1. The Carbon Market How to Trade ECX Emissions Contracts March 2008

2. 2 Contents About ECX About The Market Why Trade on Exchange How to Trade Members List Contract Specifications OTC Clearing Fees & Margin Indices Appendices

3. 3 About ECX European Climate Exchange is the most liquid marketplace for trading CO2 EU Allowances (EUAs) under the EU Emissions Trading Scheme. ECX is part of the Climate Exchange Plc group of companies, listed on AIM of the London Stock Exchange. ECX CFI (Carbon Financial Instrument) contracts are: – Listed & traded on ICE Futures Europe electronic platform, a Recognized Investment Exchange – Regulated by the Financial Services Authority – Financially guaranteed by LCH.Clearnet ECX CFI contracts include: – Futures Contracts on EUAs (launched April 2005)‏ – Options Contracts on EUAs (launched October 2006)‏ ECX will launch CER Futures on Friday, 14 March 2008 and CER Options Contracts on Certified Emission Reductions (CERs) shortly thereafter. BACK TO CONTENTS

4. 4 About ECX Sources: ECX, Nord Pool, Bluenext, EEX. BACK TO CONTENTS

5. 5 About the Market Volumes grow rapidly in the European Carbon Market – 260 million tonnes CO2 traded in 2005 – 800 million tonnes CO2 traded in 2006 – 1,500 million tonnes CO2 traded in 2007 Increasing numbers of market participants in OTC and Exchange markets Growing activity boosting sophisticated products (spot, forwards, futures  swaps, structured products, options)‏ BACK TO CONTENTS

6. 6 Who is the Carbon Market? Number of companies Utilities Cement Steel Pulp and paper glass Oil Speculative traders Hedge funds Banks Other BACK TO CONTENTS Market product sophistication

7. 7 Market Participants Geographic Location Less familiar with derivative products Familiar with derivative products Central – Eastern Europe Southern Europe Western Europe – UK Northern Europe International BACK TO CONTENTS Number of companies

8. 8 BACK TO CONTENTS Price and volume ECX CFI Futures Contracts 94 million tonnes of CO2 traded in 2005 with a market value of €2.1 billion 452 million tonnes of CO2 traded in 2006 with a market value of €9 billion 1 billion tonnes of CO2 traded in 2007 with a market value of €17.5 billion

9. 9 Open Interest & Volume ECX CFI Options Contracts 109 million tonnes of CO2 have traded in options on ECX / ICE Futures Europe since launch October 2006

10. 10 Open Interest BACK TO CONTENTS ECX CFI Futures Contracts Open Interest currently rests at 148 million tonnes

11. 11 Why Trade on an Exchange? Low cost One centralised pool of liquidity Easy & efficient Transparency Credit risk management Regulated and secure market BACK TO CONTENTS

12. 12 How to Trade ECX Products There are two ways to access the market : – Become a Member in ECX CFI on ICE Futures; or – Order-Route as a customer of a Clearing Member on ICE Futures Access route decision will be driven by: – Nature of company – Type of trading activity – Volume of trading activity – Regulatory status BACK TO CONTENTS

13. 13 Members List BACK TO CONTENTS

14. 14 Clearing Members ECX CFI Clearing Members of ICE Futures able to offer clearing and trading services to third parties (‘order-routers’). BACK TO CONTENTS

15. 15 ICE ECX Screen Shot BACK TO CONTENTS

16. 16 Contract Specifications ECX EUA Futures Contract 1 lot / contract (= 1000 tonnes CO2 EU allowances)‏ Minimum Trading Size Trading will occur on ICE Futures electronic trading platform (known as the ICE Platform) which is accessible via WebICE or through a conformed Independent Software Vendor. Trading system 07:00 to 17:00 UK Local Time (02:00 to 12.00 EST)‏ Standard Trading hours LCH.Clearnet acts as central counterparty to all trades and guarantees financial performance of ICE Futures contracts registered in the name of its Members. Clearing & Contract Security Trade weighted average during the daily closing period (16.00-16.15 UK Local Time) with Quoted Settlement Prices if low liquidity. Settlement prices Contracts are physically settled by transfer of allowances from seller’s account to buyer’s account via clearing member account and LCH.Clearnet. Delivery takes place three days after last trading day. Settlement & Delivery €0.01 Tick Size Monthly contracts for Phase I up to March 2008. Annual contracts with December expiry for Phase II (2008-2012)‏ Contracts listed BACK TO CONTENTS

