1. 1 California Carbon Markets update: An overview of the regulations, market and trading activity Presented by: David Nussbaum July 2011

2. 2 Evolution Markets Overview Evolution Markets is the Intersection of Environment, Energy, and Finance™ Complete Financial Services for Green Markets and Clean Energy Sector - Commodity Brokerage - Market Execution Platforms - Structured Transactions World’s Largest Environmental Brokerage - More than 60 Professionals Worldwide - More than $150 billion in Transactions Formed in May 2000

3. 3 Evolution has offices on three continents and has completed environmental transactions in more than 30 countries New York San Francisco London Beijing Evolution Markets Overview

4. 4 Evolution covers all major environmental and energy markets Renewable Energy Credits GHG Credits, Allowances, Derivatives SO 2 Emissions Allowances NO X Emissions Allowances –Houston/Galveston NO X –RECLAIM (L.A. NO X & SO X ) Emissions Reduction Credits (ERCs) Biomass Energy Efficiency Credits Water Rights Weather Derivatives Green Power Transactions Biofuels –Ethanol –Biodiesel Coal –OTC Physical & Derivatives Natural Gas –Options, Swaps, & Calendar Spread Options –West Physical Basis Index Nuclear Fuels –Physical & Futures Energy MarketsEnvironmental Markets Environmental and Energy Markets

5. 5 * * * Annual Customer Survey Best Broker, Options (EUAs, CERs) Best Broker, Spot & Futures (EUAs, CERs) Best Primary Originator Kyoto Project Credits Best Broker, Secondary Market Kyoto Project Credits Best Broker, North American Mandatory Markets (e.g. RGGI) Best Broker, SO 2 Best Broker, NOx (Reclaim) Best Broker, NOx Best Broker ERCs Best Broker, Renewable Energy Certificates, North America Best Broker, Weather Risk Management, North America Best Broker, Weather Risk Management, Europe Best Broker, Weather Risk Management, Asia Best Broker, Catastrophe Risk Management, Global *category runner-up Best Broker, U.S. Coal Best Broker, Asia Coal Best Broker EUA Options Best Broker, CER Options Best Broker, CERs – Secondary (CDM) Best Broker, CERs - Primary (CDM) Best Broker, US SO2 & NOx Best Broker, US Weather Derivatives Best Broker, European Weather Derivatives Leadership in the Markets We Serve 2010 House of the Year: U.S. Coal (2010) Specialist Broker of the Year (2008) House of the Year: European Emissions (2007) House of the Year: Weather / Emissions (2004) Since Evolution Markets was founded in 2000, we have received more than 100 awards for excellence in brokerage. Below you will find a sample of our most recent awards from 2010. For the full list our awards, please visit www.evomarkets.comwww.evomarkets.com 2010 * * Annual Commodity Rankings * * Annual Awards * *

6. 6 Overview of California Carbon Program General Information Program administered by the California Air Resources Board (CARB) Program required to reduce emissions to 1990 levels by 2020 Covered Sources: 85% of State’s greenhouse gas emissions Covered Facilities are those with annual emissions equal or greater than 25,000 MtCo2e Start Date –First allowance auction: August 15, 2012 –Compliance obligations: 2013 Timeline December 2010:Final ratification of AB-32 July 2011:Updated cap-and-trade regulations released by CARB October 2011:Anticipated approval of cap-and-trade regulation by CARB board

7. 7 Covered Cap in million MtCo2e 2013: 162.8 Compliance Period I (2013 - 2014) 2014: 159.7 2015: 394.5 2016: 382.4 Compliance Period II (2015 – 2017) 2017: 370.4 2018: 358.3 2019: 346.3 Compliance Period III (2015 – 2017) 2020: 334.0

8. 8 Auction Timing & Quantity First auction set for August 2012 –2013 allowances will be auctioned, as well as 2015 allowances (three-year forward) –First time physical allowances will enter marketplace Quarterly auctions begin in 2013 –Each auction will auction 25% of that year’s annual budget + 10% of future vintage year allowances Participation Covered entities, voluntary associated entities (i.e. banks, funds, etc.) Any party with a Holding Account with allowances can sell at the general auction and receive the clearing auction price for their allowances Entities must register 30 days prior to the auction with the ARB Single entity can purchase maximum of 25% of the total auctioned future vintage allowances

