable energy, and other clean energy technologies.

Sulphur Oxides (SOx)

SOx refers to a family of gases, including SO2, formed by the oxidation of sulphur. Emitted in various industrial processes, in particular from the combustion of coal to produce power. SO2 reacts with atmospheric water vapor to produce sulfuric acid (acid rain.)

Verified Emission Reduction (VER)

A tradable unit, audited by a third party, that represents the reduction of one ton of carbon dioxide or its equivalent. VERs allow an organization to offset their emissions and meet reduction targets by claiming the environmental attributes of an emission-reduction project in another location, such as a methane-capture project at a landfill.

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