A glossary of carbon markets

Key terms and concepts for the agricultural industry

Additionality – A demonstration that carbon sequestration and/or reductions in GHG emission

associated with the adoption of new land management practices would be greater than
the “business as usual” scenario and would not happen without incentives from the
carbon markets.
Abatement - Refers to reducing the amount of GHG emissions released to the atmosphere
(from soil) and/or increased amounts of (soil) carbon sequestered in the environment via
the removal of GHGs already in the atmosphere. Net abatement (net sequestration)
refers to the combined action of both to achieve an overall reduction in the
concentration of GHGs in the atmosphere.
Assessment Framework (AF) – a new proposed standard for ensuring high-quality carbon
credits, proposed and created by the Integrity Council on Voluntary Carbon Markets
(ICVCM). This is being developed and consulted on in conjunction with the Core Carbon
Principles. The Framework proposes a process for assessing eligibility, tagging, and
enforcement of carbon credits.
Baseline - A baseline scenario assumes the continuation of pre-project conditions, including
agricultural management practices. This forms the reference point for determining the
outcomes from a soil carbon project with the use of MRV. For soil carbon projects,
baselines may be dynamic or fixed. The former will be updated throughout a project while
the latter will reflect conditions prior to the start of a project.
Carbon brokers – an individual or company that work with buyers and sellers of carbon credits
to facilitate carbon trading. This can be driven by buyers looking to source offsets, or
matching creators of carbon credits with a market. Brokers are not themselves regulated,
so buyers and sellers should exercise due diligence before engaging with a broker.
Carbon credit - This is the unt of accounting used in carbon markets. One credit unit should be
equivalent to 1 ton CO2e. Verifiable soil carbon credits will be determined through the
relevant quantification approach and MRV methods.
Carbon Credit Units - Each Carbon Standard has a particular geographical and sectoral scope
and its own Carbon Credit Unit that represents 1tCO2e. e.g.
• WCU- Woodland Carbon Unit (WCC)
• PCU- Peatland Carbon Unit (PCC)
• VCU – Verified Carbon Units (VCS)
• VERs– Verified Emission Reductions (GS)
• ERTs– Emission Reduction Tons (ACR)
• PVCs- Plan Vivo Certificates (PVCs)
Carbon dioxide equivalent - CO2e is the shorthand for carbon dioxide equivalents which is the
standard unit in accounting for carbon credits. This unit enables atmospheric reductions
in non-CO2 GHGs to be included in carbon credits. Non-CO2 GHGs are converted to
CO2e based on their global warming potential.

