However over the last 20 years, institutional investors have discovered this ‘perfect’ asset and now own around $35 billion worth of timberland globally, in a combination of over 100 private pension, foundation, and endowment funds. Of that around $25 billion is invested in the United States, which represents both the world’s largest producer and user of timber.

Pension funds such as Calpers, led the way in the 1980s, however it was the big university endowment funds such as Harvard and Yale that saw the true potential and invested heavily in a move to diversify their portfolios globally. Last year the Harvard Endowment Fund invested $500m in forestry and carbon credits in New Zealand.

So what makes timber such a popular asset with institutions and what are the fundamentals driving this perfect asset.

Timber can be classified as a specialised form of long-term bond. A forest that holds mature timber will generate cash each year through the harvest and sale of timber. These harvests can be modeled and forecasted with a reasonable degree of accuracy over many years. Since timber growth and subsequent harvests are scarcely affected by the movement of financial markets, forest investment can be structured to act and behave in many respects like a long-term bond.

Most view Timberland as an investment in real estate. While traditional commercial real estate generates income from leasing, timberland derives its primary income from the sale of timber and more recently from carbon credits.

However its tax that has been the major driver of forestry investment in the UK, if held for 2 or more years the Forestry land can be passed on to family members with no Inheritance tax. Timber harvest is also exempt from income tax making this especially popular as a wealth protection asset.

Risk Reward

Timber is a low risk, high return asset which has outperformed stocks, bonds and other commodities for the last 30 years. From 1973-2002, managed timber returned roughly 15% annually as an investment, while stocks returned around 11%. Timber, like most commodities, is uncorrelated to stocks and unlike all other commodities continues to grow on the stump in recessionary times.
In summery forestry:

• Provides true investment diversification
• Responsible and ethical investment
• Low correlation to equity markets
• Continued accretion of value due to the biological growth of trees
• Forestry prices are very stable over time with long growth periods and minimal demand and supply fluctuations
• Huge upside potential based on impending supply crisis
• Unleveraged
• Flexible exit options: with a range of harvest dates forestry investments have great exit strategy flexibility
• Global regional exposure and diversification: varying currency depending on project location
• Arbitrages in the price of emerging market forestry
• Tax advantages for: IHT,IT,CGT
• Carbon credit revenue from non-Annex one countries such as Brazil
• Demand & supply: global consumption of tropical hardwoods has multiplied nearly 25 times in the last 4 decades and population growth rates continue to accelerate. Around 40m acres of tropical forest are being destroyed each year and not being replaced, whilst international political pressure on forest protection increases pressure on illegal deforestation, further enhancing timber values.

Timber vs. stocks

Not only does timber beat all other major asset classes, but it also does so with lower volatility. The below graphic demonstrates this. Timber has had just three “negative years” in the last 45 years whilst stocks, comparatively, have had 12 “negative years” over the same period. The last great bear market in stocks began in the late 1960s and lasted until about 1980. An investor in stocks during that period lost money due to inflation alone.

Diversification

Commercial timberland is affected by a different set of macroeconomic and market factors than other asset classes such as stocks, bonds, and real estate, the traditional mainstay of most investment portfolios. The addition of a low correlation timberland asset can expand the risk-to-return profile of any portfolio.

Why timber prices will continue to rise

Demand for timber is raising fast, especially from the emerging economies of China and India. One current forecast predicts that China’s urban population will increase from 530 million people to 875 million people by 2030. The equivalent of almost 50 cities the size of greater London will have to be constructed over the next 20 years to accommodate them, putting huge strains on global timber prices.

Global consumption of tropical hardwoods has also multiplied nearly 25 times in the last 4 decades. Populations continue to swell as more people seek to consume and live the middle class ideal. Around 40m acres of tropical forest are being destroyed each year to meet the demand for hardwood product and agriculture, of which little to none is being replaced.

International political pressure on forest protection is increasing, the invention of the Carbon Credit has created a value for living trees. This has a very positive effect on global climate change, however it will only seek to further enhance timber values through supply shortages, good news for forestry investors.

Green and ethical investment-biological growth

Aside from its carbon capturing properties, forestry is an incredibly green construction material. The table below demonstrates the amount of energy needed to create each respected construction material. Also by using sustainable timber the carbon within is locked up for the life of the project.

Aside from offering risk adjusted returns and portfolio diversification, timberland continues to add value due to the biological growth of trees at no extra cost unlike other real-estate assets, all the while sequesting carbon from the atmosphere. Trees grow in volume, size, and ultimately into increasingly higher-valued products.

