Definitions
The words Impactport uses, and what each one means. Where a treaty gives an official text, we quote it and link to it.
The five levels
Market
A market is the broad kind of carbon market. A law creates a compliance market. Buyers join the voluntary market by choice. Countries cooperate under Article 6.
Mechanism
A mechanism is the legal or policy framework inside a market. It sets the rules that programmes must follow, as Article 6.2 or an emissions trading system does.
Programme
A programme is a body that actually runs under a mechanism, with its own rules and registry. K-ETS, JCM and Verra are programmes.
Official names sometimes say "scheme", as in UK Emissions Trading Scheme. On Impactport, scheme and programme mean the same thing.
Sector or rules
Under a crediting programme come sectors, and under each sector its methodologies. Under a trading, tax or offsetting programme come its rules instead.
Methodology or rule
A methodology is the rulebook that says which projects qualify and how their emission reductions are counted. A rule says who may do what, where and when.
Markets
Compliance market (ETS)
A law requires companies, or whole sectors, to limit or pay for their emissions. The main tool is an emissions trading system (ETS): a government caps emissions, issues allowances up to the cap, and covered companies hand in one allowance for every tonne they emit. Some compliance schemes also let companies use carbon credits, within limits.
InforMEA Negotiators' Glossary (UN Environment Programme): emissions trading
Article 6
Countries cooperate to meet their national climate targets, called nationally determined contributions (NDCs), under Article 6 of the Paris Agreement. Some of this cooperation moves emission reductions from one country to another; some involves no trading at all. Impactport also files the Kyoto Protocol's two project mechanisms, CDM and JI, here, because Article 6 replaces them.
Parties recognize that some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity.
Paris Agreement, Article 6, paragraph 1
Voluntary market
Companies, organisations and people buy carbon credits by choice, not because a law requires them to. Independent standards, such as Verra and Gold Standard, write the rules and issue the credits. No treaty or UN body defines this market. This is Impactport's working definition.
Mechanisms
Voluntary Carbon Market
Companies, organisations and people buy carbon credits by choice, not because a law requires them to. Independent standards write the rules and issue the credits. No treaty or UN body defines this market. This is Impactport's working definition.
Emissions trading system (ETS)
Paris Agreement Article 6.2 — Cooperative Approaches
Two or more countries agree to transfer emission reductions between them. The buying country counts them towards its national target. The selling country must then adjust its own accounts, so that the same reduction is not counted twice. This adjustment is called a corresponding adjustment. The transferred units are called internationally transferred mitigation outcomes (ITMOs).
Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.
Paris Agreement, Article 6, paragraph 2
Paris Agreement Article 6.4 — PACM
A crediting mechanism run under the United Nations. A UN body, the Article 6.4 Supervisory Body, approves methodologies and registers projects. Registered projects earn Article 6.4 emission reductions (A6.4ERs). It replaces the Clean Development Mechanism. It is also called the Paris Agreement Crediting Mechanism (PACM).
A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development is hereby established under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Agreement for use by Parties on a voluntary basis. It shall be supervised by a body designated by the Conference of the Parties serving as the meeting of the Parties to this Agreement, and shall aim:
Paris Agreement, Article 6, paragraph 4 (opening words; the four aims follow in the treaty)
Carbon tax with credit offsets
A government charges a tax on each tonne of greenhouse gas that covered companies emit. Some carbon taxes let companies hand in eligible carbon credits instead of paying part of the tax.
CORSIA (international aviation)
The International Civil Aviation Organization (ICAO) runs the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Airlines must offset growth in carbon dioxide from international flights by cancelling eligible carbon credits.
Paris Agreement Article 6.8 — Non-Market Approaches
Countries cooperate on climate action without trading emission reductions, for example through finance, technology transfer or capacity building. No credits are issued.
Parties recognize the importance of integrated, holistic and balanced non-market approaches being available to Parties to assist in the implementation of their nationally determined contributions, in the context of sustainable development and poverty eradication, in a coordinated and effective manner, including through, inter alia, mitigation, adaptation, finance, technology transfer and capacity-building, as appropriate.
Paris Agreement, Article 6, paragraph 8
Clean Development Mechanism (Kyoto)
Under the Kyoto Protocol, projects in developing countries earned credits called certified emission reductions (CERs). Developed countries used these credits towards their Kyoto targets. The CDM is winding down: all CDM registry transactions end on 31 December 2026. CERs moved to the Article 6.4 registry stay valid there.
The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article 3.
Kyoto Protocol, Article 12, paragraph 2
Joint Implementation (Kyoto)
Under the Kyoto Protocol, a developed country could earn credits called emission reduction units (ERUs) from a project in another developed country, and count them towards its own Kyoto target. It ended with the Kyoto period.
Kyoto Protocol, Article 6
Key terms
Carbon credit
A certificate that represents one tonne of carbon dioxide, or its equivalent, reduced or removed by a project. A crediting programme issues it after checking the project's results.
Allowance
A permit to emit one tonne of carbon dioxide, or its equivalent, inside an emissions trading system. A government issues allowances up to the cap.
Nationally determined contribution (NDC)
A country's own climate target and plan under the Paris Agreement.
Internationally transferred mitigation outcome (ITMO)
An emission reduction that one country transfers to another under Article 6.2, for the buyer to count towards its NDC.
Corresponding adjustment
The accounting entry a selling country makes when it transfers an emission reduction abroad, so that both countries do not count the same tonne.
Article 6.4 emission reduction (A6.4ER)
The credit issued by the Paris Agreement Crediting Mechanism.
Certified emission reduction (CER)
The credit issued by the Clean Development Mechanism under the Kyoto Protocol.
Methodology
The rulebook that says which projects qualify and how their emission reductions are counted.
Registry
The database where a programme records who holds which credits or allowances, and which have been used.