annual report 2007

(1)

annual report 2007

“To say the least, 2007 was an eventful year, in which we became a well established enterprise in the global climate economy.”

– niels von Zweigbergk, President and cEo

(2)

CONTENTS

1 Highlights of 2007 2 This is Tricorona 4 cEo outlook 6 The Shares

8 From Doubt to awareness 10 The Emissions Market 14 What Tricorona has to offer 18 The Market for carbon offsetting 22 Brokerage

23 Human resources 24 risk analysis 25 Sustainability report 27 corporate Governance 28 The Board of Directors’ report 31 income statement

32 Balance sheet

34 change in shareholders’ equity 35 cash flow statement

36 accounting principles and notes 53 audit report

54 The Board of Directors 55 corporate Management 56 Glossary

57 addresses

FINANCIAL INFORMATION DURING 2008 Interim report, January-March April 24 Annual General Meeting April 24 Interim report, January-June July 24 Interim report, January-September October 24

All financial reports and press releases are available at the Tricorona website:

www.tricorona.com

You can also order or subscribe to financial information and press releases via our website or at: Tricorona AB, P.O. Box 70426, SE-107 25 Stockholm, Sweden.

ANNUAL GENERAL MEETING

The AGM will take place at 4:00 PM on April 24, 2008, at Kom Hotel, Dö- belnsgatan 17–19, Stockholm, Sweden.

Notice of participation

Shareholders who wish to participate in the AGM must be entered in the register of shareholders maintained by VPC AB no later than Friday, April 18, 2008, and must inform the company of their intention to participate in writing no later than 4:00 PM, Monday, April 21, 2008 at Tricorona AB (publ), P.O.

Box 70426, SE-107 25 Stockholm, Sweden, or by fax at +46 8-308617, or via e-mail at info@tricorona.se. Please state your name, personal/organization identification number, address and phone number as well as your registered share holdings.

In order to be entitled to participate in the meeting, shareholders whose shares are registered in the name of a nominee must request that their shares be registered in their own name not later than Friday, April 18, 2008. Share- holders represented by proxy should deliver a proxy form to the company prior to the Annual General Meeting at the address above. Anyone repre- senting a corporate entity must present a copy of the registration certificate indicating the authorized signatories.

This annual report has been produced with the greatest possible conside- ration for the environment. For example, we are using an environmentally friendly type of paper for the annual report, and it is printed using water- based printing ink. Furthermore, we will only be sending the printed annual report to those who specifically request it.

TriCOrONA ANNuAl rEPOrT 2007 • CONTENTS

(3)

0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

2006 2007

Tricorona’s emission allowances (CERs) in thousands, 2006 - 2007

HIGHLIGHTS OF 2007

Net sales amounted to SEK 216.8 million (85.7).

–

Earnings after taxes amounted to SEK –53.4 million (–2.3). Extraordinary items –

included in this year’s earnings consist of the depreciation of assets and costs for liquidated businesses amounting to a total of SEK 63.4 million.

As of the end of the year, the company’s CER (Certified Emission Reduction) –

portfolio for the 2008-12 term amounted to 68.3 million tons*, an increase of 55.7 million tons during the year.

At the same time, the CER portfolio for the 2013-20 term amounted to 73.5 mil- –

lion tons and, for 2021 and beyond, 43.9 million tons.

According to the UN organization UNEP, Tricorona (via Carbon Asset Manage- –

ment, Sweden) was the second largest purchaser of Kyoto Protocol Clean Development Mechanism (CDM) Joint Implementation (JI) projects in the world.

Tricorona Climate Partner, a voluntary carbon offsetting business, was started as –

a subsidiary this year.

Climate Change Management (CCM), a company active in project develop- –

ment within the framework of the Kyoto Protocol in Russia and Uzbekistan, was acquired this year.

As part of a renewed focus on environmentally related market instruments, the –

company has disposed of all the businesses of the former Metals Division this year.

* Please note: throughout this annual report the term “ton” indicates a metric ton, i.e. 1,000 kilograms.

FINANCIAL OVERVIEW

2007 2006 2005 2004 2003

Net sales, SEK million 216.8 85.7 165.1 39.0 14.9

Operating profit/loss, SEK million -43.2 1.7 9.0 -2.2 -5.1

Profit/loss after tax, SEK million -53.4 -2.3 7.5 1.6 -10.3

Balance sheet total, SEK million 372.0 464.7 215.3 112.4 102.2

Shareholders’ equity, SEK million 318.0 357.7 114.0 51.3 49.7

Earnings per share, SEK -0.37 -0.02 0.15 0.06 -0.47

Earnings per share, diluted, SEK -0.37 -0.02 0.14 0.06 -0.47

Number of employees at year-end 53 47 32 24 15

Final share price at year-end, SEK 11.00 4.98 3.06 3.22 1.50

Market capitalization at year-end, SEK million 1,577 686 189 86 40

1 HIGHLIGHTS OF 2007 • TRICORONA ANNUAL REPORT 2007

(4)

TRICORONA

CARBON OFFSETTING

TRICORONA TCP CLIMATE PARTNER

BROKERAGE

SVENSK KRAFT-SKM MäKLING (SWEDISH POWER

BROKERS) EMISSIONS

TRADING

CARBON ASSET CAM MANAGEMENT CARBON ASSET CAS

SERVICES CLIMATE CHANGE CCM

MANAGEMENT

OTHER OPERATIONS

In 2006 Tricorona decided to focus its business on environmentally related market instruments, mainly through investments in, and the trading of project-linked instruments known as Certified Emission Reductions (CERs) within the framework of the Kyoto Protocol. Today business is being carried out in the following divisions:

Emissions trading –

Carbon offsetting –

Brokerage –

Other operations –

EMISSIONS TRADING

This business has its roots in the company’s brokerage of CERs. Early on, however, it became apparent to the company that it would be more profitable to invest in and trade CERs. The direction and emphasis of the business consequently changed, and during the Spring of 2006 a major new issue of shares valued at approximately SEK 230 million was carried out in order to finance investments in, and the trading of, project-linked emission allowances.

The aim is to create added value for end-users by contracting emission reductions and handling project risks from a portfolio perspective.

To date the company has concentrated on building up its portfolio, and business is currently carried out at Tricorona offices in Stockholm, Beijing, Moscow, Tashkent and Hamburg.

