©Alston & Bird LLP 2008 Industrial/Business Carbon Footprint Geir Vollsæter - Special Advisor Climate Change and Carbon Management Group Alston & Bird LLP AAFA Environmental Committee Meeting

©Alston & Bird LLP 2008 Alston & Bird A&B has a strong carbon management practice that specializes in CO2 management from source to final product within oil, gas, electricity and consumer products A&B initiated the North American Carbon Capture and Storage Association (NACCSA) A&B is retained by Edison Electrical Institute for CCS work A&B has major global firms as clients for CO2 mitigation, renewables, clean technologies, advocacy and strategy

©Alston & Bird LLP 2008 Energy = Growth = Prosperity WBCSD Source – WBSCD $0$5 000$10 000$15 000$20 000$25 000$30 000$35 000$ GDP per capita, US$ 1995 ppp Energy Use, GJ per capita Global Trend EU-15 North America Korea Malaysia China

©Alston & Bird LLP 2008 Growth, development and energy demand Global population divided into income groups; Poorest (GDP < $1,500) Developing (GDP < $5,000) Emerging (GDP < $12,000) Developed (GDP > $12,000) Shifting the development profile to a “low poverty” world means energy needs double by 2050 Shifting the development profile further to a “developed” world means energy needs triple by (Base) 2050 Low Poverty 2050 Developed World Population, millions Developed (GDP>$12,000) Emerging (GDP<$12,000) Developing (GDP<$5,000) Poorest (GDP<$1,500) Primary energy Population expected to rise to 9 billion by 2050, mainly in poorest and developing countries. Source – WBSCD

©Alston & Bird LLP 2008 Increased upstream CO2 intensity CO2 emission per bbl o.e produced on the rise “Low hanging fruit” light oil in decline Heavy oil on the rise CO2 intensive unconventional oil in rapid development Some say easy oil is over, more likely, easy oil is over for some, mostly international oil companies, driving some oil and gas companies to pursue unconventionals

©Alston & Bird LLP 2008 Growth, Environment and Globalization Globalization drives growth, employment, revenues, cheaper goods but, Has lead to significant environmental dumping Has made assurance of product quality and environmental impact difficult due to long value chains But increasingly, emissions = liability CO2 intensity in industrial sectors and products is under evaluation by investors and governments

©Alston & Bird LLP 2008 CO2 Intensity Benchmarks CO2 intensity standards – benchmarks CO2 intensity standard = 1 Gallon fuel, 1 ton steel, cement, fertilizer = X kg CO2 CO2 measured from well and mine to tank (WTT), Kwh’s etc California adopted, through AB 32 and LCFS, a WTT regime as a foundation for its CO2 reduction regime that governs both fuel and power. New categories of consumer products will see similar regulations, benchmarks and liabilities.

©Alston & Bird LLP 2008 Carbon Disclosure Voluntary/mandatory reporting for facilities and products Third party verification, voluntary and mandatory Many pension funds, institutional investors and banks now demand/strongly advice their potential prospects to disclose the CO2 intensity of the portfolio $ 57 trillion (before the credit crisis) stand behind the Carbon Disclosure Project that yearly benchmarks global industries on CO2 intensity and strategies to reduce the carbon footprint for their products

©Alston & Bird LLP 2008 Shoes “Timberland Co. shoe company with an outdoorsy image, has assessed the carbon footprint of about 40 of the shoe models it currently sells. The results range from about 22 pounds to 220 pounds per pair.” (WSJ) For shoes, transportation account for about 5 % of the total emissions Source: WSJ Oct 6th CO2 intensity in shoes and costs given 50 $ / ton CO2 lb CO $ additional cost Flip flopsRegular shoesHiking boots

©Alston & Bird LLP 2008 Consumer products - Benchmarked Increasingly, companies now undertake studies of the CO2 intensity of their products, for good reasons.

©Alston & Bird LLP 2008 Summary Global energy consumption and CO2 intensity is increasing Global benchmarking of industrial production ongoing Investor community treats CO2 as a risk to portfolio Lower unit CO2 intensity = increased global competitiveness when CO2 has a price CO2 intensity will increasingly impact consumer preference and increasingly impact the bottom line

©Alston & Bird LLP 2008 Thanks Geir Vollsæter Special Advisor Climate Change and Carbon Management Group Alston & Bird LLP The Atlantic Building 950 F Street, NW Washington, DC USA Phone: Fax: