Glossary

The Brussels effect is the process of unilateral (de facto or de jure) adoption of EU regulations by a non-EU nation through market mechanisms

A Compliance Carbon Market is a marketplace in which a pre-selected set of actors trade carbon offsets in form of credits. Compliance Carbon Markets are regulated by a third party, normally a governmental body, on either a subnational, national or supranational level. The goal of Compliance Carbon Markets, or Emission Trading Schemes (ETS) as they are commonly called, is to optimise emission reductions through a cap-and-trade system.

A green premium - Greenium - is the spread between green bonds and conventional bonds. Typically, this is seen when a green bond is issued at a higher price and offer a lower yield.

In theory, there's no difference between conventional and green bonds in terms of the firm's ability to repay its debt. A Greenium is often used to characterize the strong demand for green debt instruments.

The Kyoto Protocol was an international treaty signed in 1992 to which 192 countries committed and undersigned to combat climate change driven by CO2 emissions.

The Paris Agreement is a legally binding international treaty currently in effect. The treaty was adopted in 2015 by 196 countries, who committed to the goal of limiting global warming to well below 2 degrees Celsius compared to pre-industrial levels. Every 5 years, each country submits their action plan on how to reduce their greenhouse gas emissions, and the cycle is designed to get gradually more ambitious after each iteration.

The Voluntary Carbon Market, as its' name suggests, is a voluntary program, or marketplace, where any actor is free to opt in and out. In this market, an actor can generate a carbon offset and turn it into a credit, which subsequently can be sold to another actor, who for example wishes to reduce its' carbon footprint for the purpose of achieving certain climate goals.