CARBON OFFSETTING

This business began operations in 2007 and was established in order to meet the growing demand for voluntary carbon offsetting among individuals, companies and other organizations. As a result of its knowledge and experience in emissions trading and its large portfolio of CDM projects, the company considers itself well-positioned and highly competitive in this rapidly growing sector of the economy. Operations are currently located in Stockholm and Hamburg.

BROKERAGE

Brokerage operations are carried out within Svensk Kraftmäkling, which is a leading broker of electricity, electricity certificates and certificates of origin in the deregulated Nordic energy market. Revenue consists mainly of brokerage fees. Operations are located in Stockholm.

OTHER OPERATIONS

Other operations include the business that was previously conducted within the Minerals Division, consisting primarily of a number of industrial mineral deposits, which the company has had for some time.

Preparations are being made to dispose of these holdings. During 2007, the following subsidiaries (which previously made up the Metals Divi- sion) were sold: M.V. Metallvärden, Metallvärden i Lesjöfors and ANA Ädelmetal.

THIS IS TRICORONA

2

TRICORONA ANNUAL REPORT 2007 • THIS IS TRICORONA

(5)

HISTORy

The company was established in 1988 and subsequently listed on the Stockholm Stock Exchange (OMX) O-list in 1989 under the name Wermlands Guldbrytning. At that time, the company’s operations were directed towards the exploration and exploitation of gold deposits.

Beginning in 1993, operations switched from the exploitation of gold to industrial minerals.

In connection with this transition, the company’s current industrial mineral holdings were acquired. In 1996 Woxna Graphite, a subsidiary company, began mining and refining graphite ore. Operations were discontinued in 2002 as a result of inadequate profitability.

A restructuring decision was made in 2003 that led to the acquisition of a number of companies, among them SKM. Tricorona was then organized into three business divisions, Commodity Services, Metals and Minerals. During the spring of 2006, a major new issue of shares valued at approximately SEK 230 million was carried out in order to finance investments in and the trading of project-linked emission allowances.

At the same time, the board of directors decided to concentrate the company’s operations and dispose of the businesses of the Metals and Minerals Divisions as they did not comprise strategic core holdings.

During 2007 all the businesses of the Metals Division were sold.

3 THIS IS TRICORONA • TRICORONA ANNUAL REPORT 2007

(6)

During 2007 we continued to concentrate single-mindedly on what we do best, and have now divested ourselves of all operations that are not a part of our core business.

Through the acquisition of Climate Change Management, the direction of our business has been further reinforced, and this acquisition has helped us to establish ourselves in Russia and Uzbekistan.

We noted a breakthrough in 2007 in the field of voluntary carbon offsetting, when Trico- rona Climate Partners signed an agreement with Volvo to deliver a climate neutral driving experience for Volvo environmental car owners. Interest in offsetting the carbon that comes from the company’s products and production has increased as more and more people have come to realize that these steps genuinely contribute to actual emission reductions. Currently Tricorona Climate Partners are doing business in a market that is still in its infancy, and the outlook for strong future growth is good.

TRICORONA – A PIONEER ON A NEW FRONTIER

Issues related to climate change have been fea- tured extensively in the media this year. Most international reports on the subject have point- ed out the urgency of undertaking measures to reduce global warming. In Sweden and other European countries it has been suggested that we should first and foremost reduce emissions at home. Unfortunately, this widely-held—and

generally well-intended—attitude can only have a marginal impact on global warming. Europe is responsible for only 15 percent of the carbon emissions in the world and cannot, in the short run, noticeably improve the climate via emission reductions at home.

The current climate change is a global con- cern and must be treated as such, which means that research and technology transfers to developing nations ought to be given priority. The most cost-efficient solution in the short term is to bring about emission reductions in fast growing economies such as India and China.

It is also important to realize that both the technology and solutions already exist. What’s needed now are appropriate incentives to promote change towards more climate-benign technology and climate-smart solutions.

Emission reduction projects in developing countries—established as a result of one of the Kyoto Protocol’s flexible mechanisms, the Clean Development Mechanism (CDM)—have demonstrated that they spur the reduction of carbon emissions very effectively. Despite red tape and political risks, the market has shown—via the economic incentives that have been created by the flexible mechanisms—

that it can allocate resources more efficiently than traditional political administration. The Swedish Ministry of Finance Expert Group for Environmental Studies even points this out in a report:

“To unilaterally invest in national emissions reductions is both expensive and inefficient.

The Swedish climate policy’s preoccupation with national emissions reductions produces no noticeable global effect. If we instead par- ticipate fully in the Kyoto Protocol’s emis- sions trading regime, Sweden will be able to contribute to much greater global emissions reductions, and at lower costs.”

Tricorona recognized the business oppor- tunities inherent in the trading of emission allowances at an early date, and we were quick to establish ourselves as one of the leading companies in the world in this new, high- growth field. Because of our rapid growth, we are now globally ranked number two in size by the United Nations Environment Program. By guaranteeing the project owner a set price for each project’s emission allowances over several years, the company provides the financial foundation that makes many of these projects possible. Further value is created for the project proprietor as Tricorona assumes the volume risk associated with each individual project.

This means that the project owner is obliged to deliver the emission allowances that the project actually generates, but has no obligation to deliver emission allowances in unforeseen situations where the project fails to generate any. Our customers, in turn, are spared the need to assume the risks of non-production associated with individual projects and can buy guaranteed volumes. We balance these risks by

CEO OUTLOOK

Tricorona does business in the trading of emission allowances and the brokerage of electricity and electricity certificates. To say the least, 2007 was an eventful year, in which we became a well established enterprise in the global climate economy.

4

TRICORONA ANNUAL REPORT 200 • CEO OUTLOOK

(7)

maintaining a diversified portfolio consisting of many different projects.

In 2007, the number of emission allowances and projects in our portfolio increased at a greater rate than for any other market partici- pant in the world. We are gong to continue to add to our portfolio, even as we assure ourselves that new projects begin to deliver CERs.

For the projects to begin deliveries of emission allowances they must be registered by the UN.

Validation, or final project review, is an important step in the registration process. Vali- dation is carried out by independent inspectors accredited by the UN and must be completed before the project can be submitted for certification. A shortage of independent inspectors has resulted in delays, which in turn delay the registration process at the UN. Furthermore the UN was evidently surprised by the number of projects started in 2007, and lacked the resources to handle the onrush of applications;

thus increasing the degree of uncertainty concerning how many CERs (emission allowances generated by CDM projects) we can expect to see delivered to us during 2008. Despite the uncertainty, I am convinced that our technical team—through careful planning—has done everything in its power to secure the current year’s deliveries.

