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Climate change A to Z: an FT jargon buster

© Ulla Puggaard
© Ulla Puggaard

Adaptation Making changes to deal with the effects of climate change — both now and in the future. This includes building infrastructure such as flood and fire defences, developing crops that can cope with new climatic conditions, and exploring new ways of cooling buildings.

Air/Atmosphere While oxygen is critical to life on earth, it is not the main component of the atmosphere. It is composed of about 78 per cent nitrogen and 21 per cent oxygen. It also has small amounts of other gases such as carbon dioxide, neon and hydrogen, plus particles such as soot and microbes.

The damaging effects of carbon, methane and other greenhouse gases are evident in their description: though small in proportion, they powerfully absorb and trap heat.

Air pollution Is distinct from carbon and greenhouse-gas emissions, and is not always caused by climate change.

AQI Air pollution is measured with an Air Quality Index, or AQI, which is calculated as a combination of different types of pollution, such as small particulate matter, nitrogen dioxide and ozone. When the AQI is more than 100, it’s about the same as breathing in exhaust from a car all day. However, AQI is not a standardised formula — countries can calculate AQI in different ways.

Afolu Agriculture, Forestry and Other Land Use is a term that is used in the Intergovernmental Panel on Climate Change (see IPCC) report on climate change.

Aosis The Alliance of Small Island States, made up of island and coastal states, mostly in the Pacific and Caribbean, that are likely to be the most affected by rising sea levels, extreme weather and other effects of global warming.

Biofuel A fuel derived from renewable, biological sources, including crops such as maize and sugar cane, and some forms of waste.

Biomass Renewable organic material that comes from plants and animals.

Climate is the average of weather, and includes phenomena such as rain, flooding, drought and storms, heat and cold, and other extreme weather events.

Climate change refers to the shifts in climate that result from the warming of the planet. The impact of climate change is not uniform: one place could become wetter because of climate change, and another could become drier. Some places are heating up much more quickly because of climate change (particularly in polar regions) while others have experienced only small temperature shifts.

Carbon Border Adjustment Mechanism (CBAM) An EU proposal that will place a carbon price on imports of a targeted selection of products from countries with less ambitious national climate policies. This is designed to avoid what is known as “carbon leakage”, or the transfer of production by businesses to countries with more lax emission constraints.

Carbon budget The total amount of carbon that can be released into the atmosphere before breaching a given level that would lead to global warming beyond agreed limits.

Carbon capture and storage (CCS) Refers to capturing carbon dioxide — typically when it is close to the source of emissions, such as at the smokestack on a power plant — and then permanently storing (or sequestering) the CO2, for example by injecting it underground.

Carbon capture utilisation and storage (CCUS) As above, but using the carbon rather than storing it. In other words, capturing and recycling the carbon for further use. For example, by injecting it or binding it to something else, for example to harden “green” cement.

Carbon dioxide CO2 in the air is measured in parts per million — so in 2021 the air contained about 414 parts of carbon dioxide for each 1mn parts of air. This compares with pre-industrial levels of an estimated 280 ppm. Scientific consensus is that the planet remains healthy for humanity at up to 350.

Total carbon dioxide emissions in the year of 2021 alone are expected to be 33bn tonnes (source: IEA report).

Total greenhouse gas emissions (see entry) were estimated at 59bn tonnes of carbon dioxide equivalent in 2019, with an error margin of about 10 per cent, according to the scientists behind the latest IPCC report (see IPCC),

Carbon dioxide equivalent Greenhouse gases each have a different global warming potential. To be able to compare the amounts of other gases to the equivalent amount of carbon dioxide on the basis of their global-warming potential, the carbon dioxide equivalent is needed.

Carbon intensity Measure of carbon dioxide emissions relative to a unit of revenue (for a company, ExxonMobil, for example) or relative to GDP (for a country). For example, if a company is growing its emissions faster than its revenue, then carbon intensity will decrease over time, even though its absolute emissions will increase.

Some developing countries have adopted carbon intensity targets, rather than absolute emissions targets, to accommodate their fast-growing economies. For example, China’s target is to reduce carbon intensity by more than 65 per cent by 2030, relative to 2005 levels. But that reduction in carbon intensity belies the fact that absolute emissions will rise even while that goal is met.

Carbon leakage Refers to the relocation of an industry to countries where emission rules are weaker.

Carbon neutral Only refers to the balancing out of carbon emissions with carbon removal. This differs from ‘net zero’, which typically includes the removal or offsetting of all greenhouse gas emissions, including methane and hydrofluorocarbons.

Carbon offsetting Compensating for the release of emissions by making a cut or saving of carbon dioxide from the atmosphere. This could involve the planting of trees or another carbon removal activity.

Carbon price A cost applied to carbon dioxide pollution to incentivise businesses and consumers to reduce carbon-intensive activities. It can come in the form of either a tax or a pollution permit that companies trade.

Carbon sequestration Storing carbon dioxide, either naturally, through its absorption by trees and plants, or mechanically, through carbon capture and storage (see entry).

Emissions Trading Scheme/System (ETS) Emissions trading works by setting a cap on the total amount of greenhouse gases that can be emitted by polluters and issuing allowances accordingly. The cap is reduced over time so that total emissions fall. Carbon allowances can be bought at auction and traded, and these markets determine the carbon price. Each unit traded is meant to cover a tonne of carbon emitted.

EU taxonomy An EU-wide classification system to provide companies and investors with a common framework for identifying to what degree economic activities can be considered environmentally sustainable. To this end, the EU has set out six environmental goals, with most having a direct or indirect link to climate change. It will require large companies to disclose whether their capital spending is aligned with the EU’s environmental objectives.

Fossil fuels Formed from the remains of plants and animals over millions of years. The main fossil fuels are coal, petroleum and natural gas. When burnt they release carbon dioxide, methane and other greenhouse gases (see Greenhouse gas).

Global warming Refers to the fact that the planet is hotter now, on average, than it has been over the past century. Average air temperatures are estimated to be about 1.1C warmer now than they were in 1900. Oceans have warmed as well.

Global average temperature The mean surface temperature of the Earth measured from three main sources: satellites, monthly readings from a network of land stations and sea surface temperature measurements from a shipping network.

Glasgow Finance Alliance for Net Zero (Gfanz) Group of financial institutions that has backed the UN Race to Zero campaign that has pledged to decarbonisation the world economy and reach net zero emissions by 2050.

Under the Gfanz umbrella, the banks are represented by the Net Zero Banking Alliance (see entry) and the fund managers are represented by the Net Zero Asset Managers initiative.

Greenhouse gas The main gases causing the heating of the atmosphere are carbon dioxide, methane, ozone, nitrous oxide and hydrofluorocarbons (HFCS). 

Total annual greenhouse gas emissions were estimated at 59bn tonnes of carbon dioxide equivalent in 2019, with an error margin of about 10 per cent, according to scientists that signed off the latest IPCC report (see IPCC). This is mostly made up of carbon dioxide, as well as others such as methane and nitrous oxide.

Green bonds Green bonds, green loans, nature bonds, social bonds, sustainability bonds — the definition depends on the use of proceeds.

Green bonds were created to fund projects that have positive environmental and/or climate benefits. Sustainability-linked bonds and loans involve specific reporting or project selection criteria. Check the requirements as set down by the International Capital Market Association and Loan Market Association.

HYDROGEN

Green hydrogen Made by using clean electricity from renewable energy technologies to electrolyse water (H2O), separating the hydrogen atom within it from its molecular twin oxygen. Currently expensive.

Blue hydrogen Produced using natural gas but with carbon emissions being captured and stored, or reused. Negligible amounts in production because of a lack of capture projects.

Grey hydrogen This is the most common form of hydrogen production. It comes from natural gas via steam methane reformation but without emissions capture.

Brown hydrogen The cheapest way to make hydrogen but also the most environmentally damaging because of the use of thermal coal in the production process.

Pink/purple hydrogen Made using nuclear energy to power the electrolysis.

Turquoise hydrogen Uses a process called methane pyrolysis to produce hydrogen and solid carbon. Not proven at scale. Concerns around methane leakage.

IPCC The Intergovernmental Panel on Climate Change is a scientific body established by the UN Environment Programme and the World Meteorological Organization in 1988 to provide the world with a clear scientific view on the latest knowledge in climate change and its potential effects. Thousands of scientists contribute to its work on a voluntary basis.

Levelised cost of energy (LCOE) is a measure of a power source that allows comparison of different methods of electricity generation on a consistent basis.

The LCOE can also be regarded as the minimum constant price at which electricity must be sold in order to break even over the lifetime of a project.

Methane Potent warming gas that comes both from natural and man-made sources, the latter including gas leaks, rice paddies, landfill and coal mining. Natural sources include swamps, cows, wetlands and melting permafrost. Natural gas is made up mainly of methane.

A methane molecule is about 25 times more potent than carbon dioxide on a weight basis. But it also has a much shorter lifespan, lasting about 12 years compared with CO2, which stays in the atmosphere for a century or longer.

