1. GF I NVEST AG F INANCIAL S OLUTIONS 1 Introduction to the Emissions Market February 2008 Mélanie Stauffer GF I NVEST AG F INANCIAL S OLUTIONS

2. GF I NVEST AG F INANCIAL S OLUTIONS 2 The response to global warming is being driven at international through to local levels under the Kyoto Protocol International Response to Global Warming International NationalSectorInstallationIndividual? Kyoto Protocol: –Reduce GHGs by 5.2% compared with 1990 emission levels Europe: –Reduce by 8% against the same period Annex 1: –Developed world, EU, Switzerland, Japan etc. Annex 2: –Developing countries Joint Implementation (JI): Allow Annex 1 nations to obtain emission credits (Emission Reduction Units – ERUs) for projects that reduce emissions in other Annex 1 countries. Clean Development Mechanism (CDM): Annex 1 countries can obtain permits (Certified Emission Reduction Units - CERs) for projects that reduce emissions in Annex 2 countries. Connection Between Annex 1 and 2 Countries

3. GF I NVEST AG F INANCIAL S OLUTIONS 3 In the EU, carbon trading was introduced to meet the Kyoto obligations - Europe has the largest emissions trading market Overview of Phases of EU Emissions Trading Scheme (EU – ETS) Phase I (2005-07) Phase II (2008-12) Phase III (2013-20) Cap on estimated 1990 levels 8% reduction on 1990 levels 20% - 30% reduction on 1990 levels Market Assessment Long (150 Mt / year) Short (-220 Mt a year) Short (-750 Mt a year) Investment Opportunities LowHighMedium

4. GF I NVEST AG F INANCIAL S OLUTIONS 4 Carbon trading schemes aim to place a price on carbon by providing a market place for tradable contracts How the Emissions Market Works Installation AInstallation B Allocated emissions allowance: 10,000 t 10,000 t Actual emissions: 9,500 t 10,500 t Option 1 Trade: sell 500 t buy 500 t Trading within EU-ETS Using CDM / JI Projects Option 2 Installation B invests in an installation in a developing country Investment into the foreign installation reduces emissions by 500 t Emissions reductions are verified and transferred as CERs to Installation B Penalty Option 3 Installation B is fined €100 / tCO 2 for each tonne above their allowance for failing to reduce emissions and is also required to buy carbon credits

5. GF I NVEST AG F INANCIAL S OLUTIONS 5 There are six major drivers that can influence carbon prices in the EU-ETS Business cycles Strong economic growth increases energy consumption and therefore leads to higher demand for carbon credits. Weak growth could result in lower prices Fuel Switching (Gas vs. Coal) Gas emits less carbon / unit energy vs. coal Switching to gas cuts emissions Higher gas prices could cause a switch to coal, increasing demand for carbon credits Innovation Development of new renewable fuels or more energy efficient technologies could lead to reduced demand Weather Changing weather impacts demands for heating in the winter and air conditioning in the summer This influences energy consumption Availability & prices of CERs China - main supplier of credits via CDM China introduced a price floor of €8/tCO 2, which could support EUAs prices if there is a scarcity of credits in the EU-ETS Regulation Carbon regulation changes effect prices There is considerable uncertainty over the terms of Phase III and global energy blueprint that could effect Phase II prices Drivers Influencing Carbon Allowance Prices

6. GF I NVEST AG F INANCIAL S OLUTIONS 6 Phase II allocation plans have helped provide greater stability in the pricing of carbon allowances (EUAs) compared with Phase I Phase I: Allocations of carbon credits in Phase I were too generous In spring 2006, when the first set of verified emissions data was published – prices fell as a consequence to a few cents / tonne Phase II: New national allocation plans ensure the market will be short of allowances if it continues as business as usual Though CERs are cheaper an import cap has been imposed Chinese CERs are capped at €8/tCO2 protecting EUAs To date Phase II contracts have stayed in a range of €12 to €30 Analysis of Phase 1 and 2 in EU-ETSEUAs Future’s Price Analysis ‘07 vs ‘08 Futures Prices Dec 2008 Futures Prices Dec. 2007

7. GF I NVEST AG F INANCIAL S OLUTIONS 7 The Bali Roadmap sets a course for a new global climate deal to be agreed in Copenhagen in 2009 The Deal in Bali Acknowledged global warming Agreement to tackle deforestation in developing countries Launch of a two-year "Bali Action Plan" for negotiations on a new international climate regime Adaptation Fund launched to protect poorer countries from global warming Sectoral emissions proposals to be considered Considered how to transfer clean technologies from industrialised nations The negotiations process is scheduled to conclude in December 2009 in Copenhagen.

8. GF I NVEST AG F INANCIAL S OLUTIONS 8 There are significant opportunities to invest into the carbon market over the next few years Investment Opportunities Growing market: Worldwide carbon market is growing rapidly and estimated to be worth USD 60bn in 2012 and USD144bn in 2020. Carbon allowance shortfall: Credit shortage will support prices, which should be more stable and trade in a EUR 12 to EUR 30 range in Phase II. Greater certainty: More clarity on Phase III and forecasted prices around EUR 35 No correlation to other asset classes: MarketEquityBondsOilGas Correlation20%44%52%31% GF Invest proposes a number of structured products giving private investors access to the Carbon markets.

9. GF I NVEST AG F INANCIAL S OLUTIONS 9 Opportunités Carbon Wedding CakeFévrier 2008 Capital Protection Currency Maturity Underlying Payoff Schedule 100% EUR 1 year EUA Phase II Dec. 2009 Future (MOZ9) If Underlying remains inside [85%, 125%]: 122% If Underlying remains inside [80%, 130%]: 111% If Underlying remains inside [75%, 135%]: 105% Else: 100%

10. GF I NVEST AG F INANCIAL S OLUTIONS 10 Opportunités Carbon Reverse ConvertibleFévrier 2008 Currency Maturity Underlying Coupon Barrier EUR 1 year EUA Phase II Dec. 2009 Future (MOZ9) 15.50% 60% of initial level