For example, trees begin as lower-value pulpwood, then grow into low value saw timber trees (9 to 12 inches in trunk diameter) before maturing into high value saw timber (greater than 12 inches in trunk diameter).
As a tree grows into a larger and higher value product classes, the monetary value of the tree increases along with its carbon credit value. The effect of inflation and possible downward movement in timber prices is mitigated by volume growth; however what makes timber such an attractive investment is the effect of upward price movement is compounded by volume growth.

Timber continues to grow although at a slower rate as trees mature. This allows the investor to “warehouse” the timber “on the stump,” until such time as market conditions are optimal.

Timberland portfolio structuring to produce specific investment objectives

Timberland is an incredibly diverse asset and can be structured to meet different investment objectives. For example, higher cash flows can be achieved by including a higher proportion of more mature timber holdings such as teak.

If long-term gains are more important than regular cash flow, this goal can be achieved by acquiring young plantations and investing at the seedling stage for maximum long term uplift combined with high growth rates and intensive management techniques.
If the investors’ objective is a balance of cash flows with an emphasis on long-term appreciation, various timber age classes can be included in the portfolio to achieve this goal. In addition, investment returns can be improved with a variety of additional structuring and management options such as carbon credits, the use of leverage, selling selected properties that have real estate development potential or recreational use value such as shooting right.

In short, timberland investments have the versatility to be shaped through financial engineering to meet a variety of goals for both the institution and the sophisticated private investor. Its amazing how few investors have exposure to forestry in light of the above, a fact which won’t stay this way for long, double digit returns and tax benefits will attract a vast number of investors especially as the green revolution takes hold.

What the experts say

Tree growth averages about 8 per cent a year. “If the market goes up that is an added bonus [to the tree growth]. This is what makes timberland a safe investment,” says Liane Luke, head of timber investment at Four Winds, which manages specialist fund Phaunos Timber.

Bloomberg Wealth Management: Hardwood has quietly and consistently outperformed nearly all other commodities for the past 100 years

Another attraction of forestry investing is that when timber prices fall, there is still a “steady offset of the physical growth of the tree”, says Eva Greger, who runs GMO Renewable Resources, the large Boston-based fund manager that has been putting money into forestry since the 1990s.

For More Information on Forestry Investments Click Here

Climate Change

THE EARLY DAYS:

Scientists have long been aware of the Earth’s extreme temperature variations, with the last major ice age ending about 10,000 years ago. However, in 1824 Jean- Baptiste Fourier discovered a global warming (or greenhouse) effect and, in1861, the Irish physicist John Tyndall carried out key research on carbon dioxide (CO2) and heat absorption.

In 1896, Swedish and American scientists independently concluded that CO2 was the likely cause of global warming. By 1957, US oceanographer Roger Revelle was warning that humanity is conducting a ‘large-scale geophysical experiment’, while colleague David Keeling set up the first continuous monitoring of CO2 in the atmosphere, confirming year-on-year-rises.

FORMATION OF THE IPCC:

Despite these early signs, it took until 1979 for the first World Climate Conference, organised by the World Meteorological Organisation (WMO), to state that ‘continued expansion of man’s activities on Earth may cause significant extended regional and even global changes of climate’.

By 1987 the “Montreal Protocol” the international community agreed to act on scientific evidence that certain industrial gases can lead to dangerous depletion of the Earth’s ozone layer. This led the WMO and the United Nations Environment Programme (UNEP) to establish a scientific advisory body: the Intergovernmental Panel on Climate Change (IPCC).

The IPCC issued its First Assessment Report in 1990, finding that the planet had warmed by 0.5°C in the past century and would rise further by 0.3°C per decade in the 21st century, accompanied by global mean sea level rises of 6 cm per decade.

THE KYOTO PROTOCOL:

The UN established the Framework Convention on Climate Change (UNFCCC) that 154 nations (including the US) signed at the Rio ‘Earth Summit’ in 1992. In 1995, the IPCC Second Assessment Report confirmed that concentrations of greenhouse gases (GHGs) were continuing to increase, and that the socioeconomic impacts of climate change were significant, while the UNFCCC began negotiations on an international agreement to limit the emission of GHGs.

The result was the Kyoto Protocol, adopted in 1997, which: (1) set mandatory targets for emission reductions for the world’s 38 leading economies, and (2) proposed three flexible market mechanisms for achieving these reductions through carbon trading. The targets collectively amounted to a 5.2% global reduction in GHGs from these countries against 1990 levels by 2012.