9. 9 Allocations Utility/Power Allocation Starting 2012, the Electric Distribution Utilities (EDUs) will receive 90% of 2008 sector level emissions, declining linearly to 85% in 2020 (roughly 97.7MM to start, declining to 83MM in 2020) Independent Power Producers (IPPs) will receive no free allowances under AB 32 IOUs must sell 100% of allocation at auction; POUs can trade or retire allocations Industrial Allocation Largest sectors include up/downstream petroleum, cement, manufacturing, mining & minerals, paper & pulp Industrial sectors will receive a majority of their required allowances for free from the outset and will continue to be freely allocated for the entire program –Can retire or trade allocations Individual sector/facility-level allocations aren’t yet known

10. 10 The “Four Buckets” of CA Carbon Products Early Action Credits Early action credits subject to re-verification to meet AB 32 compliance requirements Indicative Pricing: 7/21/11 $16.75 bid / $17.25 offer $10.75 bid / $11.75 offer ODS $8.50 bid / $9.50 offer Forestry $6.00 bid / $8.00 offer Livestock (dairy) $7.75 bid / $9.75 offer $2 bid / $4 offer Guaranteed ARB-compliant Offsets Firm delivery of offsets guaranteed to meet AB 32 compliance requirements California Carbon Allowances (CCAs) Forward delivery of California Carbon Allowances Potential Early Action Credits ARB is expected to approve additional methodologies from Offset Standard Bodies such as the Climate Action Reserve, American Carbon Registry and potentially others

11. 11 California Carbon Allowance Overview –First trade executed in early November –CCA contracts deliver in December each year (first auction set for August 2012) –OTC market and standard forward contracts have begun trading for early hedging and trading purposes –Exchange-based products are currently being developed with one expected to launch September 2011 –Liquidity currently less than that of the offsets but expected to pick-up as power marketers and traders digest this program and as additional covered entities implement risk management strategies.

12. 12 Guaranteed ARB-compliant Offsets/ Early Action Credits Guaranteed ARB Offsets –Project specific or non project-specific with term out to five years –Product guarantees firm forward delivery of offsets useable for compliance with AB 32 (onto an ARB-approved registry) –Generally offered by secondary sellers with strong credit Early Action Credits –Climate Reserve Tonnes (CRTs) CAR-approved protocols include: Livestock Methane (U.S.) Forestry & Urban Forestry Ozone Depleting Substances (ODS) –Criteria for inclusion Vintages 2005-2014 Location: Domestic United States Project start date prior to January 1, 2013

13. 13 Compliance buyers Energy companies Commodity trading shops Financials Hedge funds Industrials Buyer liability EAC  ARB offset conversion Proposed regulatory changes Potential future legal action FactorsParticipants Market Participants and Factors

14. 14 Current Transaction Structures Fixed price for allowances and forward settlement Fixed price for ARB-guaranteed offsets (where seller takes all delivery and eligibility risk – this may or may not be project-specific) Fixed price for project-specific ARB approved Early Action offsets where volume is not guaranteed Floating Price for ARB-approved offsets linked to a forward allowance or offset price Floating Price for non ARB-approved offsets linked to a forward allowance or offset price Fixed price for offsets that are currently not ARB approved (Advantage: Lower Price / Risk: eligibility may or may not happen) Numerous options structures on any of the above products Spread trading between allowances and offsets

15. 15 Historical Pricing 3/1/11 – 7/1 /11

16. 16 David Nussbaum Director Evolution Markets Inc. 10 Bank Street 4 th Floor White Plains, New York 10606 tel. +1.914.323.0265 mob. +1.917.816.2255 email dnussbaum@evomarkets.com websitewww.evomarkets.comwww.evomarkets.com Contact Information