17. 17 Contract Specifications ECX EUA Options Contract Trading will occur on ICE Futures electronic trading platform (known as the ICE Platform) which is accessible via WebICE or through a conformed Independent Software Vendor. Trading System A range of strike prices are automatically listed for each contract month covering the price range from €1.00 – €55.00. The Exchange may add one or more strike prices nearest to the last price listed as necessary. Strike price intervals are €1.00. Quotation 07:00 to 17:00 UK Local Time (02:00 to 12.00 EST)‏ Standard Trading Hours European-style. Premiums are paid at the time of the transaction.Option Style & Premium LCH.Clearnet acts as central counterparty to all trades and guarantees financial performance of ICE Futures contracts registered in the name of its Members. Clearing & Contract Security Trade weighted average during the daily closing period (16.00-16.15 UK Local Time) with Quoted Settlement Prices if low liquidity. Settlement Prices ECX CFI Options Contracts turn into ECX CFI Futures Contracts at expiry (which are physically settled contracts) 3 business days before the expiry of the relevant ICE ECX CFI Futures Contract. Settlement & Delivery €0.01 (tick size capability up to 3 decimal places)‏Tick Size 1 lot / contract ( = 1000 tonnes CO2 EU allowances)‏Minimum Trading Size Front two contract months plus next 6 December contract months (currently Mar08, Dec08, Dec09, Dec10, Dec11 and Dec12). Please note that only listed contract months are eligible for clearing OTC options contracts (EFS). Contracts Listed BACK TO CONTENTS

18. 18 Contract Specifications ECX CER Futures Contract One lot of 1000 certified emission reduction units (CER) (i.e. units issued pursuant to Article 12 of the Kyoto Protocol and the decisions adopted pursuant to the UNFCCC to the Kyoto Protocol with the exception of allowances generated by hydroelectric projects with a generating capacity exceeding 20MW, LULUCF activities and nuclear facilities). Each CER being an entitlement to emit one tonne of carbon dioxide equivalent gas. Unit of Trading 1 lot / contract (= 1000 tonnes Certified Emission Reduction units)‏ Minimum Trading Size 07:00 to 17:00 UK Local Time (02:00 to 12.00 EST)‏ Standard Trading hours LCH.Clearnet acts as central counterparty to all trades and guarantees financial performance of ICE Futures contracts registered in the name of its Members. Clearing & Contract Security Trade weighted average during the daily closing period (16.00-16.15 UK Local Time) with Quoted Settlement Prices if low liquidity. Settlement prices Contracts are physically settled by transfer of CERs from seller’s account to buyer’s account via clearing member account and LCH.Clearnet. Delivery takes place three days after last trading day. The Exchange will, from time to time, issue a list of Registries from which LCHC will accept and will deliver CERs. Initially, this will be restricted to the UK Registry. Settlement & Delivery €0.01 per tonne (i.e. €10.00 per lot)‏ Tick Size Contracts are listed on an quarterly expiry cycle such that 17 contract months are listed from December 2008 to December 2012 on a March, June, September and December cycle. Contracts listed

19. 19 OTC Clearing The EFP/EFS Mechanism The Exchange for Physical (EFP) and Exchange for Swap (EFS) mechanisms can be used by participants in the emissions markets who wish to avoid OTC risk exposure, by registering their positions with the Exchange for clearing by LCH.Clearnet. The EFP facility is used to clear OTC forward contracts and the EFS facility to clear OTC option or swap contracts. Both counterparties must have a clearing agreement in place with one of the ECX CFI Clearing Members on ICE Futures. The counterparties agree to cancel their OTC position and novate it into an exchange futures position. BACK TO CONTENTS

20. 20 Fee Structure ECX CFI Futures and Options Contracts Membership fees €2,500 €2,500 per annum Application fee Annual fee LCH.Clearnet Clearing fee €1.50 per lot per side (€.0015 per tonne)‏All business (inc. Blocks, EFPs and EFSs)‏ €2.00 per lot per side (€0.002 per tonne)‏ €2.50 per lot per side (€0.0025 per tonne)‏ Members Order-routers and other business (inc. Blocks, EFPs and EFSs)‏ Exchange fee AmountFee type BACK TO CONTENTS

21. 21 Margin Rates ECX CFI Futures and Options Contracts Margin comes in two forms: Initial and Variation Margin - Initial margin is a returnable good faith deposit required whenever a futures or options position is opened. The money is returned when the position is closed out or expires (goes to delivery)‏ - Variation Margin represents the profit/ loss in a position each day. LCH.Clearnet calculates the profits/ losses sustained on each position at the end of day – NOTICE: The outright initial margin for ECX CFI Feb’08- Mar’08 Futures and Options Contracts is currently €550 per lot (€0.55 per tonne)‏ €600 (€0.60 per tonne)‏ €2200 (€2.20 per tonne)‏ ECX CFI futures Contracts (per lot) as per February 2008 Inter- month spread Outright Initial margin BACK TO CONTENTS

22. 22 ECX Indices Morning Marker & Emissions Index ECX Emissions Morning Marker – A trade-weighted average of all ECX CFI futures trades within 15 minute period from 9.00 –9.15 UK Local Time. Published shortly after 9.15 UK Local Time for the Mar 08, Dec 08, Dec 09 and Dec 10 contract months. ECX Emissions Index – A trade-weighted average of all ECX CFI futures trades over the course of the trading day. Published shortly after 17.00 UK Local Time for the Mar 08, Dec 08, Dec 09 and Dec 10 contract months. ECX indices are used by the market as benchmarks but are not tradable Available on www.ecx.eu (under Market Data) BACK TO CONTENTS