LOOKING FORWARD

In addition to continued development in China, the Russian market is coming alive. Conse-

quently, we expect to be involved in a number of new projects in Russia in 2008. Our collabo- ration with Swedish environmental technology companies has also begun to produce results.

By working with technology suppliers, and thereby facilitating the financing of JI projects, we can get involved in them at a much earlier stage. This also gives us the opportunity to initiate new projects and thus contribute to significant technology transfers.

The critical factors for success for Tricorona are both external and internal in nature. The external factors consist primarily of how future political decisions are formulated and how prepared politicians are to use market forces to combat climate change. The primary internal factor is our ability to recruit and retain new personnel who will continue to develop the company with the same intensity and enthusi- asm that distinguishes our current employees.

WE PRACTICE WHAT WE PREACH Naturally, Tricorona is a climate neutral enterprise. Given the increasing attention being paid to global climate change, I am convinced that we will be joined in 2008 by many more businesses and NGOs who want to take responsibility for their impact on our climate.

Niels von Zweigbergk Stockholm, Sweden. March 2008

5 CEO OUTLOOK • TRICORONA ANNUAL REPORT 2007

(8)

THE SHARES

Tricorona shares have been listed on the Stockholm Stock Exchange since June 1989. The shares are currently traded on the OMX Nordic Exchange Stockholm Mid Cap list. A trading lot consists of 2,000 shares.

SHARE CAPITAL

As of December 31, 2007, the share capital in Tricorona AB amounted to SEK 14,340,304 divided between 143,403,043 shares, each with a nominal value of SEK 0.10. Every share entails an equal right to the company’s assets and profits. At the Annual General Meeting, every owner or proxy may vote the full number of shares owned and/or represented, with no vote per share restrictions.

year Transaction Changes in number

of shares Total number of

shares Share capital Other

contributed capital Total other

contributed capital Quota value

1988 Company established 1,200,000 1,200,000 1,200,000 - - 1

1989 New share issue 1,200,000 2,400,000 2,400,000 28,800,000 28,800,00 1

1994 New share issue 2,400,000 4,800,000 4,800,000 19,200,000 48,000,000 1

1995 New share issue 600,000 5,400,000 5,400,000 13,200,000 61,200,000 1

1996 New share issue 5,400,000 10,800,000 10,800,000 21,600,000 82,800,000 1

1999 New share issue 21,600,000 32,400,000 32,400,000 -1,684,521 81,115,479 1

2000 New share issue 32,400,000 64,800,000 64,800,000 -1,770,614 79,344,865 1

2001 Write-down/combination/ reduction -58,320,000 6,480,000 6,480,000 13,801,690 93,146,555 1

2001 New share issue 2,844,344 9,324,344 9,324,344 288,965 93,435,520 1

2002 New share issue 8,000,000 17,324,344 1,732,434 12,700,000 106,135,520 0.1

2003 New share issue 9,275,656 26,600,000 2,660,000 10,444,046 116,579,566 0.1

2004 New share issue 100,000 26,700,000 2,670,000 140,000 116,719,566 0.1

2004 Conversion 468 26,700,468 2,670,047 1,357 116,720,923 0.1

2005 New share issue 34,803,071 61,503,539 6,150,354 49,608,062 166,328,985 0.1

2005 Conversion 326,962 61,830,501 6,183,050 786,589 167,115,574 0.1

2006 New share issue 71,808,782 133,639,283 13,363,928 225,597,191 392,134,918 0.1

2006 Conversion 2,258,588 135,897,871 13,589,787 5,422,153 398,134,918 0.1

2006 Warrants 1,978,974 137,876,845 13,787,685 6,095,240 404,020,221 0.1

2007 New share issue 2,086,074 139,962,919 13,996,292 7,912,283 411,932,504 0.1

2007 Conversion 3,440,124 143,403,043 14,340,304 7,929,057 419,861,561 0.1

CONVERTIBLE DEBENTURES

In December 2002, the company issued convertible debentures (2002/2009) to Norrlandsfonden and ALMI Företagspartner Gävleborg for a total of SEK 13,356,216, which entitle the holders to exercise a conversion to 3,339,054 shares during the period of December 31, 2007 – December 31, 2009. The exercise price is SEK 4.00 and the debentures have a fixed interest rate of 2 per cent. Norrlandsfonden is entitled to convert to 2,810,252 shares and ALMI to 528,802 shares.

In September 2003, Tricorona issued additional convertible debentures (2003/2007) for a nominal SEK 15,198,909, which entitled the holders to exercise a conversion to 5,066,303 shares during the period of De- cember 31, 2003 – December 31, 2007. The exercise price was SEK 3.00 and the debentures had a fixed interest rate of 7 per cent. June 30, 2007 was the final day for conversion. As of June 30, 2007 convertible debentures valued at a total of SEK 400,000 had not been converted and were repaid at their nominal price in accordance with the terms of the loan.

6

TRICORONA ANNUAL REPORT 2007 • THE SHARES

(9)

TRICORONA ON THE STOCK ExCHANGE

Tricorona shares are traded on the OMX Nordic Exchange Stock- holm Mid Cap list. The company was first listed on the OMX (Stock- holm Stock Exchange) O-list in 1989 under the name Wermlands Guldbrytning. In 1996 the name was changed to Tricorona Mineral, and in 2003 the Annual General Meeting changed the name to Trico- rona. A trading lot consists of 2,000 shares.

During 2007, 230 (252) million Tricorona shares worth approximately SEK 1,905 (935) million traded hands. The price paid on the final day of trading for the year, December 28, 2007 was SEK 11.00 (4.98). The highest price paid during the year was SEK13.85 (6.35) on November 2, 2007, and the lowest price paid during the year was SEK3.72 (2.52) on February 14, 2007. Tricorona’s market capitalization at the end of the year amounted to 1,577 million, compared with SEK 687 million the year before.

OWNERSHIP STRUCTURE

At the end of the year, Tricorona had approximately 8,250 shareholders, an increase of more than 800 shareholders in comparison with the same time in 2006. A number of large, institutional owners were added in conjunction with the new share issues in the spring of 2006. The ten largest shareholders own approximately 36 percent of the outstanding shares. The board members, the management and the employees in the company own approximately 7 percent of the outstanding shares.

