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Welches, OR - May 4, 2010
Western Forest Economists - 45th Annual Meeting
11
Wolfgang Ortloff Equator, LLC | cell (917) 969 0051
www.equatorllc.com
EQUATOR, LLC,
• Established in 2007 by several of the principals of Chatham Energy Partners, LLC, one of the largest natural gas brokerage firms in North America, now a subsidiary of InterContinental Exchange Inc (NYSEsubsidiary of InterContinental Exchange, Inc. (NYSE ticker: ICE)
• Integrated timberland and environmental asset management company focused on the convergence between timberland investments and environmentalbetween timberland investments and environmental markets
• US$ 500M+ committed capital for timberland investments in Brazil;
• Co-manager of US$ 100m The Eco Products Fund for investment in carbon, wetlands and biodiversity mitigation
• Focus on US regulated and un regulated markets
Equator, LLC (DE USA)
• Focus on US regulated and un-regulated markets
• Transacted in terrestrial carbon, biodiversity offsets, and wetland mitigation
• 20 professional staff 5 administrative staff
The Timber Group, LLC
Equator Environmental
Markets
20 professional staff, 5 administrative staff
• Headquartered in New York, NY, with offices in Seattle, WA, Sao Paulo (Brazil), and Minas Gerais (Brazil)
The Timber Group Investimentos
Florestais LTDA (Brazil)
The Eco Products Fund
THE ECO PRODUCTS FUND (EPF)( )
• C d b E t LLC d N F t I S d b d ti b l d tCo-managed by Equator, LLC and New Forests Inc., a Sydney-based timberland asset management firm
• US$ 100m private equity fund, launched in 2008
• Premised on long-term growth prospects for ecosystem service markets
• Investing in suite of environmental credit positions associated with carbon, biodiversity and water
• No interest in owning the underlying land asset
ANNUAL GLOBAL CO2 EMISSIONS CAUSED BY HUMANS2
SOURCES OF CO2 EMISSIONS
FORESTRY – ONE OF THE CHEAPER OPTIONS
Source: McKinsey
FORESTRY CARBON ONLY PARTIALLY RECOGNIZED
PROTECTION FOREST (Andermatt, Switzerland)( , )
PROTECTION FOREST (avalanche zoning, Davos, Switzerland)( g, , )
PROTECTION FOREST (avalanches)( )
PROTECTION FOREST (avalanches)( )
PROTECTION FOREST (rockfall)( )
SWISS RAIDROAD ACROSS THE ALPS
• Swiss railroad company owns and manages all forests which potentiallymanages all forests which potentially threaten operation of train tracks
• “Avoided business interruption”Avoided business interruption , several million $ per day
SHAREHOLDER PRESSURE TO ACT ON CLIMATE CHANGE
INSURED CATASTROPHE LOSSES 1970 - 2009
US FEDERAL CARBON POLICY OPTIONS
SENATE TIMELINE & POLICY UPDATES
Sept. 30, 2009
Senate bill introduced
December 2009
Copenhagen climate summit
Nov. 2, 2010
Senate midterm elections
May 31–June 4
Expected Senate Recess
Feb. 15-19
Expected Senate Recess
Mar. 30 – Apr. 9
Expected Senate Recess
July 5–July 9
Expected Senate Recess
Aug. 9– Sep. 10
Expected Senate Recess
2009 2010
Week of Early November
2009 2010
Key Committees ChairpersonLatest Policy News:• Nov. 4: Sen. Stabenow (D-MI) introduced the Clean Energy Partnership Act (S.
Week of Oct. 27, 2009
Senate hearings
Early November
Committee markups began
EPW Barbara Boxer
Foreign Relations John Kerry
Energy Jeff Bingaman
Commerce Jay Rockefeller
2729), which would create a domestic offsets program within a cap-and-trade bill• Nov. 5: Senator Barbara Boxer (D-CA) pushed the climate bill through the Senate
Environment and Public Works Committee.• Dec. 7: EPA announced Endangerment Finding, which stated that GHG
emissions threaten public threat. This finding obligates the EPA to regulate
16Note: Dates are subject to change
Finance Max Baucus
Agriculture Blanche Lincoln
emissions under the Clean Air Act.• Jan 21: Senator Lisa Murkowski (R-AK) introduced a joint “resolution of
disapproval” of EPA’s Endangerment Finding• Compromise committee is awaiting Senate bill.
