Evolution Markets Brokers CDM Carbon Credit Trade Indexed to European Emission Allowances

Transaction Uses Financial Hedging Tool New To the Carbon Market to Help Manage Risk

London, England (March 28, 2006): Evolution Markets Ltd. announces today it has arranged one of the first trades of carbon reduction credits under the Kyoto Protocol’s Clean Development Mechanism (CDM) to be indexed to the price of European Union emission allowances. RNK Capital LLC (RNK), a New York based Investment Firm, specializing in environmental markets, administered the sale of Certified Emission Reductions (CERs) for an RNK affiliate. RNK trades and manages carbon and other environmental products, including certified emission reductions (CERs) and emission reductions units (ERUs) on behalf of its affiliates. The EUROPEAN CARBON FUND (ECF), one of the largest global funds devoted to the greenhouse gas emissions market, purchased the credits.

Under the transaction, ECF will buy 3.6 million CERs from an RNK affiliate. The candidate CERs are from a landfill gas project in South America. The credits are to be generated during the 2006-2012 period. ECF will buy a portion of the credits on a conventional fixed price basis. The fund will also purchase a portion of the CERs at a price determined as a percentage of the cost of European Union Allowances (EUAs) at the time of the transfer of credits. The trade is priced as an index to the European ETS to manage price risk in both the European allowance and Kyoto credit markets.

“Since you can use certified emission reductions within the EU emissions trading scheme, this hybrid structure is an excellent means to engage in risk management across the two largest carbon markets,” said Andrew Ertel, President of Evolution Markets. “This transaction essentially allows both the buyer and seller to hedge their risk that EUA or CER prices may move against them by pegging the price of credits to the price of allowances. Such indexed deals will become a standard risk management tool for the carbon market.”

Indexed pricing combinations allow both the buyer and seller to mitigate volatile carbon market price risk. In typical indexed transactions, the price of a portion of CERs can be determined by taking a percentage of the price of EUAs at the time of transfer. The price of EUAs will be set by a daily EUA price index.

“The interaction of fixed and floating pricing used for this sale provided a solution to many of the risks concerning both Buyers and Sellers in today’s market,” said Robert Koltun, the portfolio manager and managing member of RNK. “As a specialist in transactional and project risk management, and a liquidity provider in early stage markets, RNK expects to offer further innovative risk management solutions for the carbon market in the near future.” RNK’s portfolio includes an extensive pool of projects generating CERs and ERUs.

“As one of the largest buyers of carbon credits in the world, we have a keen interest to employ risk management techniques that ensure the greatest return for our investors,” said Laurent Segalen, Investment Manager, EUROPEAN CARBON FUND. “This indexed transaction achieves our objective and allows us to hedge price risk not only in CERs, but also the European emissions scheme.”

This transaction is one of more than a half-dozen high-volume trades of CERs employing innovative risk management tools facilitated in the last five months by Evolution Markets, one of the largest brokers of credits and allowances in the global carbon market.