The 10 largest shareholders as of December 31, 2007

Shareholder No. of shares % of total

Volati Ltd 15,834,128 11.0

Fjärde AP-fonden 11,046,900 7.7

NVZ Förvaltning 5,000,000 3.5

SEB Life Ireland 4,088,000 2.9

Stena Metall Finans 3,578,000 2.5

Avanza Pension 3,316,951 2.3

Nordea Nordic Equity Hedge Fund 2,460,000 1.7

Svante Bengtsson 2,309,000 1.6

Close Int. Custody Services 2,300,000 1.6

Kerttu Eriksson 2,189 000 1.5

Other shareholders 91,281,064 63.7

Total no. of shares 143,403,043 100

No. of shareholders: 8,248

Ownership structure as of December 31, 2007

No. of owners No. of shares % of total

Swedish residents 8,019 96,394,491 67.2

Other Nordic 65 2,213,053 1.5

Other European 139 44,245,067 30.9

USA 7 328,607 0.2

Rest of world 18 221,825 0.2

Total 8,248 143,403,043 100

Distribution of shareholdings as of December 31, 2007

No. of owners No. of shares % of total

1-2 000 5,391 4,293,435 3.0

2 001-20 000 2,383 16,715,274 11.7

20 001-100 000 362 15,617,148 10.9

100 001-1 000 000 83 24,979,082 17.4

1 000 000- 29 81,798,104 57.0

Total 8,248 143,403,043 100

0 3 6 9 12 15 18

0 2 000 4 000 6 000 8 000 10 000 12 000 Sales volume

OMX Nordic Exchange Stockholm, SPI Tricorona shares

FEB JAN 2008 DEC NOV OCT

SEP AUG JUL

JUN MAY APR MAR FEB

JAN 2007

PRICE IN SEK Volume in thousands

Källa: SIX/Hallvarsson&Halvarsson

TRADING IN TRICORONA SHARES , JAN 2007 – FEB 2008

7 THE SHARES • TRICORONA ANNUAL REPORT 2007

(10)

As a fitting end to a year where climate change has been in focus around the world, the Nobel Peace Prize was awarded to Al Gore and the UN Intergovernmental Panel on Climate Change (IPCC), “for their efforts to build up and disseminate greater knowledge about man- made climate change, and to lay the foundations for the measures that are needed to counteract such change.”

FROM DOUBT TO AWARENESS

During 2007, the issue of climate change established itself as one of the most important topics on both political and mass media agendas. Consistent science on the subject was comple- mented by reports of harsh weather events from all around the world, and began to politically motivate decision makers to act.

During 2007, the UN Intergovernmental Panel on Climate Change (IPCC) presented three significant reports, in which the panel’s one-thousand-plus researchers and reviewers cleared away any last doubts concerning the seriousness of climate change. The IPCC also established that we humans are indeed responsible for global warming.

In the first report, which was presented in February, the researchers showed that the global mean temperature had already increased by 0.74 degrees Celsius compared with the pre- industrial era; and continued emissions are expected to increase the temperature by between 1.8 and 4.0 degrees by the year 2100.

The second report, released in April, dealt with effects and vulnerabilities. Here the au- thors establish that many changes have already manifested themselves as adverse effects on ani-

mal and plant life, precipitation and drought.

Furthermore, the report states, grave effects can be expected if emissions continue to increase;

and while the wealthy nations have primarily caused climate change, the developing countries suffer most.

In the third report, published in May, possible steps were suggested to reduce greenhouse gas emissions. The IPCC found that if the average temperature increase is to be limited to two degrees, global carbon dioxide emissions must reach their maximum no later than 2015 and then decrease by between 50 and 85 percent by the year 2050.

According to the report, it is possible to meet this goal. The technology exists and the economic disruption is affordable compared with what the consequences will cost if the temperature increases are allowed to become greater.

THE KyOTO PROTOCOL

In the Kyoto Protocol of 1997, the industrial nations of the world agreed to reduce their greenhouse gas emissions by about five percent on average (compared with 1990) during the period between 2008-2012.

Most countries of the world have ratified the Kyoto Protocol, but the United States has not. Australia signed as late as December 2007, which means the US is now the only major emitter of greenhouse gases that has not ratified the agreement.

The Kyoto Protocol covers six greenhouse gases, the most prevalent of which is carbon dioxide. The other five gases are measured in carbon dioxide equivalents, based on their impact on the climate or their Global Warming Potential (GWP) in relation to carbon dioxide.

Methane gas, for instance, has a GWP factor

8

TRICORONA ANNUAL REPORT 2007 • FROM DOUBT TO AWARENESS

(11)

of 21, which means that 1 ton of methane is as harmful as 21 tons of CO2.

Each nation that has ratified the Kyoto Protocol has made a different commitment to reducing its emissions. Canada and Japan, for instance, are committed to five percent reductions while Australia is allowed to increase its emissions by eight percent. The EU has a common commitment under the protocol to reduce emissions by eight percent.

Through a “distribution of burden” mechanism, member nations have agreed how much each country will be expected to contribute.

Denmark and Germany are required to reduce their emissions by 21 percent, for instance, while Sweden will actually be allowed to increase its emissions by four percent. Sweden has, however, set a purely national goal of decreasing emissions by four percent instead.

The UK has also committed itself to greater reductions than required, 21 percent instead of the imposed 12.5 percent.

AFTER KyOTO

In December 2007, negotiations on emissions reductions post-2012 began when over 10,000 participants from 180 countries gathered in Bali. The meeting was a success, and the signatories of the Kyoto Protocol decided that the industrial nations should reduce their emissions by 25 to 40 percent by 2020, and the US declared that its emissions would be slashed by 50 percent by 2050.

All the participating countries agreed that all industrial countries should be responsible for similar efforts. During the autumn of 2009, the deliberations will continue on a new agreement with final negotiations planned for Copenhagen. The questions that are up for discussion in the meantime deal with finding a common vision for future emission reductions, emission markets, deforestation, adaptation to a changing climate, technology transfers to the developing world and financing.

THE EU ENERGy AND CLIMATE PACKAGE The EU Commission proposed an energy and climate package in January, 2007 aimed at lowering EU emissions of greenhouse gases by at least 20 percent by 2020. It stipulates that the goal will be raised to 30 percent if a new international agreement can be reached on the issue.

