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What Are Environmental Markets?

According to USDA, environmental markets are innovative policy approaches to leverage funding for environmental conservation on private lands. Environmental markets can serve as a complement to traditional conservation programs. Current active and pilot markets exist for greenhouse gases, water quality, water quantity, wetlands, and habitats.

According to Duke University, Nicholas Institute for Environmental Policy Solutions, environmental markets are focused on a broad range of challenges—from reducing greenhouse gas emissions to providing incentives for the restoration and protection of forests to improving water quality.

Market-based approaches or incentives provide continuous inducements, monetary and near-monetary, to encourage emitting entities to reduce their releases. (EPA) 

EMA believes market-based solutions create sustainable solutions that work for the environment.

Learn more about the history of cap-and-trade and environmental markets here.

Glossary of Terms

This section contains links that will direct the viewer away from the EMA website; while every effort has been made to verify the content of these websites please be aware that these outside websites do not represent the opinions or views of the EMA.  Also, the EMA cannot be held responsible for the accuracy of the information presented by these websites.


Acid Rain Program

Created under the Clean Air Act to reduce acid rain: employs a cap and trade framework to achieve SO2 reductions.  The program is generally seen as a success; it has reduced emissions of these gases at a fraction of the costs that other means of control would have forced on energy consumers.


Berlin Mandate

Amendment to the treaty arrangements of the Kyoto Convention passed in 1995 that extended the treaty obligation date beyond 2000 and strengthened the legal obligations undertaken by signatories.


Carbon Capture

Experimental procedure that removes CO2   from atmospheric emissions and purifies it. The trapped gas is then used for industrial purposes or stored in geological substrates. Although this process shows great promise for reducing GHG emissions, it is not yet an economically feasible means of keeping CO2 from entering the atmosphere.

DOE research

IPCC research


Carbon Offsets  Practice where individuals or corporations, either voluntarily or in order to maintain compliance with regulations, purchase carbon credits produced elsewhere, through means such as tree planting, renewable energy production, and energy conservation.  The benefits that these offsets bring is a matter of some controversy as there is no universal standard as to what constitutes an offset, meaning that often the offsets purchased may not have come from an actual reduction in carbon emissions.


Clean Air Act of 1990

Reauthorization of the Clean Air Act.  Amendments were passed by the Congress and strengthened the ability of the EPA to set and enforce pollution control programs aimed at protecting human health and the environment; included provisions for Acid Rain Program.


Clean Renewable Energy Bonds (CREBs)

Bonds issued to entities undertaking the construction of clean or renewable energy projects.  There are a variety of projects that qualify for the issuance of bonds including biodigestors, wind power, and solar production. The program provides compensation for interest on the loans in the form of tax credits to the borrower.


European Union Emissions Trading scheme (EU ETS)

Created in response to the implementation protocols of the Kyoto Convention; the program uses market-based mechanisms to help parties curb CO2 emissions and comply with regulations.


Global Warming

Change in the earth’s average climate range; believed to be caused by increasing concentrations of greenhouse gases in the Earth’s atmosphere.  The burning of fossil fuels and deforestation are believed to be the major causes of modern global warming.


Greenhouse Gases (GHGs)

Gases that trap radiant heat from the sun within the Earth’s atmosphere.  Although most greenhouse gases are naturally occurring and in ambient amounts contribute to proper climate regulation, scientific evidence increasingly supports the theory that human emissions of GHGs as a byproduct of fossil fuel burning is contributing to global warming.  Greenhouse gases include CO2 (Carbon dioxide), NOx (Nitrous Oxides), CH4(Methane), and O3 (Ozone).  One of the major difficulties with climate control is that, with the exception of ozone, the gases that contribute to global warming are highly stable, meaning that once emitted into the atmosphere they are likely to remain there for a very long time.


Kyoto Protocol

Landmark treaty agreement formed under the auspices of the United Nations Framework Convention on Climate Change intended to deal with the effects of global warming on an international scale.  The convention sets targets for CO2 emissions at 5% less than 1990 levels for developed countries.  Owing to non-ratification by the and the divergent enforcement standards for developed and developing nations, the efficacy of the convention is a matter of controversy.


Landfill Gas to Energy (LFGTE)

A method of energy generation whereby landfill gases are collected, purified, dehydrated, and then burned to produce energy.  This reduces greenhouse gas emission in two ways, first in that it removes methane from the atmosphere.  The process, which is a low GHG contributor, also offsets coal energy production.

Marrakesh Accords

Final amendment to the Kyoto Convention decided in 2001; the Marrakesh provides for capacity building in developing nations without penalty, it also provides for the resolution of state-centered adverse effects associated with global warming. The Accord also clarified the guidelines for international emissions trading.



National Ambient Air Quality Standards

Health based standards for a variety of pollutants set by the EPA as a part of the 1990 Amendments to the Clean Air Act that must be met nationwide.  Air borne pollutants are divided into primary and secondary categories with those in the primary category are directly linked to adverse effects on human health.  Secondary pollutants are linked to a decrease in population welfare.



Renewable Energy Credits (RECs)

Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are the property rights to the environmental benefits from generating electricity from renewable energy sources. These certificates can be sold and traded and the owner of the REC can legally claim to have purchased renewable energy. While traditional carbon emissions trading programs promote low-carbon technologies by increasing the cost of emitting carbon, RECs incentivize carbon-neutral renewable energy by providing a subsidy to electricity generated from renewable sources.

View the ABA ACORE EMA Master Renewable Energy Certificate Purchase and Sale Agreement


Regional Clean Air Incentives Market (RECLAIM)

Cap and trade market established in the greater Los Angeles region of California to alleviate a severe smog problem. RECLAIM includes cap and trade programs for NOx and SO2


Regional Greenhouse Gas Initiative (RGGI)

Collaboration between nine north-eastern states to reduce greenhouse gas emissions. In the agreement the states are party to a cap and trade market that caps CO2emissions from energy producers and eventually reduces them to levels below 1990 emission amounts.


South Coast Air Quality Management District (SCAQMD)

The air pollution control agency for the four-county region including Los Angeles andOrange counties and parts of Riverside and San Bernardino counties.


United Nations Framework Convention on Climate Change (UNFCC)

A treaty signed in 1992 by 165 countries (including the ); it took effecting March 1994. The Convention set a target of stabilizing greenhouse gas concentrations in the atmosphere to a level that would prevent dangerous anthropogenic interference with the climate system.  A framework was established whereby specific actions could be agreed to by the signatories.


United States Climate Action Partnership (USCAP)

Partnership between several energy industry leaders that has taken the unprecedented step of lobbying the Federal government to take decisive legislative action to implement plans on reducing GHG emissions.



West Coast Global Warming Initiative (WCGGWI)

Agreement signed between Washington, Oregon, and California in 2003 that sought to curb emissions of GHG’s and create a regional cap and trade market to assist in the reduction of these gases.  The initiative also looked at reducing demand for energy in the states through regional energy saving measures.   WCGGWI was largely superseded by the larger Western Regional Climate Action Initiative which has a similar goal and plan of action but has several more participants.


Western Regional Climate Action Initiative (WRCAI)

Agreement signed by a number of western state governors whereby the states agree to work together to establish targets for greenhouse gas reductions within a market based framework.  Initially composed of Washington, Oregon, California, New Mexico, andArizona the agreement has expanded to include Utah and other western states as well as British Columbia . 

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