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Carbon farming – this is a relatively new term to describe farming according to agricultural
practices that will increase (soil) carbon capture within the agricultural land involved.
Increased soil carbon may be the main aim of these practices, or a by-product of other
agricultural goals. While often use interchangeably with ‘regenerative agriculture’, the
latter implies the potential for broader environmental or biodiversity benefits.
Carbon finance – finance that intends to reduce the impact of greenhouse gas emissions. The
term can refer to the concept or methodology of channelling finance towards emissions
reducing activities, or the flow of finance or investments themselves.
Carbon leakage - Leakage is used to account for increased GHG emissions or losses in carbon
sequestration beyond a project boundary which have occurred as a result of the project.
For example, lower productivity or intensification of land use or management elsewhere.
Carbon market - Carbon credits are tradeable in a carbon market. The voluntary carbon market
(VCM) supports the trade in credits issued by voluntary organisations. UK land based
carbon projects generally operate in the VCM. Compliance markets reflect the trade in
credits to meet legal compliance obligations.
Carbon Offset Standards – recognised standards, protocols or/and methodologies to guide
GHG quantification, monitoring and reporting.
Carbon Registries – used to track all credits generated, transferred and tradable in a VCM and
trace transactions between buyers and sellers.
Carbon disclosure – when a body, organisation or company discloses the environmental impact
and risks of their operations in relation to greenhouse gas emissions. This is currently
optional in the private sector, although there is increasing numbers of bodies opting into
the process, and some governments (e.g. USA) are considering requiring carbon
disclosure for bodies providing public services or employed/contracted by the state.
Organisations such as the Carbon Disclosure Project enable such bodies to report
disclosures transparently, and support insights and improvement on the data.
Climate finance – similar to carbon finance, this refers to finance aimed at reducing emissions,
but also more broadly to addressing the impacts of climate change, so can be
considered to include finance for climate adaptation or compensation (e.g. Loss &
Damage).
Code - The GHG accounting rules that determine project eligibility, additionality, and baseline
and project emissions for a particular project type. The code also includes the program
requirements for monitoring, reporting, verification, and certification. The terms code,
protocol, and methodology are often used interchangeably. Examples, The Woodland
Carbon Code
Compliance markets – emissions markets that are linked to meeting of mandatory/regulatory
emissions targets e.g. Cap & Trade. This can relate to national emissions targets which
countries are legally committed to, or in some cases sectoral or regional targets (based
on the individual country).
Core Carbon Principles – a new proposed standard for ensuring high-quality carbon credits,
proposed and created by the Integrity Council on Voluntary Carbon Markets (ICVCM).
This is being developed and consulted on in conjunction with the Adjustment Framework.
The 10 principles include additionality, transparency, no double-counting, permanence,
governance, robustness, and registry. For full details see:
https://carboncredits.com/integrity-council-unveils-core-carbon-principles-for-
consultation/

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Corresponding adjustments – Part Article 6 of the Paris Agreement, corresponding adjustment
is a stipulation intended to guard against double-counting of emissions reductions. When
Parties transfer a mitigation outcome internationally to be counted toward another
Party’s mitigation pledge, this mitigation outcome must be ‘un-counted’ by the Party that
agreed to transfer it. While this seems straightforward, questions around how and when a
corresponding adjustment should be applied remain contentious.
Crediting period - The period over which credits can be generated for a project, typically
between 7 and 25 years. For some codes, a crediting period can be renewed at the end
of the term.
ETS (Emissions Trading Scheme) – a scheme that enables trading of emissions allowances to
support meeting emissions reduction targets. There are various regional schemes
globally, although the best known is the EU ETS, based on the model of capping emissions
by country, and trading allowances not used in the country’s quota to another country
that has exceeded its emissions targets. The EU ‘Cap & Trade’ aims to reduce allowances
year by year, keeping the market buoyant as well as further incentivising emissions
reduction.
ERPAs - “Emission Reduction Purchase Agreements”, a contract between buyer and project
developer for carbon offset credits, no intermediaries.
Futures market - a market where the commodity or services is traded with the agreement to
deliver the underlying asset at a set future date at a set price, e.g. cereals bought at a
locked-in price by buyers, decreasing the risk of price post-harvest. When a futures
contract expires, the buyer and seller are both obligated to buy/sell and accept/deliver
the underlying asset. Intercontinental Exchange (ICE) launched its Carbon Futures Index
Family in early 2022, which accounts for 95% of global exchange traded volumes. Trading
based on future price of carbon credits helps to stabilise and predict the price of carbon
while de-risking investment in carbon markets through giving investors an asset to hedge
against future price changes This is a practice used mitigate other common financial risks
such as credit, interest rate and default risk.
Forward selling – Agreeing to sell an asset at a set future date at a set price; The transactions
that constitute a futures market; Financial instrument used in a risk management strategy
for the purpose of hedging.
Gold Standard (GS) - one of the main carbon credit registries for voluntary carbon credits
(alongside VERRA). The GS is a non-profit organisation which provides quality assurance
to voluntary carbon markets and non-governmental carbon reduction projects such as
the Clean Development Mechanism (CDM).
Histosols - Histosols (from Greek histos, "tissue") are soils that are composed mainly of organic
materials. They contain at least 20-30 percent organic matter by weight and are more
than 40 cm thick. Bulk densities are quite low, often less than 0.3 g cm3. They are often
referred to as peats and mucks and have physical properties that restrict their use for
engineering purposes. These include low weight-bearing capacity and subsidence when
drained. Histosols are divided into five suborders: Folists, Wassists, Fibrists, Saprists and
Hemists. Most Histosols form in settings such as wetlands where restricted drainage
inhibits the decomposition of plant and animal remains, allowing these organic materials
to accumulate over time. As a result, Histosols are ecologically important because of the
large quantities of carbon they contain. These soils occupy approximately 1.2 percent of
the ice-free land area globally.