The reduction will be realized in part through the EU system for trading emission allowances, and in part through measures in other areas. The trading system will be expanded and the number of allowances will be gradually reduced, so the emissions covered by the system will be reduced by 21 percent when compared to the levels of 2005.

In the areas not covered by the trading system, emissions are to be reduced by 10 percent on average compared with 2005. According to the proposal on burden sharing between EU member states, Sweden will reduce its emissions by 17 percent. At the same time, the Commission proposes that until a new international agreement is reached, member states will be allowed to use carbon credits from CDM and JI projects in other countries corresponding to three percent of the emissions that are not included in the trading system.

Global Warming Potential (GWP) in relation to carbon dioxide

Greenhouse gas Formula

Carbon dioxide equvalents

Carbon dioxide CO2 1

Methane CH4 21

Dinitrogen oxide N₂O 310

Flourinated hydro-

carbons HFC 140–11,700

Chlorofluorocarbons/

Perflourocarbons CFC/PFC 6,500–9,200

Sulphur hexafluoiride SF6 23,900

Emissions of greenhouse gases are measured in a unit called a carbon dioxide equivalent (CO2e). Greenhouse gases are each defined by their Global Warming Potential (GWP). For example, methane gas has a GWP factor of 21, which means that 1 ton of methane gas is as harmful as 21 tons of carbon dioxide.

gwp fOR sIx dIffeReNT gReeNhOuse gAses

9 FROM DOUBT TO AWARENESS • TRICORONA ANNUAL REPORT 2007

(12)

To the signatories of the Kyoto Protocol, the UN allocates emission allowances called Assigned Amount Units (AAU)—which match each country’s maximum allowed emissions for the period of commitment.

Each allowance or credit corresponds to one ton of CO2. To make it easier for countries to meet their obligations, and to make reductions as cost-efficient as possible, three flexible mechanisms have been devised:

International emissions trading – trade of a country’s allocated AAUs –

Clean Development Mechanism (CDM) – investments in projects that –

reduce emissions in developing countries

Joint Implementation (JI) projects – investments in projects that –

reduce emissions in another industrial country

The idea behind the mechanisms is that emissions reductions should be carried out where they cost the least—and costs vary substantially between different countries. From a climate change perspective it makes no difference where emissions (or the reductions of emissions) occur.

Emissions reductions from these different mechanisms may have different designations, but each corresponds to a one ton carbon dioxide credit on the emissions market. By purchasing any one of them, a country can count a reduction in another country against its own

obligations to cutback CO2. CDM and JI entities are usually called

“project based” mechanisms since they are tied to specific emission reduction projects.

International trade in emission allowances infers that countries are trading the AAUs that they have been allocated as a result of their obligations to reduce emissions under the Kyoto Protocol. This trading takes place during the Kyoto Protocol’s first commitment period (2008-2012) and should not be confused with the Emission Trading Scheme (ETS) within the EU. The EU ETS started with a “trial period”

of operations in 2005-2007, and is now continuing into a new trading period, 2008-2012.

The EU trading system deals only with carbon dioxide and trades only in European Union Allowances (EUAs), which are allocated to energy-intensive industries, and each represents one ton of carbon dioxide emissions per trading year. Plants that emit less carbon dioxide than they are allocated can sell their unused credits to other plants that exceed their allocated EUA emission ceilings.

The ETS encompasses somewhat more than 730 Swedish plants, and a total of approximately 13,000 plants in the entire EU, which are together responsible for approximately 40 percent of EU carbon dioxide emissions.

THE EMISSIONS MARKET

TRICORONA ANNUAL REPORT 2007 • THE EMISSIONS MARKET

10

(13)

THE EMISSIONS MARKET • TRICORONA ANNUAL REPORT 2007

In Sweden, 23.2 million carbon credits were allocated annually during 2005-2007, and during the 2008-2012 commitment period, Swedish companies will be allocated 22.5 million emission allowances annually.

Within the entire EU, the allocation figures for the two periods are 2,200 million and 2,100 million tons per year respectively.

Transactions take place on an electronic trading platform that is administered in Sweden by the Swedish Energy Agency. Anyone can open a trading account with the agency and begin to buy emission allowances. Any person or organization that does not need the credits to offset their own emissions, can remove as many EUAs as they purchase from the trading system, thereby preventing a corresponding amount of CO2 from being emitted into the atmosphere.

CLEAN DEVELOPMENT MECHANISM

The CDM makes it possible for industrialized countries with Kyoto Protocol commitments to obtain emission allowances to credit against their own emissions by investing in projects that reduce emissions in certain countries (primarily developing countries) that have not made such a commitment.

Projects within the CDM framework are not only intended to reduce or eliminate the release of greenhouse gases, but also to promote technology transfers and to enhance production capacity as well as sustainable development in the country where the investment is being made. Projects must also meet the additionality criterion, which means that the emission reductions were realized because of the CDM project and must be greater than those that would have been achieved had the project never existed.

The host country must confirm that the project contributes to sustainable development before the project can be approved and registered under the CDM. To ensure that the specified reductions are truly achieved, CDM projects are regulated by an administrative process.

The project must be registered and approved by the CDM Executive Board appointed by the UN convention on the climate.

Before any emission allowances are issued, an independent third

party must validate the reductions. The allowances generated by CDM projects are called Certified Emission Reductions (CERs). CERs can be purchased by sovereign states, for instance, to meet their Kyoto Protocol commitments or by businesses to meet their Kyoto obligations within the ETS.

JOINT IMPLEMENTATION

The JI concept is based on the same principle as the CDM, except that a JI project is carried out in an industrialized nation that has a Kyoto Protocol commitment. Unlike CDM projects, JI projects produce no new carbon credits. Instead some of the associated country’s AAUs are converted into Emission Reduction Units (ERUs).

JI can be carried out according to either “Track 1” or “Track 2”.

Under Track 1 the project can be approved and the credits transferred between countries without UN review. This is permissible when both countries have committed to limiting their emissions and the transaction is thus a “zero-sum game.” However, for Track 1 to apply, both countries must meet certain criteria, concerning the cataloging and reporting of greenhouse gases.

No countries have yet to meet all these criteria, so in the meantime all JI projects are being carried out in compliance with Track 2 proce- dures, according to which the projects are subject to monitoring similar to the rules in force for the CDM.