THE 21st CENTURY:

Despite US opposition to the Protocol, momentum continued to build, with the EU launching its Emission Trading Scheme for CO2 in 2005. In 2007, the UK’s Stern Review, prepared by former World Bank Chief Economist Sir Nicholas Stern, warned that tackling climate change will now cost around 1% of global GDP, whereas the cost of not acting could be between 5% and 20%.

Shortly thereafter, the IPCC released its Fourth Assessment Report, concluding with 90% confidence that human activity is causing climate change. This seemed to mark the end of denial and the beginning of urgent global action on climate change. The IPCC Fourth Assessment Report in 2007 found that “Global GHG emissions due to human activities have grown since pre-industrial times, with an increase of 70% between 1970 and 2004.”

CURRENT GLOBAL CARBON LEVELS:

In 2008 our planet was estimated to contain 385 ppm (parts per million) of CO2 in its atmosphere, the highest concentration of CO2 for more than 630,000 years.

This has occurred primarily due to human industrial and technological progression, specifically the production and consumption of power from the burning of fossil fuels, estimated to have caused around 85% of CO2 emissions. Just 15% is estimated to have occurred from land use change.

Natural CO2 absorption systems that remove and store CO2 from the air, known as “sinks”, have historically provided the natural balance to keep atmospheric CO2 concentrations at a safe level. Without these sinks, such as the earth and oceans and trees, total CO2 emissions caused by humans would have already caused atmospheric CO2 to increase from pre-industrial values of 280 ppm to nearly 500 ppm.

CO2 CONCENTRATION GROWTH RATES:

Many scientists believe our planet can only comfortably sustain a balanced population of 4bn inhabitants. Considering current human social, political, economic and health trends, it is believed our global population of 6.5bn should peak around 9.5bn in 2050. With the necessary industrial output required to sustain this population explosion (see “Global Energy Demand Growth”), global CO2 emissions will continue to increase over the next 40 years.

Currently the atmosphere’s concentration is increasing at 2 ppm CO2 per year, however with natural sinks weakening (such as disappearing forests) and previously inert carbon pools (such as peat land and Arctic permafrost) now breaking down and releasing CO2 back in to the atmosphere, the rate of atmospheric CO2 concentration increase is spiralling.

OUR TARGET:

To keep the World within a safe level of climate change global temperature increase must be below 2 degrees Centigrade, meaning CO2 concentrations must peak at 450ppm.

Beyond a global 2 degrees Centigrade temperature increase the IPCC has outlined that the capability of society and ecosystems to adapt will rapidly decline, with an increasing risk of social disruption through health impacts, water shortages and food insecurity.

At current growth rates a 2 degrees Centigrade temperature increase could occur in around 30 years, 2040.

To try to avoid this many leading scientists suggest that CO2 emissions must peak at 2015 and be phased out as soon as possible after 2050. In most recent reports from the United Nations Environment Program, climate researchers now agree however that the global thermometer will rise around 6 degrees F during the century, even if all emission reduction targets are achieved.

GLOBAL ENERGY DEMAND GROWTH:

From the International Energy Outlook Report 2009 IEO2009, published by the US Department of Energy, these are the current energy consumption forecasts for the globe;

• Total world energy consumption will increase 44% by 2030

• 65% of this increase will come from within Asia, specifically India and China, at which point they will total 28% of total world consumption

• World natural gas consumption is set to increase by 1.6% per annum, with coal consumption set to increase 1.7% per annum despite climate change warnings.

• Coal will still account for 28% of world energy consumption in 2030, with natural gas & coal together to still account for 64% of global electricity generation in 2030.

• Together the US, China and India will account for 88% of the projected net increase in coal consumption from 2006 to 2030

• Upfront costs for financing will stifle solar power energy plant development, despite this being the only major long-term solution.

• OECD Europe & Japan are expected to decrease coal consumption before 2030, with most short-term renewable energy growth expected to come from wind and bio-mass.

• Hydroelectric generation is expected to be the predominant source of renewable energy growth in China, India, Brazil, Vietnam and Laos.

• Bio-fuels will increase from 800,000 barrels per day (now) to 5.9m barrels per day in 2030 (6% of total)

WHAT NEEDS TO BE DONE:

“What Green Investment” will give everyone the opportunity to invest in projects, companies, systems and technologies whose underlying aim is to mitigate climate change. Here is a brief overview of the most fundamental industries that need all of our attention.

Energy Efficiency:

The most efficient and immediate method of reducing our overall power consumption is to improve efficiency. With residential and commercial buildings being responsible for a large percentage of power consumption, simple concepts such as reducing the Wattage of light bulbs used, or intelligent power management systems in buildings known as SMART systems.

