Carbon Trade

Salomon Sacal, Kamel Ait El Hadj, Maria Risholm, Yanee Zang & Geraldo Carvalho

International Business Project Presentation

tCO2e Units

•Cap and Trade

•tCO2e Units( Tonnes of Carbon Dioxide Equivalent)

•Forestry in Australia and South America

•Units Registry – MARKIT•Entry in the U.S. and European MarketsICE ECX , MARKIT, CCX

Kamel Ait El Hadj, Geraldo Carvalho, Arinutt Joshi, Maria Risholm, Yanee Zhang

• Carbon Trade is an International based Company with its headquarters in Delaware, US.

• We aim to provide carbon credits to buyers and sellers in the market.

• Main focus is the Brazilian market • Through a mechanism of Carbon

sequestration provide any business and entity that emits CO2, carbon offsets in order to balance their emissions in the atmosphere.

• The sequestration of carbon will be made by dense forestlands in Brazil and also by potential forests that will be planted in the newer future. The forestlands will generate a specific amount of metric tonne of carbon, which will be converted into units. These Units will then be registered into the Markit Environmental Registry, which through a transparent listing will manage our credits. The credits will then be exchanged in the markets around the United States and Europe.

Product Description

• Carbon Credits• A financial instrument representing a tonne of CO2 removed

or reduced from the atmosphere • Can be used to offset damaging emissions

• Associated with either removing existing CO2 or CO2e emissions from the atmosphere in the case of carbon sequestration from forests and planting of trees or the reduction of future CO2 or CO2e emissions from renewable energy and energy efficiency projects that displace fossil fuel power generation production or industrial processes.

Legal Structure

Kyoto Protocol

• KP mandates developed countries (Annex I countries) to reduce their carbon emissions by 5.2%

• Novel systems put in place to fulfill this requirement among which the baseline-and-credits system through Clean Development Mechanism under UN auspices

• Projects are undertaken by developing countries (Annex II countries) and carbon offset credits are purchased by companies in Annex I countries

Forestry projects

• REDD projects are not allowed under the CDM program

• REDD projects are admitted to trade on voluntary platforms

• CCX is the largest for REDD projects but the new VCS platform is the most profitable

• Existing forests will be traded on VCS after clearance by Mirkit experts

• Naked lands for forestation will go through the CDM system

Corporate structure

• Ownership of rural lands prohibited for foreigners

• Loophole through 1988 constitution allows for holding rural land through a Brazilian subsidiary/foreign parent company indirectly

• Set up of threefold structure with operating company in Brazil, holding company in Luxembourg for tax optimization and management company as Delaware LLC

Corporate structure

BRAZILCarbon Trade Ltda

Partners: GC + Carbon Trade SCA

CEO: GC

LUXEMBOURGCarbon Trade SCALPs: MR, YZ, SS, KA

GP: Carbon Trade LLC

DELAWARECarbon Trade LLCShareholders + C-level execs: all team members Dividend

fluxes

Brazil Sector Analysis– Attractive country for FDI

• Stock of FDI in 2009 ~ 320 billion USD• Measures initiated

– Macroeconomic improvements– Privatization– Reducing entry barriers and financial flows

• Risks:– Economic risk:

» GDP growth– Political risk:

» Presidential election October 2010– Legal risk:

» Property protection– Costs:

» Corruption

Industry Environment-Porter’s Five-Forces Model

Degree of Rivalry:Rivalry refers to the intensity of competition within an industry.

• Diversity of Rivals:

Major players in the industry: The CDM identifies over 200 types of projects suitable for generating carbon offsets, which are grouped into broad categories. These project types include renewable energy, methane abatement, energy efficiency, reforestation and fuel switching, etc.• Industry growth:

The rapid growth of carbon trade implies the increasing demand of carbon credits and huge potential for the related development.• Industry concentration:

CDM Projects: India (557), China(299), Brazil(210)

Threat of substitutes:Threat of substitutes implies the degree to which products of one industry can satisfy the same demand as those of another.

• Different sources of carbon offsets, e.g. : renewable energy, energy efficiency projects, the destruction of industrial pollutants or agricultural byproducts, destruction of landfill methane, etc. The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams.

Entry Barriers:Entry barriers describe the condition under which it is more difficult to join or compete in an industry.

• According to Law 5,709/71 and Decree 74,965/74, foreigners cannot acquire rural lands (within which existing and future forests would fall) except for agricultural or industrial projects and in any event, only with prior authorization.

Power of Suppliers & Power of Buyers:

Power of suppliers and buyers represent how much pressure can suppliers and customers place on a business. If one supplier or consumer has a large enough impact to affect a company's margins and volumes, then it holds substantial power.

• Powers of Suppliers: Landowners: Large area of deserted land in Brazil; Cheap price of the land. Seed sellers: Abundant supply Low power

• Power of Buyers: Compliance market: low power Voluntary market: high power

Low power

Financial Analysis

•US$ 14.40 Average Unit Price

•5 Year Contract Period

•1.5% Broker Fee

•Corporate and Registration Taxes

•Investor sales Discount Markdown