1. Carbon Finance North America Workshop NYC Catherine A. Lee, Esq. Consultant to Maine DEP June 15, 2007 The Nation’s First GHG Cap and Trade Program www.gcglaw.comwww.go-worldlee.com

2. 2 The RGGI Region At A Glance  Ten States  53 million people  8th largest emitter in the world  2.4+ trillion dollar economy

3. 3 RGGI Program Goals Cap emissions at current levels through 2014; reduce 10% by 2018 Achieve lowest cost reductions Encourage energy efficiency Stimulate innovative technologies Act as a model for a national program

4. 4 How Does RGGI Work? The region has a single cap Each state has an emissions budget – in tons of CO 2 States issue “allowances”, one per ton, up to the amount of the state budget Most states to auction most or all allowances Each RGGI source must “cover” its emissions with allowances every three years

5. 5 State CO 2 Budgets Connecticut10.7 mt Delaware 7.56 mt Maine 5.95 mt Maryland 37.56 mt Massachusetts 26.66 mt New Hampshire 8.62 mt New Jersey 22.89 mt New York 64.31 mt Rhode Island 2.66 mt Vermont 1.23 mt TOTAL188 mt

6. 6 Allocation of Allowances Model Rule requires minimum of 25% of allowances to be auctioned, proceeds used for Consumer Benefit and/or Strategic Energy Purpose Remaining 75% left to each state to decide how to allocate  Vermont law requires 100% auction  Maine law requires 100% after small set aside  New York pre-proposal calls for 100% auction  New Jersey and Massachusetts are evaluating 100% auction  Connecticut to auction 100% after small set asides All states favor regional auctions

7. Additional Market Flexibility “Offsets” or Project-Based Reductions Methane Capture from Farms Convert Land to Forest

8. Additional Market Flexibility Landfill Gas Capture at Small Landfills SF 6 Gas Leak Prevention in Electricity Distribution

9. Additional Market Flexibility And End-Use Energy Efficiency Projects i.e. reductions in fuel use for space and water heating Does not include electric end use energy efficiency

10. 10 Offset Program Characteristics Offsets—limit on use:  No limit on issuance of offsets  Each Source may “cover” up to 3.3% of its total reported emissions in a compliance period with offsets  If $7/ton price trigger hit, limit on use expands to 5% of reported emissions  If $10/ton trigger price hit, limit on use expands to 10% of reported emissions  At $10 price trigger, allowances from projects outside the US

11. 11 Current Critical Path Items The Regional Organization  Non-profit corporation  Based in NYC  In the process of hiring Executive Director  Provide technical and administrative support to the states  Implement auctions platform and emissions tracking system  Technical support for offsets program

12. 12 Current Critical Path Items Emissions Allowance Tracking System  Joint regional platform for entire RGGI program  Administrative infrastructure will be up and running before program launch  Web based, open and transparent  Will track allowances by source and general accounts  Offsets tracking: Issuance of allowances Prices Filing of consistency applications Issuance of determinations Submittal and approval of monitoring and verification reports

13. 13 Current Critical Path Items Auction Platform  Regional design, participation optional  NYSERDA oversight of Auction Research team  Resources For The Future  University of Virginia  Two Phase Report

14. 14 Phase I Report: Preliminary Recommendations From the Auction Research Team Quarterly auctions with limited number of allowances auctioned each time Pre-sale of later vintages in limited quantities Reserve price set for each auction Participation open with binding financial assurances Goal to hold first auction by July 2008 Phase I report available at:www.coopercenter.org/econ/sitefiles/documents/pd f/rggi_interim_report Phase II Report will be completed in October 2007

15. 15 Current Critical Path Items Offsets Implementation  Common applications and monitoring/verification forms  Guidance documents for regulators and developers  Accreditation process for independent verifiers  Consider additional offsets categories

16. 16 Other Issues Potential Emissions Leakage March 2007 Report  Available at www.rggi.org/emisleak.htmwww.rggi.org/emisleak.htm  Final Report expected December 2007  Further evaluation of policy options and final recommendations Model Rule Implementation Legislation and/or Rulemaking  Model Rule implementation underway in all 10 states  Expected to be complete between December 2007 and December 2008

17. 17 A Federal Program No preemption Science based cap and trade Economy wide No price triggers or caps Not contingent on action by other countries Federal program a floor, not a ceiling No grandfathered coal plants Allow banking

18. 18 Other Jurisdictions Interested in Joining/Linking to RGGI District of Columbia Canadian Provinces  Ontario and Quebec EU ETS - Design Elements - Implementation Protocols

19. 19 California and RGGI RGGI + California Having Conceptual Discussions - 28.5% of US population - 32% of US economy - 3 rd largest World economy - 17% of US emissions - 6 th largest emitter worldwide

20. 20 Questions? For further discussion or information contact: Catherine Lee cathy@go-worldlee.com 207-415-5354 www.gcglaw.comwww.go-worldlee.com