Within efficiency, the minimisation of industrial output through the recycling of goods is now an important practice, whilst general global system efficiencies are also being improved to ensure other vital reductions such as food wastage are achieved.

Renewable Energies:

Replacement of all fossil fuel dependent technology is the essential solution to the Worlds climate problems, however this is not an easy solution to accomplish.

Society’s dependence on electricity is the single largest problem, with the vast majority of power plants currently running on coal and causing around 30% of global green house gas emissions. Generation of electricity from renewable energy sources such as solar energy and bio-fuels (algae) present the long-term solutions, with short-term intermediate solutions offered by wind and hydro-electric power.

Our dependence on fossil-fuelled transportation systems is also a major cause of global pollution, with automobiles around the planet still almost completely fueled on oil. Governments must enforce an emphatic and fundamental change in our transportation systems, stopping all petrol-fuelled engine technology and move to new transportation technologies such as bio-fuels and hydrogen.

To reduce their carbon footprint, Governments will also need to develop intelligent modern schemes such as modern public transportation, car-sharing, remote work-station networks and individual carbon liabilities to ensure every country is responsible for its low-carbon impact.

References:

University of Copenhagen Sythesis’ Climate Change Report 2009 www.climatecongress.ku.dk

“International Energy Outlook May 2009” from the US Department of Energy

WEF Green Report, January 2009

Stern Review: www.hm-treasury.gov.uk/sternreview_index.htm

Intergovernmental Panel on Climate Change (IPCC): www.ipcc.ch

Kyoto Protocol: unfccc.int/kyoto_protocol/items/2830.php

BBC, section on climate change: www.bbc.co.uk/climate

Carbon Trust: www.carbontrust.co.uk

Cool Mayors for Climate Protection: www.coolmayors.org

Corporate Leaders Group on Climate Change: www.cpi.cam.ac.uk/bep/clgcc

E3G: www.e3g.org/index.php/programmes/climate

EU Greenhouse Gas Emission Trading Scheme: ec.europa.eu/environment/climat/emission.htm

Institute for Public Policy Research (ippr): www.ippr.org.uk/research/teams/?id=86&tid=86

Princeton Stabilization Wedges: www.princeton.edu/~cmi/resources/stabwedge.htm

Stop Global Warming: www.stopglobalwarming.org

Tyndall Centre for Climate Change Research: www.tyndall.ac.uk

Together.com: www.together.com

Non-Annex I Countries: Those developing countries without a binding GHG emissions reduction commitment under the Kyoto Protocol. Non-Annex I countries are expected to receive technology transfer and financial assistance from Annex II countries to help them achieve emissions reductions in the absence of a binding commitment.

Additionality: Additionality is the whether a project would have occurred irrespective of whether the carbon credit incentives had been in place, under a “business as usual” scenario. Crucial to the additionality consideration is whether the deforestation threat was genuine and real, and whether this itself would also have occurred under a business as usual scenario.

Adaptation Fund: A fund set up under the Kyoto Protocol to provide money for poorer non-annex 1 countries to adapt to climate change. This currently receives 2% of transactions under the Clean Development Mechanism.

Afforestation: Afforestation is the practice of planting new seeds to forest land that has not historically (considered to be more than 50 years) previously been forested, generally accepted as “agricultural land”.

Agroforestry: This is the practice of combining forestry production with agricultural production to gain full benefits such as biomass grown on short-rotation plantations can replace the burning of fossil fuels whilst therefore decreasing carbon emissions.

Assigned Amount Units (AAUs): The total volume of green house gas in units of one tonne CO2e – that each Annex B country is allowed to emit during the first phase of the Kyoto Protocol. Unless the country government agrees otherwise, any emissions reductions that occur in that country can be counted towards its AAU reduction target. Organisations that buy and sell carbon offsets from Annex B countries may thus run the risk of double-counting their emission reductions.

Baseline: An established benchmark against which any reduction in emissions can be calculated, ie the volume of greenhouse gas emissions in the absence of the project activity or emissions reduction initiative. The baseline is compared against the emissions following project implementation. The difference between baseline emissions and with project emissions is the emission reduction that can be used as a carbon offset.

Business-as-usual: The scenario in which policies to reduce emissions are not enacted. The business-as-usual scenario is often used to determine the greenhouse gas emissions baseline.

