1. California’s Cap-and-Trade Program Overview & Market Update

2. AIR QUALITY CONSULTANTS Founded in 1984, AQC has been providing emissions brokerage, environmental permitting, and compliance services to a variety of industrial and commercial clients throughout the state of California. Regional Emissions Markets Emission Reduction Credits RECLAIM Trading Credits Greenhouse Gas Markets California Carbon Allowances California Carbon Offsets Greenhouse Gas Offsets for CEQA Compliance Voluntary Greenhouse Gas Offsets Emissions Brokerage Consulting Services Compliance Software AB 32 Strategic Management Regional Emissions Credit Management ERC Emissions Appraisals Emissions Quantification/Qualification Risk Review and Management Assessments Environmental Due Diligence & Liability Title V Water Quality/Stormwater VOC- CALC New and Upgrade Software Installations Software Support Services Software Training Services

3. Federal GHG Initiatives Climate Action Plan, reducing carbon from power plants In 2030, when CPP is fully implemented carbon pollution will be 32% 2005 levels State have the ability to develop their own plans for achieving the CPP goals States have to submit their final plans to the EPA by September 8, 2018 January 2022 Compliance period begins Regional GHG Outlook Western Climate Initiative Quebec Ontario Mexico ENVIORNMENTAL MARKETS CONVERGE IN CA

4. California Cap-and-Trade Program California is to return to 1990 levels by 2020 Overall goal of reducing GHG levels to 80% below 1990 levels Post 2020 program SB 32 – Interim target of 40% below 1990 levels by 2030 Low Carbon Fuel Standard California Environmental Quality Act Voluntary Carbon Offsets CAPCOA Offsets Renewable Portfolio Standard Governor Brown called for a 50% by 2030 renewable target Emission Reduction Markets Criteria Pollutants ENVIORNMENTAL MARKETS CONVERGE IN CA

5. In January of 2015, with the inclusion of the natural gas and fuel suppliers, the program doubled in size ARB is hosting workshops to discuss an extension of the program past 2020 November 2 nd, was the first triennial compliance deadline Approved Rice Cultivation Protocol, potentially adding additional supply to the offset market The program generated ~ 1 billion in revenue for the state through 2014, and anticipates an additional 2 billion in revenue in 2015 from auction proceeds CAP-AND-TRADE MARKET UPDATE

6. COMPLIANCE INSTRUMENTS Offsets can only come from projects under approved protocols Allocated to industry or through ARB-hosted quarterly auctions 1 allowance or 1 offset 1 metric tonne of CO 2 Allowances are issued by the ARB Irrevocable when used for compliance Allowances have vintages associated with them that restrict usage Buyer Liability Risk Vintage-less and can be used at anytime for compliance Quantitative usage limit of 8% ALLOWANCESOFFSETS

7. MEETING COMPLIANCE Each verified emission reported = 1 compliance instrument Annual and triennial compliance obligations Deadline for compliance is November 1 st of the year following – Ex. 30% of 2013 reported emissions had to be in Compliance Account November 1, 2014 No borrowing from future years - Must be from the allowance budget year within or before For example, a vintage 2013 allowance may be used for compliance for any compliance year throughout the program, you can procure a 2016 compliance instrument, but cannot use it for compliance until 2016 and after Limited use exemption for “true up” allowances, allowances purchased from the Auction Reserve, and offsets Allowances purchased from the Allowance Price Containment Reserve Sale

8. SUPPLY DEMAND FUNDAMENTALS - 2015 Compliance Options Banking 3-year compliance period GHG Market Total Supply ~394.5 million tons CO 2 e IOU/POU Allocation Refining/ Industry/University/Legacy Contracts/Natural Gas/ARB Price Containment Reserve ARB Allowance in Current Auction VER Account Total Projected Demand ~354.7 million tons CO 2 e IOU/POU Allocation Natural Gas Allocation Price Containment Reserve / Set Asides Current Auction Advance Auction 400 350 300 250 200 150 100 50 0 2013 Supply 162.8 2020 Forecasted Demand 365.91 MMt ARB Allowance Sold in Advance Auction

9. ALLOWANCE/OFFSET MARKETS A.) Freely allocated B.) Auction participation C.) Procure in secondary market Bilateral Contract Exchange Trade – Futures contracts Auction – CCAs – Primary Market 4 Quarterly Auctions Auction floor price increases by CPI + 5% Offsets OTC Contract with developer Investor California Carbon Allowances - Secondary Market OTC Agreement with Seller Exchange Traded Futures Contract on ICE Procurement Process Determine price, volume, and delivery date Payment is due upon physical delivery of product

10. AUCTION FORMAT ARB Hosted Quarterly Auction FrequencyQuarterly Auction Available for saleCurrent vintage, allowances not sold in past auctions and advanced auction tons FormatSingle-round, sealed-bid, uniform price format, bid quantities of 1,000 allowances Who can participateAnyone Floor Price (2015, 2018) Currently $12.10 Floor Prices (2014+) Increases every year by CPI+ 5%

11. AUCTION RESULTS Auction 1Auction 2Auction 3Auction 4Auction 5Auction 6Auction 7Auction 8Auction 9Auction 10 Settlement Price$10.09$13.62$14.00$12.22$11.48 $11.50 $12.10$12.21 Current Floor/Settlement Spread $0.09$2.91$3.29$1.51$0.77$0.14$0.16 $0.76$0.11 Offered MT23.112.914.513.816.419.516.922.523.173.6 Sold MT23.112.914.513.816.419.516.922.523.173.6 Advance Settlement Price $10.00$10.71 $11.10 $11.38$11.34 $11.86$12.10 Advance Floor/Settlement Spread $0.00 $0.39 $0.04$0.00 $52.00$12.10 Offered MT39.49.6 9.3 10.810.4 Sold MT5.64.47.59.6 9.346.510.810.4 Auction 12 $12.52 $0.42 76.9 $12.30 $12.10 10.4 Auction 11 $12.29 $0.19 73.4 $12.10 10.4

12. ALLOWANCE PRICING Intercontinental Exchange (“ICE”) Operates futures and over the counter markets California Carbon Allowances – represent one metric ton of CO2 having a vintage of any year Liquid market that can be pointed to for pricing reimbursement Vintage 2015 Spot ~$12.95/CCA Vintage 2015 October 2016 ~ $13.25/CCA Auctions have historically cleared lower than exchange traded product

13. OFFSETS CCO – Non – Guaranteed Buyer takes liability risk Payment occurs upon delivery into Buyer’s CITSS Holding Account 3-8 year invalidation period Bilateral Agreement Specified delivery date ~ $ 11.25- $11.50 “Golden” CCO Seller takes liability risk and replaces with an offset/allowance if invalidated Payment occurs upon future delivery into Buyer’s CITSS Holding Account Specified delivery dates ~$12.00-$12.30

14. STRATEGY CONSIDERATIONS Primary vs. Secondary Markets Cost of Capital Ability to Post Collateral Risk Tolerance Offsets Stay abreast of regulatory and legislative changes Market behavior Post 2020 considerations Price increase prior to compliance deadline Adjustments for increase in floor price

15. CAP-AND-TRADE MANGEMENT SERVICES Keep customer abreast of GHG market, regulatory and legislative updates Provide weekly market pricing Develop a short and long term compliance strategy Budget and compliance planning for short and long term compliance strategy Evaluate current portfolio with reference to the current and expect regulatory environment Optimize portfolio – vintage spread and basis management Quarterly auction result analysis Identify counterparties and solicit competitive offers based on GHG plan objectives Assist customer in ensuring compliance in the Cap-and-Trade program

16. CONTACT INFORMATION Jackie Ferlita Vice President Environmental Credit Brokerage 15541 Commerce Lane Huntington Beach, CA 92648 (714) 397-5508 jferlita@aqc-inc.com