SUPPLEMENTARITy PRINCIPLE

According to the Kyoto Protocol, emissions trading and the use of project-based mechanisms (JI and CDM) should be “supplemental to domestic actions” to reduce emissions. These mechanisms should only be a limited part of a country’s efforts to meet its treaty obligations.

In order to meet the requirements of the so called “Supplementarity Principle” within the ETS, the EU Commission sets out how many CERs and ERUs each member state may use. For Sweden, the limit has been set at 10 percent of the allocated amount of European AAUs, but the limit will vary from plant to plant.

Mechanism Associated Credit/Allowance Abbreviation International Emissions

Trading Assigned Amount Unit AAU

European Trading

Scheme (ETS) European Union Allowance EUA

Clean Development

Mechanism (CDM) Certified Emission Reduction CER Joint Implementation (JI) Emission Reduction Unit ERU No. of CDM-

projects

Annual average of CERs (millions)

No. of CERs through 2012 (millions)

Under validation 1,775 211 1,084

Under registration 149 21 110

Registered 859 184 1,156

CDM projects in pipeline 2,783 418 2,351

Recognized CDM Projects in the World, January 2008 Definitions of Flexible Mechanisms according to the Kyoto Protocol

11

(14)

A MARKET EMERGES

As described earlier, each of the different types of emission allowances represents the equivalent of one ton of carbon dioxide and can be traded on the emissions market. In addition to international trade under the Kyoto Protocol and the ETS, demand for emission credits is generated by Japanese firms that have entered into voluntary agreements with their government, for instance, and by several regional and voluntary trading systems that have developed in countries not currently subject to the Kyoto Protocol.

TRADING IN PRACTICE

According to figures compiled by the Norwegian market analysts, Point Carbon, 1,400 million carbon credits were traded in the ETS in 2007.

That is up from 817 million in 2006.

Approximately 70 percent of all trades take place directly between parties in bilateral, over the counter (OTC) contracts, while about 30 percent take place at exchanges. The largest established exchange is the European Climate Exchange (ECX) which administered approximately 87 percent of all exchange-based trades in 2007.

During the first half of 2007, 292 million CERs and about 10 million ERUs switched hands. The trade of CERs from CDM projects has sky- rocketed in recent years. In 2005 approximately 397 million changed hands, and in 2006 the number was 523 million. The turnover here corresponds to the number of contracts of sale for carbon credits carried out. Such contracts usually cover the volume that the project is expected to generate through 2012.

As approved CDM projects are verified and registered by the CDM Executive Board, CERs are issued. By December 2007, the CDM Execu- tive Board had issued 98 million CERs.

The supply of CERs through 2012 can be estimated from the projected volume of credits for CDM projects in the pipeline. According to figures compiled by the Swedish Energy Agency, there were 2,783 such projects at the time, which are forecast cumulatively to generate 2,300 million carbon credits. In the past year, approximately 1,000 projects have been added while the number of carbon credits has increased by 800 million. The number of registered projects has increased from over 400 to 859.

How the Emissions Market Works

Auu, emission allowances assigned to

countries

National programs for emission rights

acquisition

Japan, Canada, New Zealand

CdM/JI

eTs, the eu trading system

demand supply

Countries private sector

12

TRICORONA ANNUAL REPORT 2007 • THE EMISSIONS MARKET

(15)

13 THE EMISSIONS MARKET • TRICORONA ANNUAL REPORT 2007

Assume that Company A and Company B each annually emit 100,000 tons of carbon dioxide and that the government allocates them both 95,000 emission allowances. Each such carbon credit entitles the hol- der to emit one ton of carbon dioxide. Consequently, Company A and Company B must each cover a deficit of 5,000 emission allowances in order to avoid penalties. This can be achieved in two ways:

1. Reduce emissions by 5,000 tons.

2. Purchase 5,000 carbon credits on the open market at the market price.

For the sake of simplicity, assume that the market price per carbon credit is €25 per ton, and the cost of reducing emissions amounts to only €5 per ton for Company A. Company A will therefore decide to reduce its emissions because reductions are cheaper than purchasing carbon credits. Company A decides, in fact, to reduce its emissions by10,000 tons, which means that it now holds 5,000 unused carbon credits that can be sold.

Company B finds itself in a less fortunate situation. The costs for reducing its emissions amount to €30 per ton, which means that it is more advantageous for Company B to purchase carbon credits at €25 per ton rather than reducing emissions from its own plants.

Company A spends a total of €50,000 on reducing emissions by 10,000 tons and sells its 5,000 unused emissions allowances at €25 each, for a total of €125,000. Net earnings for Company A are €75,000, compared to a net cost of €25,000 for the mandated reduction of its emissions in-house had the EU ETS trading system not been in place.

Company B spends a total of €125,000 to acquire 5,000 emission allowances at €25 each. The net cost, €125,000, can be compared to what Company B would have had to spend (€150,000) to meet the mandated reduction of its emissions in-house had the EU ETS trading system not been in place.

Because only companies that actually reduce their emissions by more than the prescribed amount can sell emission allowances (Com- pany A, in this example), the carbon credits that are purchased (by Company B) represent a genuine reduction in emissions. This means that emissions overall will drop in accordance with the country’s commitment to the Kyoto Protocol, but that the emissions reductions take place where they make the most sense economically.

exAMpLes Of eMIssIONs TRAdINg

(16)

Portfolio Model – Guaranteed Delivery

WHAT TRICORONA HAS TO OFFER

Tricorona’s business concept is to build up a portfolio consisting of a large number of Kyoto Protocol Clean Devel- opment Mechanism (CDM) and Joint Implementation (JI) projects and thereafter to sell the associated emission allowances principally to European industries. Value is added in these transactions as the company identifies early- stage projects, processes the applications to register them with the UN, and monitors progress in each case until the associated emission allowances are issued.

By guaranteeing the project owner a set price for the project’s emission allowances over several years, the company provides a financial foundation that makes many of these projects possible. Further value is created for the project proprietor as Tricorona assumes the volume risk associated with each individual project. Working with Tricorona, the project owner is obliged to deliver the emission allowances that the project actually generates, but has no obligation to deliver emission allowances in unforeseen situations where the project fails to generate any.

Tricorona’s customers, in turn, are spared the need to assume the risks of non-production associated with individual projects since Tricorona’s diversified project portfolio spreads these risks among many different projects.