Bioenergy: Any form of energy created from bio matter such as crops, algae or timber, that can be converted into fuel. In Brazil corn has been successfully turned into ethanol to replace petrol, whilst many scientists believe oil derived from Algae represents the future of Bio fuel

Biomass: This is solid, mostly wood-based material used for heating (woodchips), cooking (fuel wood in developing nations) and increasingly for power generation to replace coal. Fast growing woods such as Paulownia and Eucalyptus are idea for this. Biomass projects can also receive carbon credits for the sequestration of CO2.

Cap and Trade: A system pioneered in the United States in the 1980s under which an overall limit or “cap” for emissions is set and tradable allowances are auctioned, sold or granted to participating organisations. The total amount of allowable emissions is gradually reduced causing participants to trade their permits to achieve the desired reduction at the lowest overall cost.

Carbon Budget: A set amount of carbon that can be emitted in a give a country. Part of a strategy to limit climate change by capping greenhouse gas concentrations in the atmosphere.

Carbon Credit: An instrument created to represent one metric tonne of CO₂e whose emission is either avoided or removed.

Carbon Dioxide: a naturally-occurring atmospheric gas, widely attributed as being responsible for global fluctuations in climate change. Created by burning fossil fuel, and naturally released by peat bogs, oceans, volcanoes and biological respiration.

Carbon Dioxide equivalent (CO₂e): A metric used to compare the relative global warming potential of different greenhouse gases. For example, methane is 21 times more potent than CO₂ making 1 tonne of methane equal to 21 tCO₂e.

Carbon Footprint: The total greenhouse gas emissions produced by individuals and companies expressed in tonnes of CO₂ equivalent. Activities such as travel, heating, air conditioning and waste disposal all form part of your carbon footprint.

Carbon Funding or Finance: This is where an investor pays a project developer in return for ownership of the emissions reductions achieved by that project over a certain time period. Funding may be provided as capital at the start of a project, as income over its life or as a mixture of the two.

Carbon Neutral: Being carbon neutral refers to neutral (zero) total carbon release brought about by balancing the amount of carbon released with the amount sequestered or offset. When an individual or organization sets out to become carbon neutral it is usually achieved by the following; limiting energy usage and emissions, obtaining electricity and other energy from a renewable source (e.g. solar power) and offsetting the remaining emissions (that cannot for the moment be avoided or generated) in a carbon project or buying carbon credits.

Carbon Neutrality: The state in which the emissions from one activity are balanced by emission reductions achieved elsewhere. For example, a company that emits 100 tCO2e can be carbon neutral if they purchase and retire 100 tCO₂e of carbon credits from outside their company.

Carbon Neutral: when a person or company – through energy efficiency, carbon offsetting and sustainable practices- contributes no net CO2.

Carbon Offsetting: The process by which emissions from one source are matched against carbon credits derived elsewhere. Buying carbon credits to offset the impact of your business or personal activities on the environment by contributing to support projects that reduce CO2 production.

Carbon Source: Any natural store of carbon that releases CO₂ into the atmosphere. Note that soils, forests and oceans can be both sinks and sources at different times.

Carbon Sequestration: The process when greenhouse gases or carbon dioxide are absorbed from the atmosphere by growing plants, trees and algae or even the storage underground.

Carbon Sink: Process or structure that removes a greenhouse gas from the atmosphere. Forests, water, peat deposits, and carbonate deposits (shells and limestone) and mechanical carbon capture and storage systems are carbon sinks.

Carbon Trading (cap and trade): Any system where countries, companies or others trade in the right to emit CO₂ into the atmosphere. Europe has already implemented and the USA is planning a “cap and trade scheme”, in which major emitters are given or sold a certain allocation of a limited (capped) number of permits and then allowed to trade the permits among themselves.

The Carbon Trust: Is a not for profit company set up by the UK Government in 2001. Its purpose is to advise businesses on how to reduce the amount of energy they use. The Carbon Trust works with both large and small companies.

Certified Emission Reductions (CERs): Carbon Credits granted by the Clean Development once a project has been validated and the emission reductions themselves have been verified. They can then be used by governments towards their Kyoto targets or by companies to trade in the EU Emissions Trading Scheme. The purchasing company surrenders the CERs to government as part of the company’s emissions target.

Clean Development Mechanism (CDM): The CDM allows Annex 1 countries that have targets under the Kyoto Protocol to make emission reductions overseas in non-Kyoto countries and count those reductions towards their own legal commitments. A CDM project is issued with Certified Emission Reductions, which may then be traded.

Crediting Period: The period of time during which the emissions reduction project generates valid carbon credits. The crediting period cannot exceed the operational lifetime of the project, but may be considerably shorter, depending on the rules of the project standard and the decisions of the project proponent.

