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South Pole Carbon Asset Management Ltd. State and trends of the CDM Market

2. Overview. Brief introduction to South PoleCDM market: current development and expected DemandCER pricesThe CDM supply sideMarket trends and Latin American perspectives . Brief introduction to South Pole . Part 1. 4. Who we are. Private company with offices in Zurich and Bangkok (soon in Chi

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South Pole Carbon Asset Management Ltd. State and trends of the CDM Market

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    1. South Pole Carbon Asset Management Ltd. State and trends of the CDM Market V Taller de ANDs de América Latina para el MDL 19 April 2007 Asunción, Paraguay Patrick Bürgi, Partner

    2. 2 Overview Brief introduction to South Pole CDM market: current development and expected Demand CER prices The CDM supply side Market trends and Latin American perspectives

    3. Brief introduction to South Pole Part 1

    4. 4 Who we are Private company with offices in Zurich and Bangkok (soon in China, India and most probably Brazil) Strategic Partnerships in 10+ countries South Pole Founders combine over 40 years of experience in the carbon markets Main services: CDM project development, carbon finance and consultancy

    5. 5 What we do CDM activities in 20+ countries with emphasis on sustainable development contribution of projects Development and issuance of first Gold Standard CERs on the market Strong position in voluntary carbon market (more than 1 mio VERs sold within one year) Carbon finance agreements with high-rated buyers (Government of Austria, Government of Switzerland and others) CDM Fund for projects with high sustainability profile „under construction“ Consultancy and methodology development for complex project activities (e.g. „programmatic CDM“, biofuels, pipeline project)

    6. CDM Market Current Development and Expected Demand Part 2

    7. 7 Carbon Market Development

    8. 8 CER Buyers

    9. 9 Uncertainties on the demand side Final adjustments to NAPs and linking directive (gross EU ETS demand and limitation of CER/ERU volume in EU ETS) Limitation to certain project types? Political issues: Hot air from Russia and Ukraine? What about Canada, Australia and the US? How many CERs will the voluntary carbon market absorb? Strong post 2012 signal urgently required

    10. CER Prices Part 3

    11. 11 CER prices mainly driven by EUA prices

    12. 12 Prices for project-based transactions vary strongly

    13. 13 CER prices

    14. 14 Future price development Price development will depend on CER supply and demand Demand is still difficult to predict due to open questions: - hot air from Russia/Ukraine - final adjustments to EU ETS - position of Canada, Australia and US Supply is growing rapidly (mainly from China) => Situation of oversupply will occur within the next two years if the demand is not increased

    15. CDM Supply Side Part 4

    16. 16 CDM countries by number of projects

    17. 17 CDM countries by CER volume

    18. 18 CER volume by project type

    19. 19 CER volume growth by project type

    20. Market trends and Latin American Perspectives Part 4

    21. 21 Rise and fall of CDM projects

    22. 22 Market trends Low hanging fruits (HFC, N2O, big landfills) are gone Smaller projects would be the logical next step However, opportunity window until 2012 is getting short Large energy efficiency, gas flaring and fuel switch as well as methane avoidance projects (effluent treatment and landfills) will become more popular Role of CDM Funds targeting projects above will grow Programmatic CDM as interesting new modality for smaller projects

    23. 23 Situation of CDM market in Latin America Slow growth, lagging behind Asia (in 2006 only 3% of sold CERs came from Brazil, against 70% from China and 12% from India) Reasons: - slower economic growth, excessive taxation - mixed signals regarding political stability - bureaucratic and long CDM approval procedures - clean electricity mix - lack of favorable CDM methodologies (biofuels, reforestaion, avoided deforestation, non-sustainable biomass as baseline)

    24. 24 Perspectives in Latin America Latin America gains importance in diversification strategy of buyer Asian dominance likely to decrease since big HFC, N2O and CH4 projects are drying up Economic growth and country risk perception is improving Big still undiscovered potential (biomass, animal waste, landfills, biofuels)

    25. Muchas gracias! Patrick Bürgi +41 44 633 78 76 p.buergi@southpolecarbon.com

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