PROJECT A

TRICORONA PROJECT

B PROJECT

C

PROJECT D

PROJEC T E

PROJECT F

PROJECT

G CER/ERU CER/ERU BUyER

14

TRICORONA ANNUAL REPORT 2007 • WHAT TRICORONA HAS TO OFFER

(17)

A diversified project portfolio protects the aggregate investment from individual project risks. Most of the projects in Tricorona’s portfolio are contracted to deliver all the emission allowances they generate for a period of seven or ten years. These terms reflect the UN accreditation regulations for CDM projects, which also apply for a term of either seven or ten years. A seven-year accreditation

period can be re-registered twice, giving a total maximum term of 21 years.

In most of Tricorona’s purchase agreements, the company has committed itself to buy—or been granted an option to buy—

CERs even after re-registration. Tricorona acquires emission allowances via agreements with project owners, according to which the price is determined today, yet delivery and

payment take place at a later date. As the exclusive purchaser of CERs from a specific project, Tricorona obtains a significant degree of influence over the project, thus mitigating many project-specific risks. Tricorona’s current operations do not include direct investment in the underlying physical projects, but only in the administrative process that leads to the issuance of emission allowances.

The 20 largest purchasers in the world of CDM/JI projects as of December 31, 2007

No. of projects

Eco Securities – Ireland 206

Tricorona – Sweden 98

IBRD – World Bank 68

EDF Trading – UK 64

ENEL – Italy 58

AgCert – Ireland 51

Agrinergy – UK 51

Trading Emissions – UK 51

RWE – German 47

Mitsubishi – Japan 44

Cargill International – USA 43

Nobel Carbon – Hong Kong 43

CAMCO – UK 37

Carbon Resource Management – UK 33

Energy Systems International – UK 32

Kommunalkredit – Austria 30

Mitsubishi UFJ Securities – Japan 28

Climate Change Capital – UK 28

MGM Carbon Portfolio – USA 28

Endesa – Spain 26

Source: UNEP Risoe Centre on Energy, CDM Pipeline Overview

15 WHAT TRICORONA HAS TO OFFER • TRICORONA ANNUAL REPORT 2007

(18)

0 10 20 30 40 50

0-20 21-30 31-50 51-100

Biomass, 1 %

Efficiency upgrading, 21

%

Methane, 0 % Wind power

, 14

%

Hydroelectric, 64

% 101-300 301-600 >600

Contracted, 27% Validated, 44 % Registered, 14

%

Registration pending, 15

%

India, 12

%

China, 86

% Vietnam, 2 % No. of

projects

CO₂, thousands of tons per year

DIFFERENT DEGREES OF MATURITy As of December 31, 207, Tricorona’s portfolio comprises 163 CDM projects, of which 120 have been added this year. These projects are principally engaged in the field of renewable energy and energy conservation. Every project is subjected to a thorough in-house review process before it can be added to the portfolio.

Projects in the portfolio demonstrate different degrees of maturity, i.e. they find themselves at different stages in the CDM process. The portfolio currently includes primarily projects in China and India, but Tricorona is actively seeking to expand its presence in new geographical markets.

The projects in the portfolio vary in size from one-time deliveries to ventures that are projected to generate substantial emission reductions for up to 21 years. The projects vary from 10,000 to 800,000 CERs per year. Approximately 70 percent of them fall into the interval between 30,000 and 150,000 CERs annually.

Approximately 80 percent of the CDM projects in the portfolio involve the production of electricity from renewable energy sources. Most of Tricorona’s commitments are to energy conservation projects.

Tricorona is also actively engaged in registering projects according to the Gold Standard. This voluntary benchmark, sponsored by the World Wildlife Fund (among others), guarantees that CDM projects foster sustainable development.

INTERNATIONAL MARKET

The market for emission allowances that has emerged as a result of the Kyoto Protocol is limited by no borders and thus genuinely global. Climate change is a worldwide problem that requires global solutions beyond the capabilities and self-interests of individual nations.

This market is growing rapidly and consists of many different parties that can basically be divided into two groups:

– COMPLIANCE

(those who buy CERs to meet their legal or treaty obligations)

• Energy companies

• Industrial companies

• Governments – VOLUNTARy

(those who buy CDRs voluntarily for any number of reasons)

• Financial firms

• Non-government organizations (NGOs)

• Non-industrial companies

The voluntary group consists mainly of financial parties who commercially trade emission allowances for profit while, at the same time, supporting a futures’ market. These financial parties contribute to increased liquidity and thereby a better-function- ing market.

Today Tricorona is a significant player on the international market for project-linked emission allowances. Despite increased competition during 2007, Tricorona ascended to second place on the UNEP list of the world’s most active purchasers of CERs. Please see www.cdmpipeline.org/cers.htm for more details. Tricorona is listed there as “Carbon Asset Management Sweden”.

Tricorona’s Portfolio by Project Size, December 2007

pROJeCT desIgN dOCuMeNT (pdd) sTAge

desIgNATed NATIONAL

AuThO- RITy (dNA) AppROvAL

vALIdATION by dOe

CDM Project Registration Process

RegIsTRATION by CdM exeCuTIve bOARd

veRIfICATION by dOe (desIgNATed OpeRATIONAL

eNTITy)

CeRs Issued by CdM exeCuTIve bOARd

The KyOTO

MARKeT The

vOLuNTARy MARKeT

CeRs, thousands*

Estimated delivery

2008

Estimated delivery

2009

Total 2008-2012

Total 2013-2020

Total 2021-

Contracted purchase volume 5,015 11,306 68,273 73,524 43,915

Sold volume 310 310 1,165

Net position 4,758 10,996 67,108 73,524 43,915

* Contracted volume refers to purchases of emission allowances for future delivery. The contracted volumes specified are not guaranteed; rather they are estimates based upon what each project is expected to generate. Actual delivered volumes from individual projects may vary significantly from the contracted volume.

Sold volumes refer to the sales of emission allowances for guaranteed future delivery.