CO₂ equivalent: A term used to describe the global warming potential of greenhouse gases in terms of the equivalent amount of CO₂. For instance, CO₂ concentrations in the atmosphere are now approaching 390 parts per million (ppm). If other greenhouse gases added by human activity are included the figure rises to above 460 ppm of CO₂ equivalent.

Concentrate Solar Power (CSP) systems produce heat or electricity using mirrors which track the sun (“heliostats”), reflecting and concentrating the suns radiation to a communal region where the temperatures can reach between 400 and 1000 deg C. Heat is converted immediately to electricity or alternatively stored in various medium to be released at night or on overcast days. It is suitable for peak-loads and base-loads.

COP15 is the 15^th “Conference of Parties” under the United Nations climate change convention and will be held in Copenhagen in December 2009. Its single goal is to produce a road-map for the safety of human kind in the face of potentially catastrophic climate change

Dangerous climate change: A term embedded in the UNFCCC. It is not defined, but the world’s governments have agreed to prevent it.

Designated Operational Entity (DOE): An organization accredited by the carbon credit standards body to validate projects, request registration, and verify emission reductions from the project activity.

Emission coefficient: A number used to convert units of an activity or product into units of CO₂e that result from the activity or from the manufacture and/or use of the product. Emission coefficients are usually expressed as tonnes CO₂e/[unit of activity].

European Solar Thermal Electricity Association (ESTELA) is a European Industry Association created to support the emerging European solar thermal electricity industry for the generation of green power in Europe and abroad in the Mediterranean region

European Union Emissions Trading Scheme (EU ETS): In 2005 the European Union Greenhouse Gas Emission Trading Scheme (EU ETS) commenced operation as the largest multi-country, multi-sector Greenhouse Gas emissions trading scheme. The main participants in the scheme are large industrial users of energy who are allocated a maximum emissions cap by the government. It is a regional cap and trade system intended to help the European Union meet its 2012 goal of reducing greenhouse gas emissions by 8% below 1990 levels.

European Union Emissions Allowance (EUA): A EUA is a unit of one tonne of CO2 and was designed to be identical with the equivalent AAU (assigned Amount Unit) of CO2 defined under Kyoto. Hence, because of the EU’s decision to accept Kyoto-CERs as equivalent to EU-EAUs, it will be possible to trade EAUs and UNFCCC (United Nations Framework Convention on Climate Change)-validated CERs on a one-to-one basis within the same system.

Emission reduction: The removal, limitation, reduction, avoidance, sequestration or mitigation of greenhouse gas emissions.

Fossil Fuels: fuels such as coal, oil and natural gas, created by the decomposing of plants and animals and algae. When burnt create CO2

Global Warming: is the increase in the average temperature of the Earth’s near-surface air and oceans since the mid-20th century and its projected continuation.

Global Warming Potential (GWP): The GWP is used to compare the abilities of different greenhouse gases to trap heat in the atmosphere. GWPs are based on the radiative efficiency (heat-absorbing ability) of each gas relative to that of carbon dioxide (CO₂), as well as the decay rate of each gas (the amount removed from the atmosphere over a given number of years) relative to that of CO₂. The GWP provides a construct for converting emissions of various gases into a common measure, which allows climate analysts to aggregate the radiative impacts of various greenhouse gases into a uniform measure denominated in carbon or carbon dioxide equivalents.

Gold Standard (GS): This is awarded to CDM and voluntary projects that have higher sustainable development credentials than required by CDM regulations. There is a GS VER accreditation scheme for the voluntary market. GS was set up by a group of environmental NGOs to encourage developers to run high quality projects and created to facilitate the move from fossil fuels to renewable energies. GS was created by the Gold Standard Foundation in order to offer a quality label to CDM / JI and voluntary offset projects. The Gold Standard is endorsed by 49 non-governmental organisations worldwide.

Greenhouse Gases (GHG): GHG’s trap heat radiated from the earth, and contribute to global warming. The Kyoto Protocol covers human-induced emissions of six gases: carbon dioxide (CO₂, the most important), methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

Hydro-electric Power: electricity generated by hydropower, i.e., the production of power through use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy.

Hydrogen Engine: Hydrogen-fueled internal combustion engines convert the chemical energy of hydrogen to mechanical energy or electrochemical conversion in a fuel-cell.

Intergovernmental Panel on Climate Change (IPCC): Set up by the UN in 1988 to produce consensus reports on the science, impacts and mitigation of climate change, it has now produced four major assessments, the latest in 2007. All go through extremely detailed reviews by both experts and governments before publication.

