1 Risk and Chances for the Lime Industry through the European Emissions Trading System Dipl.-Ing. Andreas von Saldern, ESolutions GmbH, Germany

2 Since 2005 CO 2 EUAs European Emissions Trading System Installations

3 The Europe-wide CO 2 –Emissions Trading System (ETS) exists since autumn 2004 It includes installations of energy intensive industries like power stations, steelworks, cement, lime, bricks, ceramic… Verified reports of CO 2 -emissions have to be generated, annually An equivalent number of CO 2 -Emission Allowances have to be submitted to the authorities Companies receive less CO 2 -Emisson Allowances than they need Lacking CO 2 -Emission Allowances have to be bought, surpluses can be sold Sales can be conducted between plant operators (OTC) or via Stock Exchange (e.g. Leipzig, London, Paris…)

4 Direct CO 2 –dependency in Germany CO 2 –Emissions of different industries in relation to sales

5 Trading Periods the first trading period lasted 3 years, from the second trading period lasts 5 years, from and the third period will last 8 years, from The basic rules have been fixed for the third period, some important details will be determinied in 2009 and 2010  Reduction Target by the end of 2020: Setting I: -21% compared to the emissions of 2005 Setting II: -30% if an ambitious Kioto II agreement will passed

6 Allocated Emission Allowances in the European Emissions Trading System

7 CO 2 -prices for 1 st and 2 nd trading period differed significantly in 2007

8 Forwarding production from 2008 in 2007 add 24 € profit / ton emission factor1,1t CO 2 / t lime CO 2 emissions11.000t CO 2 / year CO 2 reduction10% amount of CO 2 reduction1.100t CO 2 / Year CO 2 price22 € / t CO 2 value of CO 2 reduction24.200€ / year percentage of revenue40% production10.000t lime / year price60€ / t lime revenue € / year profitability10% profit60.000€ / year

9 What does a 21% reduction requirement mean? 21 % per product at 0% annual growth 42 % per product at 2% annual growth 62% per product at 5% annual growth since 2005

10 Current number of installation covered through the European Emission Trading System CountriesNumber of Installations Austria31 Belgium294 Czech Republic394 Denmark374 Estonia50 Finland572 France1004 Greece141 Germany1665 Italy934 Ireland106 Latvia73 Lithuania98 Luxembourg14 Malta2 Netherlands341 Portugal212 Romania217 Slovenia89 Spain1006 Sweden743 United Kingdom925 EU (total)9285

11 Industries which have to comply with the European Emissions Trading System Industries covered by the European Emissions Trading System (ETS) Combustion Emissions from various industries especially utility services Mineral Oil Refineries Coke Ovens Metal Ore Roasting and Sintering Production of Pig Iron and Steel including Continous Casting Production of Cement Clinker Production of Lime Production of Glass Manufacture of Ceramic products Pulp and Paper Production

12 The prices for CO 2 -Emission Allowances are highly volatile

13 Different price predictions of CO 2 -Emission Allowances Analysts predict a significant price increase Phase II Phase III ( ) ( ) Citibank EUR/t EUR/t ( ) 50 EUR/t (after 2015) Barclays Capital 9 EUR/t (2009) EUAs: 45 EUR/t ( ) 20,50 EUR/t ( ) CERs: 35 EUR/t ( ) Société Générale EUR/t 23 EUR/t in 2013 Deutsche Bank EUR/t (fundamental) <10 EUR/t (temporary) Fundamental Price (incl. cost of carry of 4%) 48 EUR/t in 2020 Point Carbon EUR/t (increasing) Daiwa House EUR/t (increasing) Source: EET-Mac

14 “Process”-emissions can hardly be influenced Lime production emits 1.0 to 1.9 t CO 2 /t lime

15 The duties of enterprises which have to comply with the European Emissions Trading System include: Monitor their CO 2 -emissions Compose an annual CO 2 -emissions report Let the report be verified through an external accredited verifier Submit an according number of CO 2 -Emission Allowances

16 The cost for CO 2 -Emission Allowances can lead to losses Euro/ Product Euro/tCO 2 CO 2 -price Contribution to profit EF= emissions factor in t CO 2 /product -10 loss EF=0.8 EF=1.0 EF= 1.2 example: Contribution to profit = 25 €

17 Reducing production can become profitable CO 2 - price € Contribution to profit per product Profit by selling equivalent amount of CO 2 - Allowances €/tCO 2 Contribution to profit Break even

18 What impact does a 10% CO 2 reduction have ? 10% reduction of CO 2 would lead to 40% increase of profit At a price of 22 € / t CO 2 (average 2008) 1 t CO 2 / t lime at10% profitability (profit / revenue)

19 A holistic CO 2 -Management offers the best chances permission allocation of free EUAs energy consumption distribution / production / planning purchase of fuels and commodities CO 2 -controlling & risk management CO 2 monitoring & reporting purchase & sell of CO 2 allowances consideration of CO 2 allowances in balances & tax

20 The CO 2 -Emissions Trading System offer new opportunities - Harvest them!

21 Contacts: Dipl.-Ing. Andreas von Saldern CEO / Accredited Environmental Verifier Schoppastraße 2 D Hofheim a. Ts., Germany Close to Frankfurt Airport Phone:+49 (6192) – 10 Mobile:+49 (170) Internet: Dr. oec. Susanne Achilles-Kuhnhardt Director Sales and Marketing Reinhardtstraße 23 · D Berlin Phone: +49 (30) Mobile: +49 (171) Internet: