A Quick-Reference Guide to Climate Change Terminology

In November the United Nations held the 26^th global climate summit, the Glasgow Climate Change Conference, or COP26. Delegates from almost 200 countries discussed items ranging from membership in the UNFCCC and compliance with the Paris Agreement to Green Finance. If you have difficulty keeping the terminology straight, check out the CPR’s Climate Change lexicon:

 

UNFCCC

The United Nations Framework Convention on Climate Change (UNFCCC) is the treaty that established an international initiative among member states to the United Nations to combat human-induced climate change. Signed by 154 states in Rio de Janeiro in 1992, the requirements of the UNFCCC – scientific research and regular meetings, negotiations, and future policy agreements from and between states regarding climate change, food production and economic development – are operationalized in the Kyoto Protocol and Paris Agreements.

 

Kyoto Protocol and Paris Agreement

The Kyoto Protocol and the Paris Agreement are legally binding obligations that commit industrialized countries and economies-in-transition to individual targets of limiting and reducing greenhouse gas emissions. The Kyoto Protocol governed the period from 2005-2020, though not all members of the UNFCCC were signatories. In 2016, the member states adopted Paris Agreement. At Paris, the members established the 1.5° Celsius maximum warming goal.

 

COP

A COP is a “Conference of Parties” – an annual global climate summit open to all signatories to the UNFCCC. Its purpose is to monitor progress in dealing with climate change and to negotiate and establish legally binding obligations for developed countries to reduce their greenhouse gas emissions.

 

CMP

A CMP is a “Meeting of the Parties” (the signatories) to the Kyoto Protocol. These occur at the COPs. COP26 was also host to CMP16.

 

CMA

A CMA is a meeting of the signatories to the Paris Agreement. CMA3, the third of these meetings, occurred at COP26.

 

NDC

An NDC is a ‘Nationally Determined Contribution’. In COP26, these are the new climate plans submitted by each country to reduce their emissions. By the end of COP26, 151 countries had NDCs. Countries are called on to submit revised plans to slash emissions by 2030 at the next COP, in 2022.

 

Net zero

Net Zero is the point at which the amount of greenhouse gases emitted into the atmosphere is no more than that removed from it – when equilibrium is reached. Global warming is predicted to get worse until humanity has globally reached Net Zero. Many countries and businesses have included plans to reach this internally in their NDCs.

 

Because it is largely considered impossible to eliminate greenhouse gas emissions, countries include carbon sequestration, or the removal of CO₂ from the atmosphere, in their plans. In the past this has most often taken the form of carbon offsetting via reforestation. Carbon offsetting is the reduction of greenhouse gasses in one place, often in less-developed countries, to compensate for emissions made elsewhere.

 

1.5° Celsius

The 1.5 degrees Celsius target is the goal to keep the rise in global temperature under 1.5° Celsius, or 2.7° Fahrenheit, relative to what the global average temperature was just before the Industrial Revolution (considered the baseline average global temperature). If this threshold is surpassed, scientists predict that the heat waves, droughts, and ecosystem collapses associated with global warming will grow astronomically. Although not an extinction-level event for humans, this threshold represents a point of no return – the point where we will see lasting changes in many natural systems.

 

Adaptation

Responses to climate change. Adaptation is defined by the European Environment Agency as ‘the process of adjusting to the current and future effects of climate change.’ Examples of this include building recycling infrastructure or ‘nudging’ individuals to reduce their food waste.

 

Mitigation

Mitigation is defined as “human intervention that reduces the sources of greenhouse gas emissions and/or enhances the sinks,” which are reservoirs that store carbon in another form, like coal deposits or forests. Mitigation efforts specifically target emissions, and examples of them include improving storage of gases such as through afforestation (planting trees) or increasing use of renewable energy sources such as wind.

 

Renewable Energy Certificates/Credits ( RECs)

RECs are a way of complying with renewable energy portfolio standards in which purchasers pay for renewable energy production – most often through solar (e.g., Solar Renewable Energy Credits, ‘SRECs’) or wind – without directly obtaining the energy from renewable energy sources. In other words, an entity can buy an REC that says they used a prescribed amount of solar-generated electric energy instead of electricity generated from a non-green origin, such as coal.

 

Because these credits can be traded, they can be used to encourage production and development of green energy which generates credits that may then be sold to entities who would otherwise not stay under emissions caps. When entities, ranging from individuals to multinational companies, stay under their caps, they can save or sell their credits.

 

A typical carbon credit contract or REC allows the entity that holds it to emit carbon dioxide – one credit permits the emission of one ton of carbon dioxide or other greenhouse gases.

 

Renewable Energy Tax Credits

Though similar in name to RECs, Renewable Energy Tax Credits are indirect federal subsidies – money granted by a public body to keep the price of a commodity or service low or competitive – that finance the investment and production of renewable energy. These credits can be focused on solar power, wind development , or generally ‘renewable energy focused.’ Examples include the Investment Tax Credit (ITC), the Production Tax Credit, and the Section 1603 Treasury Program.

 

Green Bond

A bond is money borrowed by an investor, a company or government, from an issuer (the lender) in exchange for a promise to pay the money back with interest at a fixed time. A green bond is a bond in which the investor must spend the proceeds – the money brought in from whatever they spent the bond on – on things with a positive environmental impact. In practice, “green” is often an unregulated, undefined, term and is thus either contractually defined on an ad hoc basis or ignored.

 

There are a few subcategories of Green Bonds. Blue Bonds specifically finance projects that protect the ocean and related ecosystems, and Climate Bonds focus on reducing carbon emissions and mitigating the effects of climate change.

 

Greenium

The incentive provided by the market to issuers to be environmentally friendly is reflected in the ‘Greenium’, which is the difference between the yield of regular and green bonds issued by the same companies or governments. This can come in the form of tax exemptions and tax credits. In theory it should always be positive, but in practice it frequently barely meets this qualification; investors tend to accept .01-.02% lower returns to fund green projects than to non-green projects.

 

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