Where Profits & Ethics Unite 1

 Global Warming means that too many Green House Gases (GHGs) are continuously being released into the Earth’s atmosphere, trapping heat and increasing the Earth’s temperature. It is generally believed that this has been caused largely by human activity over many years since the start of the Industrial Revolution with the result of witnessed and recorded melting ice caps, rising sea levels and extreme weather patterns, etc.  A carbon credit is the financial instrument that represents 1 metric ton of GHG that has been reduced, stored or avoided. This can be achieved by any organisation that has produced the technology to attain this sequestration (a wind farm for example) and that is recognised and recorded by credible sources as having done so.  The ultimate goal of purchasing carbon credits is to offset emissions by “retiring” the credits so that they can never be purchased or sold again and that the emissions they represent are removed forever. 2

 Emissions trading, which is also called cap and trade, has evolved as a means of reducing the amount of GHGs released into the Earth’s atmosphere utilizing a market based approach. Since many countries now have their own emission reduction targets to achieve, caps have been placed on industries on the amount of pollution they are allowed to release. If they produce more than permitted they will either have to reduce their emissions themselves, which may involve considerable expense investing in technology and machinery to achieve this, or they will have to purchase carbon credits to offset their emissions from a verified source in order to comply.  When petrol prices increased significantly in the US, so did sales of hybrid “green” energy saving cars like the Toyota Prius. When petrol prices came down again so did the sales of the hybrid cars.  The fact is that people are more interested in saving money than saving the planet so introducing financial incentives is perceived to be the most effective way forward by both governments and the private sector alike.  “To truly transform our economy, protect our security and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.” President Barack Obama 3

 This historic meeting in 1997 attended by 160 nations in Kyoto, Japan, was the baseline to establish a way of cutting GHGs on a global scale.  Many nations had targets set to reduce their emissions with the onus on developed countries who were deemed to be principally responsible for releasing the most pollution to date.  The largest carbon emissions market is currently the European Union Emissions Trading Scheme (EU ETS) created in 2005 in compliance with Kyoto.  Although not yet ratified by America, President Obama has pledged that the US will reduce it’s emissions by 20% lower than 2005 levels by 2020 and 83% lower by A similar cap & trade market to Europe will have to be implemented to help achieve this and is expected to happen within the next 2-5 years by market experts. 4

 There are basically 2 types – VERs & CERs  A CER stands for Certified Emission Reduction and is a certificate issued by the Clean Development Mechanism (CDM) as part of the Kyoto Protocol. Each certificate represents 1 metric ton of GHG that a project in an often developing country has reduced, stored or avoided, enabling a developed country to purchase in order for them to comply with their own capped targets in line with Kyoto.  A VER is a Voluntary Emission Reduction, the concept the same as above, but outside the Kyoto Protocol regime. However, these projects have been assessed and validated by objective third parties and placed on public registries. Although currently smaller than the CER market, the growth by the private sector is already mushrooming with expectations within the industry that it will soon overtake the compliance market, especially with the anticipation of the cap and trade system soon to be implemented within the US. 5

 Additionality: This means that the credit must represent a true reduction emission over and above the normal “business as usual” scenario.  Sustainability: The 2 objectives in the compliance market are to reduce the emissions and contribute to sustainability and the voluntary market, driven by buyers who are concerned with price and value, are often even more sensitive to this.  Verifiability: An independent, objective third party must verify or validate the project to confirm it has genuinely reduced emissions. These are usually carried out by various large, international organisations accredited to the UNFCC or professional, often globally recognised, accounting / auditing and consulting firms.  Reliability: This is a key area of concern for anyone purchasing a VER in order to make sure that it has not been “double sold.” Therefore it should be officially registered on one of the recognised, central public registries. 6

 New York Times: “Carbon Trading is one of the fastest growing specialities in Financial Services.”  Louis Redshaw, Barclays Capital: “Carbon will be the world’s biggest commodity market & it could become the world’s biggest market overall”  CFCT Commissioner: “Carbon trading may dwarf that of crude oil within 5 years, worth 2 trillion”  President Barack Obama: “There is no better potential driver that pervades all aspects of our economy than a new energy economy... That’s going to be my No. 1 priority when I get into office”  Fortune: “JPMorgan isn't alone. All the big global investment banks including Barclay‘s, Citigroup, Goldman Sachs and Merrill Lynch are hurrying into carbon finance”  Chris Leeds, Head of Emissions Trading, Merrill Lynch, London “Carbon could become one of the fastest growing markets ever, with volumes comparable to credit derivatives inside of a decade“  Barclays PLC “United Nations Carbon Credit prices may rise as much as 42% by 2012” 7

 With the huge pressure on the US to join the rest of the world in developing methods to reduce their enormous emissions, particularly with the additional pressure of China announcing the launch of their own carbon trading market in 2012, we believe it is not a matter of “if” the US will introduce their cap & trade system but “when.” For investors wishing to participate in this exciting new market and gain the highest returns, investing early before the US system comes into place (between 2 and 5 years according to market professionals) means that they will be well positioned to profit handsomely.  With voluntary US credits trading relatively low at present we firmly believe that those with the foresight to enter now realistically stand to earn 200%-500% returns within the next 1-3 year timeframe.  All voluntary credits are set to increase in value because, at the Copenhagen COP15 conference in 2009, the Kyoto Protocol failed to be extended beyond The CDM credits born out of the protocol may, therefore, cease to exist so the marketplace is now rushing to buy voluntary credits to mitigate this situation and diversify their portfolios.  The Voluntary Carbon Market is a great starting point due to low cost entry and recognised and identifiable carbon standards, true and transparent verifications by credible third party organisations and official public registries and exchanges. 8

 Validated Carbon Credits only selects high quality carbon credits of VCS and above standard.  We choose projects that are in developed, stable countries, both politically and economically, utilising internationally recognised banking systems.  After several months of due diligence, we ensure that every project we put in front of a client has been verified by a reputable and recognised entity and is officially registered and, therefore, traceable and trackable throughout.  We do not promise or guarantee returns but we do believe that, due to the above, what we offer exposes our clients to the least possible risk whilst offering the best potential for maximum profit. 9

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