Sustainable Energy Roundtable Series January, 2005 Pfizer Greenhouse Gas Management Program Experience

Sustainable Energy Roundtable Series Agenda Rationale for Voluntary Goal Lessons Learned from EU Markets Feasibility of Trading with Kyoto Signatories

Sustainable Energy Roundtable Series Company Profile $45 B in global pharmaceutical sales in 2003 $ 7 B biomedical research spend in 2003 Product sales in 150 countries 81 Manufacturing plants in 32 countries 122,000 Colleagues (32,000 in mfg.) – More than 25 languages Top-tier Consumer and Animal Health Groups

Sustainable Energy Roundtable Series U.S. EPA Climate Leaders Joined in May, 2002 Established Public Goal May, 2003 Dow Jones Sustainability Index (DJSAM) score for Climate Strategy Increased from 47 to 82 Goal 1) “By 2007, Reduce CO 2 Emissions by 35% Relative to Revenues Compared to 2000.” 2) Increase Clean Energy Technology by 2010 to 35% of Total Electrical Requirement

Sustainable Energy Roundtable Series % by Group PGM 67% PGRD 19% Fleet 9% Capsugel 2% Corporate 2% TOTAL 2003 EMISSIONS: 2,791,568 MT CO2

Sustainable Energy Roundtable Series Greenhouse Gas Management Strategy and Rationale for Voluntary Program Makes Good Business Sense: –Increase Internal Efficiency: Over $15 million recurring savings and 180,000 MT CO2 Reduction Low cost/no cost energy conservation projects Capital intensive energy projects (with payback) Increase capacity utilization (facility consolidations) Corporate Responsibility –Proactive response to the issue of climate change Alignment with Global Regulatory Trends

Sustainable Energy Roundtable Series

Experience with EU ETS Kyoto Protocol –EC and Member States committed to reduction of 8% below 1990 GHG levels by –Primary driver for EU to develop its regulatory scheme EU Emission Trading Scheme (EU ETS) –Cap and Trade of CO2 for large facilities –Carbon tax to be imposed on all other facilities –Option for small facilities to join ETS and avoid tax (“opt in” provision) Will require detailed financial analysis –Member States developing trading guidelines Other “carbon” taxes on fuels being applied by specific Member States, separate from EU ETS

Sustainable Energy Roundtable Series EU ETS Regulatory Timetable October 25, 2003 EU issues Emissions Trading Directive January 1, 2004 GHG emissions permits submitted for sites subject to Directive March 31, 2004 Draft National Allocation Plans (NAPs) for Member States to be submitted to EU (UK, IRE, FIN, NL already in) January 1, 2005 Phase I of trading program begins (ends Dec 31, 2007) €40 per tonne penalty for cap exceedance Trading only within EU; can avoid penalty by buying credits January 1, 2008 Phase II begins; penalties increase to €100 per tonne Trading outside EU with Kyoto Countries? RGGI? Possible inclusion of non-CO2 gases October 31, 2004 Final allocation to be notified to each installation operator for the Phase 1 period February 28, 2005 Final allocation issued to each operator (annual basis)

Sustainable Energy Roundtable Series EU ETS key issues: Direct vs. Indirect Emissions –Reduction of direct emissions at facilities expensive –Provides no added incentive for demand-side management –Windfall for electric generators? How will new entrants be treated? High indirect costs due to higher energy costs and carbon taxes (anti-competitive) Opt-in for unregulated facilities Guidance on trading limited No central market clearinghouse established Unclear if price signal will lead to greater innovation National Allocation Plans (NAPs) not finalized yet

Sustainable Energy Roundtable Series GHG Emissions Allocations Country allocations determined by Kyoto Protocol. Sector and entity allocations determined by national governments (NAP) National Emissions Budgets Member States assign allocations (expected to be 65%- 90% of actual emissions) to each sector that is involved in an activity included in the EU ETS. Activity Sector Installation

Sustainable Energy Roundtable Series Carbon Trading Feasibility Outside US Active global markets US firms may purchase credits but may not sell credits generated in US Most reduction opportunities for Pfizer in US No incentive to participate

Sustainable Energy Roundtable Series Summary Public voluntary GHG goal drives energy conservation and cost savings As a global company, commitment to goal shows leadership in climate change issue Too early to gauge effectiveness of mandatory programs Direct vs Indirect emission issue needs to be addressed No reason for Pfizer to engage in global CO2 markets if excess reductions cannot be sold in Kyoto signatory countries