NORTH AMERICAN REGIONAL CLIMATE INITIATIVES
Global Carbon Market Size 2004-2009
Kyoto goes into effect February
2005
18Source: “Global Carbon Quarterly Q2 2009,” New Energy Finance
Global Carbon Markets BreakdownCompliance Markets
$119.5 billion4,090 MtCO2e
Voluntary Markets$704.8 million123 MtCO2e
Other$292 million61 MtCO2e Voluntary OTC
$396 million
Other$1.3 million0.2 MtCO2e
EU ETS$95.0 billion
2,982 MtCO2e
CCX
$396 million54 MtCO2e
CDM/JI$24.2 billion
1,046 MtCO2e
CCX$306 million69 MtCO2e
19Source: “State of the Voluntary Carbon Markets 2009,” New Energy Finance
FORESTRY OFFSET MARKETS STILL VERY SMALL
Various standards in the voluntary forest carbon markety
21
Risk Versus Reward for Early Offset CreditsyPost-2008 vintages have speculative value with CAR maintaining the lead from a risk-reward standpoint. Pre-2009 vintages have limited upside potential given restrictions on these older offsets.
22Source: “Pre-compliance update for Waxman-Markey,” New Energy Finance
CAR Protocol’s Common Practice zones – US wide
23
CAR Protocol’s Common Practice zones - Northwest
24
Forestry Offset Projectionsy j
Domestic Offset Supply Livestock Fugitive
Domestic Offset Supply 2020
Agriculture Livestock 8%
Fugitive 12%
Forest
Domestic Offset Supply 2012
Livestock3%
Fugitive2%
Forest Management(no till or
Landfill 36%
27%
Forest Management
12%
Afforestation6%
Forestry 18%
Agriculture
42%
Management35%
Afforestation18%
Forestry52%
(no till orreduced till)
reduced till)
• Forestry offsets account for 18% of total U.S. supply at the start of Federal compliance and grow to 52% by the year 2020
• Predicted growth in the market share of forestry offsets is supported by federal climate change legislation excluding natural gas and developing national landfill and coal mine methane performance standards, eliminating these sectors as eligible offset project types
25Source: New Energy Finance, 2009; Equator analysis
POINTS FOR DISCUSSION
• Voluntary transactions help pave the way for compliance marketsBUT l lBUT: low volume
• Lack of other markets than carbonDon’t overburden carbonDon t overburden carbon
• Regulation needed to create demand and liquid marketq
• Early action
• Emerging investment vehicles –money is available. Now.
WHY PARTNER WITH EQUATOR
• We are not a broker but principal investor• Our deal structures ensure alignment of interestg• Through deep involvement in carbon and energy markets we maximize value of carbon assets
• We manage and finance entire process of carbon asset creationg p• We offer full carbon cycle development • We already work with some of the largest landowners in the US• We have investment capitalWe have investment capital
Conclusion
• Global carbon markets will continue to experience robust growth, augmented by materialization of a U S cap and trade systemaugmented by materialization of a U.S. cap and trade system
• Forestry offsets projects are an effective and economical way of mitigating GHG emissions making them vital in lowering the costmitigating GHG emissions, making them vital in lowering the cost of abatement
Forestry is expected to be the fastest growth sector in the offset• Forestry is expected to be the fastest growth sector in the offset industry, outstripping the combined growth of other offset types
28
Wolfgang [email protected] g @ qcell (917) 969 0051
Corporate Headquarters250 Park Avenue South, New York, NY 10003, ,
Oregon office1305 SW 9th Street, Dundee, OR 97115
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