The Tricorona Portfolio

16

TRICORONA ANNUAL REPORT 2007 • WHAT TRICORONA HAS TO OFFER

(19)

PRODUCTION/SUPPly MARKET/END USERS

INvesTMeNT pROJeCT

deveLOpMeNT bROKeRAge TRAdINg whOLesALe ReTAIL

0 10 20 30 40 50

0-20 21-30 31-50 51-100

Biomass, 1 %

%

, 14

%

Hydroelectric, 64

% 101-300 301-600 >600

%

India, 12

%

China, 86

%

Vietnam, 2 % No. of

projects

The Tricorona Portfolio, by type of project

0 10 20 30 40 50

0-20 21-30 31-50 51-100

Biomass, 1 %

%

, 14

%

Hydroelectric, 64

% 101-300 301-600 >600

%

India, 12

%

China, 86

%

Vietnam, 2 % No. of

projects

The Tricorona Portfolio, by CDM stage

0 10 20 30 40 50

0-20 21-30 31-50 51-100

Biomass, 1 %

%

, 14

%

Hydroelectric, 64

% 101-300 301-600 >600

%

India, 12

%

China, 86

%

Vietnam, 2 % No. of

projects

The Tricorona Portfolio, by geographical location Market Participants, from Investment to Retail

CLIMATE CHANGE CAPITAL

MGM INTERNATIONAL

ECO SECURITIES

TRICORONA

AGCERT

EVOLUTION

CAMCO

MULTINATIONAL TRADING COMPANIES

BANKS AND FUNDS GOVERNMENT AND NGOS

SOUTH POLE

JAPANESE POWER COMPANIES

ECONERGy

TRADING EMISSIONS

CARBON NEUTRAL CO.

CLIMATE CARE

17 WHAT TRICORONA HAS TO OFFER • TRICORONA ANNUAL REPORT 2007

(20)

TRICORONA ANNUAL REPORT 2007 • THE MARKET FOR CARBON OFFSETTING

THE MARKET FOR CARBON OFFSETTING

Then suddenly, in 2005, the dormant market awoke. A few large, global businesses, e.g. Nike, grasped the marketing potential of buying carbon credits and publicizing their commitment to retailers and consumers alike—and the market took off.

The following year, 2006, the voluntary market for carbon offsetting expanded by 200 percent. Nike was followed by many others and the phenomenon spread to Europe.

During 2007, the size of the global market was estimated to be about 24 million tons of CO2. The US and Canada were responsible for 68 percent of this figure; Europe, 27 percent; Japan, 4 percent; and the rest of the world, 1 percent.

In North America, voluntary purchases consist almost exclusively of American projects outside the UN’s CDM system. The trend is, however, towards an increased demand for quality—British Airways moved from VERs (Voluntary Emission Reductions) to CERs for instance—and thus toward:

Additionality

– , i.e. establishing that the projects would not have oc- curred without the additional incentive provided by emission reductions credits.

Genuine reduction

– , as more projects represent a move to wind, hydro and biomass power and less to tree planting.

Third party verification

– , seen in the shift to better audited projects, which benefits projects certified by the UN’s CDM protocol and registered by the CDM board. This registration also provides protection from double accounting and/or duplicate sales.

This shift in trends falls completely in line with Tricorona’s quality requirements, i.e. that all projects in the portfolio are of CDM quality or the higher Gold Standard, which is a quality benchmark defined by more than 50 NGOs such as WWF International (the World Wildlife Fund).

Recently, governments in several countries have begun to show interest in how the players on the voluntary marker act. For instance, the UK Department for Environment, Food and Rural Affairs (DEFRA) has developed a “Code of Best Practice”, recommending purchases of only the following qualities:

Certified Emission Reductions (CERs), compliant with the UN CDM –

system

EU Allowances (EUAs), carbon credits from the European trading –

system

Emission Reduction Units (ERUs).

–

Similarly, the Swedish energy authorities recommend that voluntary carbon offsetting should be associated with the following qualities:

Certified Emission Reductions (CERs), compliant with the UN CDM –

system

EU Allowances (EUAs), carbon credits from the European Trading –

System

The market for the voluntary offsetting of carbon emissions first appeared in the United States. Initially, mostly small, environmentally conscious companies realized the advantages of neutralizing their impact on the climate – partly because they felt an environmental responsibility, which they could meet by purchasing carbon credits, and partly because the commitment they thereby made was good for their business image.

Businesses, 80

%

Governments, 12

%

Individuals, 5 %

NGOs, 2 % Others, 1 %

Type of Carbon Credit Buyers by Volume, Globally

Source: State of the Voluntary Carbon Markets, 2007

Market Forecast for Voluntary Carbon Offsetting

0 200 400 600 800 1,000 1,200

2012 2011 2010 2009 2008 2007 2006 2005 2004 2004 2003 2002 CO₂ equivalents (millions tons)

18

(21)

THE MARKET FOR CARBON OFFSETTING • TRICORONA ANNUAL REPORT 2007

Thanks to the broad scope and global coverage of Tricorona’s business, TCP was able from the outset to offer customers a wide range of high quality projects from a variety of different countries and industries—all at the customer’s discretion. TCP uses sophisticated tools to calculate and account for the climate impact of the packages it delivers.

TCP also quickly positioned itself to meet the demands made by governments and administrators in several European countries. The quality level of TCP’s projects reflects their CER or Gold Standard certification, i.e. the highest existing norms.

A maturing market that demands higher quality tends to benefit TCP, since most of its competitors sell Voluntary Emission Reductions (VERs), that ordinarily don’t meet additionality and third-party verification demands.

One sign of TCP’s credibility in this field: both the Swedish Energy Administration and WWF China have links on their websites to TCP as a provider of reliable carbon offsetting. Another indication of TCP’s credibility can be seen in the fact that the company was chosen to neu-

tralize the climate impact of the UN General Assembly’s recent meeting on climate change.

CARBON OFFSETTING – PART OF MORE BUSINESS MODELS In Sweden, we are seeing an interesting move among the companies purchasing carbon credits: they are incorporating carbon offsetting in their business models and integrating climate awareness into the brands their customers buy.

The US market continues to show signs of explosive growth. Fol- lowing in Nike’s footsteps, global corporations such as Dell, Google, Ya- hoo!, and a number of consumer-oriented conglomerates have declared that they intend to neutralize their businesses’ climate impact and thus significantly increase their purchases of carbon credits on the voluntary market.

In Europe, the United Kingdom is clearly the most mature market, closely followed by Sweden, France and Germany.

TRICORONA CLIMATE PARTNER

Tricorona Climate Partner (TCP) was founded in 2007 and almost immediately became the Nordic region’s leading force in the voluntary carbon offsetting directed towards businesses, NGOs and private citizens.

Our business concept is to provide one-stop service, ranging from calculating a company’s or individual’s carbon footprint to the delivery of carbon credits that neutralize that impact on the climate.

19