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ICVCM – integrity council for carbon credits – helps to resolve concerns in the market, create
threshold of trust - assess all GHG accrediting programs and come up which list of which
is credible – can we come up with a step by step of compliance/checklist
IETA - Emission reduction purchase agreement – IETA – international emissions trading
association has one – should be base of any transaction, a lot of time spent developing
these
Insetting - Insetting refers to the financing of climate protection projects along a company’s own
value chain that demonstrably reduce or sequester emissions and thereby achieve a
positive impact on the communities, landscapes and ecosystems associated with the
value chain. Example: A retailer paying a supplier to convert to regenerative agriculture to
increase carbon storage in soils and therefore reducing the product emissions.
Mitigation Hierarchy- This means companies should commit to reduce value chain emissions
and implement strategies to achieve these commitments as their main priority before
acting outside their value chains. Emission reductions must be the overarching priority
for companies, and the central focus of any credible net-zero strategy.
MRV - MRV (Monitoring / Measurement, Reporting and Verification) is a key component of all
carbon projects. Information from a carbon project is measured / monitored and
reported on a regular basis throughout the crediting and permanence periods. A
verification stage then validates that a project has performed as predicted and that
anticipated carbon outcomes have been realised, based on the reporting. The terms
monitoring or measurement are used interchangeably across the market-place
MRV method - Guidance and requirements for MRV are generally stipulated in a MRV Method or
Protocol document approved and issued by a carbon programme organisation. Specific
MRV approaches for a soil carbon project will reflect their application of this MRV
document to the project’s circumstance.
NbS– Nature-based Solutions projects in areas such as projects in Forestry, Agriculture and Blue
Carbon.
Net negative –tons of GHGs avoided, reduced or removed that exceed the uanbated GHG
emissions.
Offsets – the use of carbon credit creation in one place (through emissions reduction, capture or
sequestration) to counteract emissions produced in another. Offsets operate through the
trading of carbon credits, and represent a fast growing market globally. Agricultural land
use has potential to create offsets (in a small amount) through soil carbon sequestration,
and (in a larger amount) from activities such as woodland creation and peatland
management. There is much debate about the accountability and ethics of offsets, and
greenwashing is a major concern.
Offset methodology – an offset methodology is a component of designing a project for carbon
credit creation. It defines the rules that a project developer needs to follow to establish a
project baseline and to determine project additionality, to calculate emission reductions,
and to monitor the parameters (e.g., electricity produced by the project) used to
estimate actual emission reductions.
Oxford Offset Principles – a framework developed in 2020 by Oxford and associated
academics, to help guide impactful and transparent climate change reduction through
offsetting. There are 4 main principles, including prioritising emissions reduction, removal
and storage, and supporting net-zero market development.
Peatland Carbon Code- is a voluntary certification standard for UK peatland projects wishing to
market the climate benefits of peatland restoration and provides assurances to voluntary

