September 25, 2015 Sacramento, CA Zhang Xiaoguang Sinocarbon Innovation & Investment Co.,Ltd. C ONNECTIVITY CHOICES FOR REGISTRY W ORKSHOP “B UILDING R EGISTRIES TO S UPPORT THE N EXT G ENERATION OF C ARBON M ARKETS ” P ARTNERSHIP FOR M ARKET R EADINESS

2 Systems to be connected to a registry Connectivity architecture choices Connectivity protocol choices Security measures Outline

3 Potential systems Trading System Emissions Report System Registry System Other Registry Systems Information source systems Identity System Auction platform Third party platforms

4 Objectives of connecting systems Perform cross market transactions Reconciliations Perform cross market transactions Reconciliations Registries Perform cross platform carbon unit transfer transactions Reconciliations Perform cross platform carbon unit transfer transactions Reconciliations Third party platforms Achieve information from information source systems Information source systems

5 Systems to be connected to a registry Connectivity architecture choices Connectivity protocol choices Security measures Outline

6 Central hub based online connectivity

7 Peer to peer based connectivity

8 Offline connectivity

9 Comparison of connectivity architectures Central HubPeer to peerOffline Implementation complexity  High implementation complexity.  Depends on the transaction rules to be implemented.  Relatively low for implementing unified market rules.  High implementation complexity.  Depends on the transaction rules to be implemented.  Relatively low for implementing multiple rules. Low implementation complexity. Performance  Capable of processing automated transactions.  Relatively low performance due to central hub bottle neck.  Capable of processing automated transactions.  Relatively high performance due to peer to peer processing.  Not Capable of processing automated transactions.  Low performance due to offline processing. Reliability  Central hub failure will affect all the connected systems.  Easy to ensure the reliability after updating central hub.  Single peer failure will not affect the connected systems seriously.  Difficult to ensure reliability after updating one peer. High reliability. SecurityEasy to apply unified security measures. Difficult to apply unified security measures. Vulnerable to information stealth. Maintenance cost  Relatively low maintenance cost for connecting a large number of systems using single market rules.  High maintenance cost for connecting a small number of systems. Depends on the connectivity of each peer.Low maintenance cost. Data consistency  Easy to ensure data consistency with central hub based transaction log.  Easy to ensure the unified transaction check rules.  Difficult to ensure data consistency among peers.  Difficult to ensure the unified transaction check rules without erros. Difficult to react to data changes of a connected system.

10 Implementation technologies Socket level technologyWebservice based technology Implementation complexity HighLow PerformanceHighLow ReliabilityDifficult to ensure reliability.Easy to ensure reliability. Maintenance costHighLow

11 Systems to be connected to a registry Connectivity architecture choices Connectivity protocol choices Security measures Outline

12 Connecting registries - principles Specify the transactions. Specify accounting models and transaction workflows. Specify the carbon units involved. Specify the transaction check rules. Specify connection architecture. Specify data package formats. Specify data connection available rules. Specify security rules. Specify data transmission technology.

13 Connecting registries - Brief review of DES Available for processing most of the transactions in a carbon market. Unified accounting model and transaction workflows. Support Kyoto units, and EUA. Unified the transaction check rules. Central hub based protocol. Unified data package formats. (Serial number identifiers) 7X24 availability. Unified security requirements. SOAP based data transmission.

14 Connecting registries - Peer to peer protocol with mirroring approach Carbon unit cache account Holding account System 1 System 2 Carbon unit information Data exchange interface

15 Connecting registries - Reconciliation Validate account totals. Validate carbon unit blocks. Review transaction history logs. Manual intervention.

16 Connecting third party platforms Mirroring approach can be applied. Total validation level reconciliation. Total records be determined by the registry. Webservice based technology is applicable. Offline approach can be applied.

17 Connecting information source systems Specify information synchronization cycle. Specify information synchronization workflow. Specify data package format. Specify data update reaction scheme. Websevice based technology can be applied. Offline approach can be applied.

18 Systems to be connected to a registry Connectivity architecture choices Connectivity protocol choices Security measures Outline

19 Connection risks Data leakage Data tempering Data inconsistency Data loss Fraudulent transmission Data leakage Data tempering Data inconsistency Data loss Fraudulent transmission Online approach Data leakage Data inconsistency Data leakage Data inconsistency Offline approach

20 security measures Reliable workflow design Data encryption scheme Reconciliation VPN connection Point to point connection IP and port access constraint Dedicated connection sever Other network security devices Reliable workflow design Data encryption scheme Reconciliation VPN connection Point to point connection IP and port access constraint Dedicated connection sever Other network security devices Online approach File encryption Data change react scheme File encryption Data change react scheme Offline approach

21 Zhang Xiaoguang Sinocarbon Innovation & Investment Co.,Ltd. For more information on the Partnership for Market Readiness, please contact: WORLDBANK. ORG WWW. THEPMR. ORG Thank You for Your Attention