LONDON - Buyers of offsets in the global voluntary carbon market are showing increased interest in so-called exotic and U.S. credits, market players said on Wednesday.

Voluntary carbon offsets allow individuals and companies to compensate for their own greenhouse gas emissions by funding projects that reduce emissions, often in developing countries.

Projects can include land-use, methane, biomass, renewable energy or industrial energy efficiency.

The unregulated voluntary market operates outside mandatory emissions reduction schemes such as the U.N.'s Clean Development Mechanism (CDM) or the European Union's Emissions Trading Scheme.

It evolved largely in the United States as a market-based mechanism to address climate change and in Europe as a byproduct of implementing the Kyoto Protocol.

Carbon credits totaling 123 million tonnes, valued at $705 million, were transacted in the global voluntary carbon market in 2008, according to New Energy Finance and Ecosystem Marketplace estimates. This is a fraction of the $126 billion global carbon market. Some of the jargon used in the voluntary market is unraveled below:

VERIFIED EMISSIONS REDUCTIONS (VERs)

A VER represents one tonne of carbon dioxide reduced. The credits can be generated from projects which fall outside of the scope of the CDM, from a country which has not ratified the Kyoto Protocol or they are specifically developed for the voluntary market.

PRE-CDM VERs

These credits are generated by CDM projects which have been operational but have not yet been registered with the CDM Executive Board. They may not become CDM credits, called certified emissions reductions, but they can be sold in the voluntary market.

Pre-CDM VERs are a major source of supply to the voluntary market because they provide an early revenue stream crucial for project development.

VOLUNTARY CARBON STANDARD

The VCS is a global standard for voluntary offset projects and ensures they have real environmental benefits. It operates a registry system to track credits from issuance to retirement. The founding partners of the VCS are The Climate Group, the International Emissions Trading Association (IETA) and the World Business Council for Sustainable Development.

VOLUNTARY CARBON UNIT (VCU)

VCUs are credits created under the Voluntary Carbon Standard Programme.

GOLD STANDARD

The Gold Standard Foundation is a non-profit organization which operates a certification scheme for premium quality carbon offsets. The Gold Standard quality benchmark is considered to be the highest in the voluntary carbon market.

VER+

The VER+ Standard was developed by international certification organization TUV SUD. It was the main standard for offset credits before the VCS began in 2007 but has since declined in popularity.

'EXOTIC' CREDITS

The term 'exotic' refers to the location of the emission reduction project, usually in countries with smaller project numbers.

VINTAGE

Vintage refers to the year the carbon reduction takes place.

CLIMATE RESERVE TONNES (CRTs)

CRTs are traded under California's Climate Action Registry. Members of the registry include over 300 of the world's largest corporations, universities, environmental organizations and government agencies. They voluntarily measure, monitor and publicly report their greenhouse gas emissions using the registry's protocols. Sources include: www.cdmgoldstandard.org; www.v-c-s.org; www.climateregistry.org.

(Reporting by Nina Chestney; Editing by Keiron Henderson)

Renewable energy Climate change