ISO 14064-1: Standard issued in 2006 by the International Organisation for Standards (ISO). Provides guidance for quantifying and reporting greenhouse gas emissions at the organisational level. Based on the WRI/GHG Protocol for measuring organisational carbon footprints.

ISO 14064-2: Standard issued in 2006 by the International Organisation for Standards (ISO). Provides guidance for quantifying and reporting greenhouse gas emissions reductions from project activities. Forms the basis for the 2007 version of the Voluntary Carbon Standard.

Joint Implementation: The mechanism established under the Kyoto Protocol that allows for emission permits to be transferred between Annex B countries. Whereas CDM projects generate CERs, JI projects generate ERUs (Emission Reduction Units).

Kyoto Protocol: The agreement negotiated at the Third Conference of Parties to the UN Framework Convention on Climate Change in Kyoto, Japan in December 1997, and subsequently ratified by most nations except the USA, it gives industrialized nations legally binding emissions reduction targets for six main greenhouse gases, covering the period 2008- 2012. The Kyoto Protocol defined the emission reduction obligations of Annex B countries and defined CDM, JI and emission trading as mechanisms for achieving emission reductions. This means that in the five years between 2008 and 2012 the UK has to reduce its greenhouse gas emissions, on average, to 12.5% below what they were in 1990. Each country has a different target, but the total emission reductions amount to 5.7% below 1990 levels.

Land Use, Land Use Change And Forestry (LULCF): all have impacts on the global carbon cycle – they can add or remove carbon dioxide from the atmosphere, contributing to climate change. For example land-use change such as the conversion of forest into agricultural land contributes to a significant increase in carbon into the atmosphere. All areas excluded under the Kyoto Protocol can claim the amount that is stored in trees in their country.

Mediterranean Solar Plan (MSP) originally initiated in Barcelona in 1995 to create a Europe-wide plan for solar-powered-electricity generation.  On 13 July 2008 announced an objective of 20GW of renewable energy capacity within Europe by 2020, roughly forecast to be delivered as 10-12 GW from concentrated solar power (CSP), 5-6 GW from wind power and 3-4 GW from photo-voltaic technology.

Mixed Use Projects involve a number of forestry and carbon accreditation practices thereby giving the owners or investors maximum return potential whilst still mitigating climate change.

NAPAs – National Adaptation Programmes for Action: Plans being developed by the least developed countries to help protect their citizens, ecosystems and economies against climate change.

Parts Per Million (ppm): The amount of pollution concentrated in the air. Concentrations of pollutant gases such as CO2 in the atmosphere are usually measured in parts per million by volume (ppmv)

Parabolic Trough: Parabolic trough power plants use curved troughs that reflect direct solar radiation onto a linear receiver running along the trough. As the sun moves, the troughs track the Sun along one axis, typically north to south. A thermal fluid such as synthetic thermal oil is circulated within the linear receivers and is heated to approximately 400 deg C by the reflected radiation.

Parabolic Dish: Parabolic dish concentrators are individual motor-generator units that due to their singularity are ideal for de-centralised power supply and remote, stand-alone power systems. The leading producer of these dishes is Stirling Energy, whose SunCatcher Power Systems are 25 kW comprising of a 38ft diameter dish structure supporting 82 curved glass mirror facets, each 3 ft * 4 ft.

Peak Oil: is the point in time when the maximum rate of global petroleum is reached after which the rate of production enters terminal decline

Paulownia: is extremely fast growing; some species of plantation Paulownia can be harvested for saw timber in as little as five years. Once the trees are harvested, they regenerate from their existing root systems, earning them the name of the “Phoenix tree.” Paulownia has the ability to reclaim ecologically stressed and degenerate patches of land relatively quickly. Its root systems run deep and penetrate compacted and contaminated soils which have resulted from industrialized development. Paulownia is a phyto-remediator, increasing the organic content of degraded soils, processing and filtering contaminants through the uptake of its vascular system, and emitting oxygen into the atmosphere.

Per capita emissions: Emissions (usually of a country) divided by the number of inhabitants. Often seen as a measure of fairness or emissions entitlements. (The CO₂ emissions of China and the USA are about the same, but because China has four times as many people, its per capita emissions are only a quarter of those of the USA.)

Photovoltaics: The method of converting solar energy directly into electricity using solar panels. ‘Photovoltaic’ is the marriage of two words, ‘photo’ from Greek roots meaning light, and ‘voltaic’ from ‘volt’ which is the unit used to measure electric potential at a given point. Photovoltaic systems use cells consisting of one or two layers of a semi-conducting material. When light shines upon the cells an electric field is created across the layers causing electricity to flow. Whilst a photovoltaic system does not need bright sunlight to operate, indeed they work well on cloudy days, the greater the intensity of the light the greater the flow of electricity.

