Presentation by Matt Walsh, Managing Director of New Zealand Carbon Farming, to the Private Forest Landowners Association (PFLA) at their AGM in Nanaimo, BC, June 20th, 2013. The presentation includes info about: climate change impacts; global trends; carbon 101; latest developments in Canada and California; Who buys credits? How much for?; trends to watch.

2. PRESENTATION TO COVER
 Climate Change Impacts
 Global Trends
 Carbon 101
 Latest Developments
 Canada
 California
 Who Buys Credits?
 How Much For?
 Trends to Watch…..
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3. The World Mean Temperature is
Increasing (Degrees C)
Page 3.
13
13.5
14
14.5
15
1960 1970 1980 1990 2000 2010
Source Economist
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4. 4
Climate Change Prediction*
o “By 2100 average global temperatures will be 2°F to
11.5°F higher than now”
o “These higher temperatures will:
 Raise sea levels ;
 produce more-frequent, extreme and damaging
weather events, such as wildfires, heat waves,
storms, and droughts;
 disrupt ecosystems and crop production;
 increase heat-related deaths;
 require costly adaptation;
 produce many other monetary and non monetary
consequences”
*(Source US National Academy of Sciences 2012).
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Farming

5. Climate Policy Momentum 1990
5

6. Climate Policy Momentum 2010
6

7. Climate Policy Momentum 2012
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8. Climate Policy Momentum 2013
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9. Climate Policy Momentum 2015
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10. Climate Policy Momentum 2020
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11. 11
Climate Policy Momentum
What is Driving This Growth?
Key: Momentum has continued during the GFC
Why?:
1. Voters worldwide are aware of weather change;
2. Voters worldwide care about saving the planet;
3. Consumers prefer products made by carbon
neutral businesses; and
4. Carbon trading is a hidden tax that increases a
government’s domestic tax take

12. DIRTY LITTLE SECRET…..
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FOREST
OWNER
FOREST
OWNER
GOVERNMENTGOVERNMENT
ENERGY
& OIL
COMPANIES
ENERGY
& OIL
COMPANIES
Mapping,
certification,
credit sale
commissions etc
Carbon
Credits
Pass on
cost
Carbon
Credits
CONSULTANTSCONSULTANTS
CUSTOMERSCUSTOMERS
Sell credits

13. Carbon Market Growth During GFC
Page 13.
Source: Bloomberg Carbon Market Update October 2012

14. 63
81 86 96
61
83 96
330
405
333
404
499
578
0
100
200
300
400
500
600
700
2008 2010 2012 2014 2016 2018 2020
Australia
California
CDM/JI
EUA
Projected Growth in the Carbon
Market (€bn/year)
Source: Bloomberg New Energy
Finance
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15. CARBON 101
o Most developed countries have signed a treaty
to reduce pollution – “Kyoto Protocol”
o Obligation to reduce “emissions”
o One way for companies that pollute the air to
‘offset’ their pollution is to buy carbon credits
o Trees absorb & store CO2 (in trunk & roots)
and carbon credits are earned as a result
o But CO2 is deemed to be “released” from
forest on harvest (but this rule is changing)
o Climate change concerns have created
significant commercial opportunities
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16. CARBON 101
A “carbon credit” represents 1 tonne of CO2
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17. LATEST DEVELOPMENTS - CHINA
o China is the world leader in climate change policy
development. Why?
o Domestic imperatives:
1. feed their people; and
2. avoid civil unrest
o China is driving climate change policy worldwide
through its trade agreements
o Countries who want to trade with China will need
climate change policy
o China is driving for global treaty from 2015
o 7 carbon trading pilots starting in China this year
o National coverage from 2015
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18. LATEST DEVELOPMENTS - US
o Obama pledged Federal climate change policy in
his acceptance speech:
“Climate change is the threat of our time”
o Announcement could be as early as next week
o No legislation or congress funding required
o Likely to take the form of EPA type initiative
against power stations but could enable purchase
of carbon credits by those stations
o Canada will be under pressure to conform to a
Federal climate change policy in the US*
o This will likely re-ignite the Federal debate on
climate change policy in Canada
*Financial Post
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19. CARBON MARKET - CANADA
o Canada withdrew from Kyoto treaty in December
o Canada emissions up 30% since Kyoto to about
700 million tonnes pa – this is the key reason for
Canada’s exit
o Canada voted worst OECD country on climate
change policy & 4TH worst globally
o Govt purchased credits from Darkwoods project
to make Olympics “carbon neutral”
o Support for climate change policy is likely to be
province by province until US has Federal policy
or China pushes trade policy
o 4 provinces are part of the “Western Climate
Initiative” (including BC)
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20. CARBON MARKET - CALIFORNIA
o Leader of the “Western Climate Initiative”
o Carbon market opened for biz in 2011
o Recently linked with Quebec to form world’s
second largest carbon market
o Energy emitters have compliance obligations now
– oil from 2015
o 400 million+ credits will be required to 2020
o Significant proportion will come from forestry:
 Standards will be published over the summer
but is likely to include rotational forestry;
 Heavy lobbying by US forestry sector;
Key opportunity for BC forest owners
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21. WHO BUYS CREDITS?
1. Compliance Buyers (emitters)
o By far the biggest segment
o Buying for today’s obligations &
and locking in future positions
o Energy, Oil & manufacturing
o ‘Value added’ credits attractive
2. Voluntary Market
o Buying for ‘carbon neutral’ branding
o Strongly growing market segment
o Forest credits seen as “green”
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22. MARKETS FOR CANADIAN
FORESTRY CREDITS
1. BC is part of the “Western Climate Initiative”
 Credits generated by members ‘should’ be
tradable across borders
 You ‘should’ be able to sell credits locally & to
the other members e.g. California
 But political intervention risk here
 Carefully watch California forestry standards
2. Global voluntary market
3. Pacific Carbon Trust
4. Emerging markets e.g. Europe, South Korea &
Australia
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23. CALIFORNIA CARBON BUYERS
o There are 3 major energy utilities who need large
scale credits:
1. Pacific Gas & Electric
2. Southern California Edison
3. San Diego Gas & Electric
o These emitters have the power to buy ‘forward’
o Long term ‘offtake’ agreements are now being
negotiated
o Emitters are starting to buy heavily
o “Right now” opportunities to presell credits
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24. HOW MUCH DO I GET?
o Depending on the certification standard you
select, you will have access to global markets:
Voluntary = US$2-3 per credit
Compliance = US$15+ per credit
o Price forecast to hit US$70-100 by 2020
o A carbon price of US$50+ is required to
create meaningful emitter behaviour change
o Scale players will be able deal direct with
emitters and secure long term deals – 15+ yrs
o Smaller players will need a broker
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25. CAN I HAVE IT ALL?
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27. KEY TRENDS TO WATCH
1. US Federal policy – next few weeks
2. California carbon market standards:
 Rotational forestry is likely to be
included in some form
 Eligibility of BC forestry in California
3. “Harvested Wood Products” rules
 Harvested forests retain carbon
 Likely to be introduced globally
 Will enable rotational forests to be
included
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28. STRATEGIC POSITIONING
o Carbon is here to stay
o Foresters who move first will harvest biggest
returns from carbon
o BUT the market is still emerging and will take 1-2
more years to settle down
o Your focus should be on:
 California as a market;
 ‘Compliance’ credits are where the money
is…..not voluntary credits; and
 Partnering with an expert – avoid cowboys
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29. SUMMARY
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