On a 20-year time horizon, methane has 80 times the warming effect of carbon dioxide.

Mitigation Ways to prevent climate change from getting worse, including by reducing greenhouse gas emissions or increasing the absorption of emissions back into nature, by mechanical and chemical processes.

Net zero Cutting emissions as close to zero as possible and compensating for any remaining emissions with projects that remove emissions from the atmosphere, such as planting trees or funding offset projects.

Nationally determined contributions (NDCs) Each nation’s climate plans, including climate-related targets, policies and measures that each government aims to implement in response to climate change and as a contribution to global action. A comprehensive guide to national climate targets is here.

Net-Zero Banking Alliance Part of the Glasgow Finance Alliance for Net Zero umbrella group, made up of 98 member banks accounting for more than 40 per cent of global banking assets.

Nitrous oxide (N2O), commonly known as laughing gas, is a greenhouse gas with warming potential. It is produced by agriculture and fertilisers.

Nitrogen dioxide Pollutant that comes primarily from road transport and diesel vehicles.

Ocean acidification The ocean absorbs about a quarter of the carbon dioxide caused by human activity from the atmosphere. When it dissolves in seawater, carbonic acid is formed. Carbon emissions in the industrial era have already lowered the pH of seawater by 0.1. This can affect the survival of marine organisms and kill coral reefs.

Paris climate agreement The agreement aims to limit global warming to well below 2C above pre-industrial levels and ideally to 1.5C. It was adopted in 2015 and entered into force in 2016. It has been ratified by 193 countries. Each country sets voluntary targets for their own emissions, and tightens these targets over time (see NDCs).

PPM Abbreviation for parts per million. The Intergovernmental Panel on Climate Change (IPCC) has indicated that greenhouse gas levels must remain below 450 ppm CO2 equivalent in order to avert dangerous climate change. That level peaked at almost 420 ppm in 2021.

REDD Reducing Emissions from Deforestation and forest Degradation is a UN-affiliated programme to provide developing countries with a financial incentive to preserve forests.

Science-based targets Targets are considered “science-based” if they are in line with what the latest climate science deems necessary to meet the goals of the Paris agreement to limit global warming to well below 2C above pre-industrial levels and pursuing efforts to limit warming to 1.5C. 

Scope 1, 2 and 3 emissions Greenhouse gas emissions are categorised into three groups or “Scopes” by the most widely used international accounting tool, the Greenhouse Gas Protocol.

Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain. Many companies do not include Scope 3 emissions in their reporting.

Sustainable development goals (SDGs) These are 17 goals under the auspices of the UN agreed in 2015 by world leaders with a 2030 target. They include the goals of ending poverty and other deprivations alongside improvements in health, education, inequality and economic growth, at the same time as tackling climate change and preservation of the natural environment.

Sustainable finance regulation directive EU regulation that came into force on March 10 2021. Aims to impose disclosure of sustainability risk on financial institutions, pension funds and insurance companies. Includes all sustainability risk, not only climate but also social and governance.

Tipping point Critical climate thresholds that, once passed, can lead to irreversible changes to our planetary systems. Global warming could potentially push several systems past these thresholds.

TCFD Task Force on Climate-related Financial Disclosures — launched in 2015 during the Paris climate negotiations as a market-driven initiative, backed by Mark Carney, then Bank of England governor and now UN special envoy for climate action and finance. Former SEC chair Mary Schapiro leads its secretariat.

Their aim is to produce voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers and other stakeholders.

UNFCCC The UN Framework Convention on Climate Change is one of a series of international agreements on global environmental issues adopted at the 1992 Earth Summit in Rio de Janeiro. The UNFCCC aims to prevent “dangerous” human interference with the climate system. It entered into force on March 21 1994 and has been ratified by 192 countries.

Value chain emissions Otherwise known as Scope 3 (see Scope 3 above). For many businesses, value chain (scope 3) emissions account for more than 70 per cent of their carbon footprint.

Watts Kilowatts (1,000), Megawatts (1m), Gigawatts (1bn). Watts per hour represent the rate at which energy is used or generated.

One 60-Watt lightbulb left on for one hour uses 60 Watt-hours of energy.

One KW of wind turbine-generated energy will power one kettle for an hour.

The average US home uses just under 11,000 kWh per year, or 1.25kW in an average hour. So we can probably say that 1GW is enough to power about 90,000 US homes per year under average conditions.

Zero carbon Means that no carbon emissions are produced at all in. This compares with ‘net zero’, where greenhouse gas emissions are balanced out.

This guide will be updated frequently.

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