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 carbon market buyers that the climate benefits being sold are real, quantifiable,
additional and permanent. The peatland carbon code is based on emissions reductions
achieved by restoring degraded peatland.
Pending Issuance Units (PIUs)- are used in both the woodland and peatland carbon codes and
is effectively a ‘promise to deliver’ a Woodland Carbon Unit or Peatland Carbon Unit in
future, based on predicted growth. It is not ‘guaranteed’, and cannot be used to report
against UK-based emissions until verified but can be sold to provide capital for a project.
Permanence - Permanence is a necessary condition for carbon projects to demonstrate that
carbon credits reflect a long-term removal of GHGs. For soil carbon projects, this
generally means the continuance of the positive carbon management practices to ensure
that there are no reversals.
Permanence period - The defined time period that sequestered C must remain sequestered
during the period of the offset credits. The permanence period is individually defined by
each code and can vary from one code to another.
REDD- “Reducing Emissions from Deforestation and forest Degradation”
Registry - Programme registries are the platforms which enable the trading of carbon credits. A
registry facilitates the transparent listing of information on registered carbon projects
including issued and retired carbon credits units.
Reversal - Reversals are a component of permanence and used to account for losses from a
project’s net sequestered carbon. Reversals can be intentional e.g., ploughing or
unintentional e.g., extreme weather.
SBTi- The Science Based Targets Initiative is a partnership between CDP, the United Nations
Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature
(WWF). The SBTi hold companies accountable to their emissions reductions targets
ensuring scientifically proven achievable targets are set by companies.
Sequestration- the capturing, removal and storage of carbon dioxide (CO2) from the earth's
atmosphere.
Spot market – a market where the commodity or services is traded with immediate delivery.
Different asset types are traded on spot market such as financial instruments (shares in a
company or equity, bonds, treasury bills, foreign exchange) and commodities (energy,
metals, agriculture and livestock). Sometimes called the ‘cash’ or ‘physical market’
because cash payments are processed immediately and there is a physical exchange of
assets. This is in contrast to forward or futures markets, where parties agree to deliver an
asset in the future at a specified price.
TNFD = organisation leading framework, gov supported and corporate/financial insists, risk
management and disclosure framework
Validation - An independent process for the evaluation of a carbon project plan to establish that
the project should achieve the predicted carbon abatement and meets relevant eligibility
and other programme criteria.
Value Chain Emissions- Can mean a company’s scope 3 emissions. However, sometimes the
term value chain is used more broadly and includes both a company’s operational (scope
1 and 2) emissions as well as scope 3.
Verification - The process used to ensure that a carbon project continues to meet the
standards and requirements set down by organisations issuing carbon credits, to ensure
that carbon is fully accounted for and ultimately to verify carbon credits, with verification
carried out by an accredited independent verifier.

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Verifier - An accredited (reputable, competent) and independent person or persons with
responsibility for performing and reporting on the verification process.
VERRA – one of the main carbon credit registries for voluntary carbon credits (alongside The
Gold Standard). VERRA is a non-profit and the first organisation to create an
internationally recognised methodology to provide quality assurance to voluntary carbon
markets.
VCM (Voluntary Carbon Markets) – the market for optional carbon credits to be traded, as
opposed to compliance carbon markets for carbon credits linked to legally determined
emissions reduction targets. VCMs are fast growing, with increasing interest from the
private sector to offset emissions for CSR and marketing purposes.
VCMII – Voluntary carbon markets integrity initiative – clarity on the supply side (as well as
ICVCM on demand side)
VVBs – Validation and Verification Bodies, third-party bodies.
VCCs - Voluntary Carbon Credits, purchased voluntarily in a Voluntary Carbon Market
Woodland Carbon Code-The Woodland Carbon Code (WCC) is the quality assurance standard
for woodland creation projects in the UK, and generates high integrity, independently
verified carbon units. The woodland carbon code is based on the sequestration of carbon
in growing woodlands.

For any further comments, clarifications, or information, please contact the project team:
Anna Sellars, Senior Rural Business Consultant – [email protected]
Brady Stevens, Rural Business & Economics Consultant – [email protected]
Seamus Murphy, Environment Consultant – [email protected]
Luisa Riascos, Food & Enterprise Consultant – [email protected]

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