1. Peony Capital LP
Australian Embassy
25th June, 2007
New York

2. The Environment.
we have a problem….

3. China Today….

4. CHINA SURPASSES U.S. IN GREENHOUSE GAS EMISSIONS

8. people are recognizing this

9. The response is significant and increasing
US $50 billion
over 10 years to
invest in climate
change activities
May 2007
US$20 billion
environmental
Initiative
March 2007
$3 billion Euro in
carbon credits
and energy project
October 2006

10. Rupert Murdoch
Global Climate And Energy initiative:  
Newscorp will reduce emissions by 10%  by 2012 in absolute terms, go Carbon Neutral by 2010
perhaps most importantly of all they will engage there global customer base of several hundred million 
A company that spans Ice Age and The Simpsons, from the London Times to Fox,  can have a real impact in engaging the public.  
Addressing climate change is good business practice.
Immelt
John Browne
Sir John Bond (the former Chairman of HSBC: first bank to announce that it would be carbon neutral)
Blair
Schwarzenegger

11. the global carbon market is well established….

12. The Carbon Market Breakdown
RGGI
Allowance Markets
NETS?
California
KYOTO
Project Based Mechanisms
EU Emission Trading Scheme
CDM (and JI)
1101 MtCO2e
491 MtCO2e
(forward)
NSW Certificates
Voluntary & Retail
Other Compliance
Chicago Climate Exchange
20 MtCO2e
6.1 MtCO2e
17 MtCO2e
10 MtCO2e
UK ETS

13. Size of the market
2006

14. Non Kyoto Markets.. Physical Volumes (30.5 Mt CO2e)
Financial Value (€300 million)

15. Volumes steadily increasing.

16. the market in operation…

17. The basics: stimulating lowest cost abatement€
Emissions Reductions at
High Cost
Emission Reductions at
Low Cost
Global Carbon
Reductions
15 € per ton of carbon
8 € per ton of carbon ER
Party A
Party B

18. construction materials,
EU ETS
General Objective:
-meet international emission
reductions targets – 8% by 2012
Measures:
-obligation of energy intensive
sectors to reduce emissions
Member Country
-National Allocation Plan (NAP)
-Register for emissions allowances
EU Directive
-sets rules
-central administrator
-transaction record
Affected Sectors:
energy, iron, steel,
ceramics,
construction materials,
glass and paper
Market
-trading
-tangible commodity
-transparent
Company
-permit for plant operation
-annual allocation of allowances
-reporting and surrender of allowances

19. Project Based Mechanism and the Kyoto Protocol
Establishes formal system for carbon reductions from projects.
Encourages investment in clean technology in developing countries and economies in transition.
Provides benefits beyond
carbon reductions:
-health
-employment
opportunities
-stimulates investment
in renewable technology
CERs
Asia
Europe $ $
ERUs
Russia
Benefits
-lower cost reductions
-business opportunities and relationships
Benefits
-access to capital
-access to clean technologies
-access to information

20. Who is participating?
1. Countries

21. Who is participating?
2. Private Sector

22. Where are they buying from?
Countries of CDM projects 2006

23. What are they buying?
As a share of volumes contracted in 2006

24. Outlook 2008/2012
Residual demand for kyoto mechanisms is 1 billion tonnes
- more than double what has already been contracted.
volume

25. The success of the carbon market has long term implications for
Conclusion
The Carbon Markets are increasing in size, volume and activity
Project based mechanisms are and will continue to form a major part of the market
The major transactions are occurring between Asia and Europe
Participating companies are taking advantage of a new opportunity to
leverage other benefits including:
-Forging new relationships
-Leveraging other investments (WB study shows leverage value for renewables is upwards of 7 times CER value)
The success of the carbon market has long term implications for
the profit margins of big business, but also for the health, welfare and well being of the local populations in the developing countries so badly affected by the impacts of climate change

26. Oriental Kenzo Office Building
Peony Capital Limited
Unit J, 21st Floor
Oriental Kenzo Office Building
No 48, Dongzhimenwai Street, Dongcheng District
Beijing China
Telephone: +86 (010)
Fax: +86 (010)
Mina Guli, Vice Chairman
International Mobile: +44 (0)
China Mobile:
Private and Confidential. For discussion purposes only. © 2007 Peony Capital, L.P.

28. Euro payments Seller Buyer CER re-purchase on EU market
Chinese Plant
Buyer
(Private Fund, World Bank)
Resell through IM process
World Bank raised U$1.2 billion in 23 mins
CER re-purchase on EU market
compliance buyers
traders
CERs (ERPA/ SERPA)
Euro payments
Revenue to plant
Potential technology funding unless paid for upfront or netted off
65% tax to NDRC

29. CER/ERU forward stream supply via ERPAs
The Global Emissions Regulatory Market
EU25
Canada
Japan
Large
Final
Emitters
EU ETS
Russia, Ukraine,
Former Eastern Bloc
countries
AAU supply via GIS?
Kyoto CDM / JI projects
CCX, RGGI
California?
Australia?
US Federal system?
CER/ERU forward stream supply via ERPAs
Spot market will emerge when sufficient volume has been issued and made available
Keidanren
Voluntary
Agreement
International Transaction Log, European Community Transaction Log, National Accounts

30. And…Volumes steadily increasing
Physical Volume (1,632 Mt CO2e)
Financial Value (€22.5 billion)

31. Project Example Seller has project idea Puts into document “PIN”
Shows to buyer
Makes Preliminary Agreement
Start Due Dilligence and legal documentation
Project Development document
Approval by Buyer’s country gov’t
Approval by host country e.g. China
Validation- checking of project against calculation of baseline (what would have happened without project)
Registration of Project with UN
Annual Independent verification of number of tonnes of carbon reduced UN
CERS
Market