23. 23 Other Information Authorised Data Vendors and VAT Information Vendors to follow real-time ECX CFI data: - Bloomberg (EMIT for futures, tab 92), (OMON for options) - Reuters- futures: (0#CFI:) options: (CFI+) Calendar Spreads: (#CFI2Y)‏ - CMS (UX) - CQG (UX) - E-Signal/Future Source/Comstock (LUX) - IDC ( t, UX)‏ - ICE Energy Live (LUX) VAT: VAT of EUAs will be paid by the Buyer in the country where the Buyer is located. Transfers of EUAs between the Member and LCH.Clearnet will be zero-rated for VAT purposes. BACK TO CONTENTS

24. 24 Delivery Mechanism Seller’s Account EUAs are held in dematerialized form in National Registries connected to the CITL (EU Registry). The accounts refer to the National Registry account where the entity wishes to make / take delivery. Seller’s Clearing Member’s Account LCH.Clearnet Account Buyer’s Clearing Member’s Account Buyer’s Account BACK TO CONTENTS

25. 25 Contacts Thank you for your time BACK TO CONTENTS Patrick Birley Chief Executive Officer Tel: +44 (0)207 382 7818 patrick.birley@ecx.eu Albert de Haan Commercial Director Tel: +44 (0)207 382 7800 albert.dehaan@ecx.eu Sara Stahl Business Development Manager Tel: +44 (0)207 382 7804 sara.stahl@ecx.eu www.ecx.eu Henry Bakker Data & Communications Officer Tel: +44 (0)207 382 7806 henry.bakker@ecx.eu

26. 26 Appendices How to Access the Market How to Become an Order-routing Client How to Become a Member Membership Categories Trading Software Vendors Delivery Mechanism Details BACK TO CONTENTS

27. 27 How to Access the Market General Participant Trade Participant Clearing Non- Clearing Clearing Non- Clearing ICE Members Order-routing customers Non- members: Enabled to trade ECX CFI Products ICE Futures Contract sets  Oils  Utilities  Emissions Trading Privilege BACK TO APPENDICES

28. 28 How to Become an Order-routing Client No need to apply for ICE Futures Europe membership Client signs Terms of Business with Clearer Clearer provides either WebICE or ISV (Independent Software Vendor) solution for trading Client has direct electronic execution ability onto the ICE platform for the trading for ECX CFIs Trades are registered with LCH.Clearnet in name of clearer and client remains anonymous Access via a broker will be arranged between broker and Clearing Member and brokerage fees will be charged BACK TO APPENDICES

29. 29 How to Become an ECX CFI Member of ICE Futures Europe Complete: a) Application Form; b) Electronic User Agreement (EUA)‏ c) If Clearing Member: Have or be in the process of securing membership of LCH.Clearnet; or If Non-Clearing Member: Clearing Agreement; d)Assign at least one Responsible Individual (RI) to trade; e)Application processed and formally presented to the ICE Futures’ Europe Authorisation, Rules and Conduct Committee for approval; f)Pay application fee and annual subscription. BACK TO APPENDICES

30. 30 Membership Categories £2,500 – Application £2,500 – Annual £2,500 – Application £2,500 – Annual £2,500 – Application £6,000 – Annual £2,500 – Application £6,000 – Annual ICE Futures Full- Fledged membership fees (Brent, NatGas etc)‏ None £5mn None £5mn Min. Net Worth €2,500 – Application €2,500 – Annual Trade and/or clear own business and client business CM General Participant €2,500 – Application €2,500 – Annual Trade own business and client business NCM €2,500 – Application €2,500 – Annual Trade own business only NCM €2,500 – Application €2,500 – Annual Trade and/or clear own business only CM Trade Participant ICE Futures Emissions membership fees Trading rightsClearing status Membership Category BACK TO APPENDICES

31. 31 ICE Futures Europe Electronic Trading ISVs Aegis Software Communicating Ltd CQG Easy Screen ECCO Ffastfill GL Trade ION Trading Neotick Nyfix Object Trading Patsystems RTS Rolfe & Nolan Stellar Trading Systems Trading Technologies Trayport WebICE ICE Central Matching Engine Trade registration system LCH BACK TO APPENDICES

32. 32 Delivery Mechanism Details CM submits client position reports to ICE on a daily basis. i. Seller inputs transfer request to move allowances to CM. @ Expiry i. CM submits delivery confirmation to LCH.Clearnet; ii. LCH.Clearnet monitors receipt of allowances. i. CM receives allowances from its client; ii. Allowances transferred on to nominated LCH.Clearnet account. T+1 If delivery problems occur, LCH.Clearnet will randomly allocate Buyer and advise accordingly (not pro-rata). Buyers CM pays full contract value up front. i. LCH.Clearnet receives allowances from CM; ii. Allowances transferred on to randomly selected buyers CM a/c. T+2 Transfer/delivery complete for those other than failed or late deliveries. Sellers CM receives full contract value. i. CM receives allowances from LCH.Clearnet; ii. Allowances transferred on to nominated Buyer’s a/c. T+3 CommentsCash flowAllowance flow BACK TO APPENDICES