Permanence: Permanence is the title given to the concern over a project’s longevity in relation to the carbon credits produced. This is a major issue for forestry when considering potential fire, disease or logging all of which will release the carbon sequestered back in to the atmosphere. For REDD projects, the only solution is the ongoing verification of the project’s forest status once carbon offset emission credits have been generated.

Project Design Document (PDD): A document that describes an emission reduction project’s relevant characteristics, including name, location, project technology, baseline scenario, use of the additionality tool, estimated greenhouse gas reductions, etc.

Renewable Energy: sources of energy that are seemingly infinite (such as wind and solar) and do not rely on a finite source (such as fossil fuels) to create power.

Reforestation: This is the practice of planting new seeds to forest land that has been recently deforested, harvested or burned. REDD projects are also achievable in areas predicted to be under a “high-risk of deforestation” such as many areas in the Amazon Basin. Certain forecast models have been developed such as the SimAmazonia Model which forecast 50 years of deforestation in high-risk areas of the Brazilian Amazon, thereby enabling several deforestation protection projects to acquire CCB / VCS accreditation.

Reducing Emissions from Deforestation and Forest Degradation (REDD): REDD mechanisms use market/financial incentives to reduce the emission of  green house gases from deforestation and forest degradation. While initially excluded from the land use change sector within the UNFCC Clean Development Mechanism it is suspected to be part of the successor to the Kyoto Protocol. REDD credits offer the opportunity to utilise funding from developed countries to reduce deforestation in developing countries.

Registry: An inventory system that tracks the accumulation and removal or retirement of emission reduction credits by an organisation. Registries may be specific to a particular credit type, as is the case for the Gold Standard, CDM and Voluntary Carbon Standard registries, or may hold multiple credit types, as is the case for generic third party registries and proprietary registries maintained by individual companies.

Sustainable Forestry is the practice of reforestation combined with a small amount of timber harvesting, enabling both the environmental advantages from reforestation combined with the economical incentive of harvesting. Sustainable harvestry programs typically only permit 5% of the timber to be harvested and trees are replanted to ensure developing forest.

Tipping point: Any point of no return, after which change is sudden and irreversible. In climate change, this might be runaway global warming, the collapse of an ice sheet or the shutting down of an ocean current which won’t switch back on even if you go back to the old climate conditions.

“Trans Mediterranean Renewable Energy Cooperation” (TREC) aims to boost the generation of electricity and desalination of water by using solar thermal plants in Europe, Middle East and North Africa (EUMENA) and transmit the power generated via HVDV transmission lines.

UK Emissions Trading Scheme: In 2002, 33 companies voluntarily took on a legally binding obligation to reduce their emissions and began trading under this DEFRA scheme. Companies with Climate Change Levy Agreements could buy and sell credits in the scheme to help them achieve their targets. The UK ETS ended in December 2006 with final reconciliation completed in March 2007. The UK ETS was the world’s first economy-wide greenhouse gas emissions trading scheme.

United Nations Framework Convention on Climate Change (UNFCCC) Signed in 1992 at the Rio Earth Summit and ratified by 192 nations. It commits them to stabilizing climate-changing emissions and to preventing “dangerous human interference with the climate”. Its parties meet every year. The next meeting is in Copenhagen in December this year.

Voluntary Emissions Reductions (VERs): This is a unit of emission reductions that may have been verified by an independent auditor to a recognised standard. A VER can also be a CER awaiting confirmation or can be a unit that has not been verified at all.

Voluntary Carbon Standard (VCS): Work to develop the Voluntary Carbon Standard was initiated by The Climate Group, the International Emissions Trading Association and the World Economic Forum in late 2005. The VCS Program provides a new global standard and program for approval of credible voluntary offsets. VCS offsets must be real (have happened), additional (beyond business-as-usual activities), measurable, permanent (not temporarily displace emissions), independently verified and unique (not used more than once to offset emissions).

Validation: The systematic, independent and documented process for evaluating the proposed project activity and project documentation against the requirements of a project standard.

Verification: The systematic, independent and documented process for evaluating the emissions reduction claims of a project proponent against agreed verification criteria.

Verified Emission Reduction (VER): Emission reductions generated by projects that are assessed and verified by objective third party mechanisms other than the UN Framework Convention on Climate Change.