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SCHEDULE A

AUDIT COMMITTEE CHARTER

of

DynaMotive Energy Systems Corporation (the Company)

Purpose: Responsibilities and Authority

The audit committee (the Committee) shall carry out its
responsibilities under applicable laws, regulations and stock exchange
requirements with respect to the employment, compensation and oversight of the
Companys independent auditor, and other matters under the authority of the
Committee. The Committee also shall assist the Board of Directors in carrying
out its oversight responsibilities relating to the Companys financial,
accounting and reporting processes, the Companys system of internal accounting
and financial controls, the Companys compliance with related legal and
regulatory requirements, and the fairness of transactions between the Company
and related parties. In furtherance of this purpose, the Committee shall have
the following responsibilities and authority:

Relationship with Independent
Auditors.

The Committee shall have the sole
authority to appoint or replace the independent auditor.

The Committee shall be directly
responsible for the compensation and oversight of the work of the independent
auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing
or issuing an audit report or related work.

The independent auditor shall report
directly to the Committee.

The Committee shall approve in advance
all audit and permitted non-audit services with the independent auditors,
including the terms of the engagements and the fees payable. The Committee may
delegate to a subcommittee the authority to grant pre-approvals of audit and
permitted non-audit services, provided that the decision of any such
subcommittee shall be presented to the full Committee at its next scheduled
meeting.

At least annually, the Committee shall
review and evaluate the experience and qualifications of the lead partner and
senior members of the independent auditor team.

At least annually, the Committee shall
obtain and review a report from the independent auditor regarding:

the independent auditors internal
quality-control procedures;

any material issues raised by the most
recent internal quality-control review, or peer review, of the auditor, or by
any inquiry or investigation by governmental or professional authorities within
the preceding five years respecting one or more independent audits carried out
by the firm;

any steps taken to deal with any such
issues; and

all relationships between the
independent auditor and the Company.

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At least annually, the Committee shall
evaluate the qualifications, performance and independence of the independent
auditor, including considering whether the auditors quality controls are
adequate and the provision of permitted non-audit services is compatible with
maintaining the auditors independence.

The Committee shall ensure the rotation
of the lead (or coordinating) audit partner having primary responsibility for
the audit, the concurring partner responsible for reviewing the audit, and other
audit partners as required by law.

The Committee shall consider whether,
in order to assure continuing auditor independence, it is appropriate to adopt a
policy of rotating the lead audit partner or even the independent auditing firm
itself on a regular basis.

The Committee shall recommend to the
Board policies for the Companys hiring of employees or former employees of the
independent auditor who were engaged on the Companys account or participated in
any capacity in the audit of the Company.

Financial Statement and Disclosure Review.

The Committee shall review and discuss
with management and the independent auditor the annual audited financial
statements, including disclosures made in managements discussion and analysis,
and recommend to the Board whether the audited financial statements should be
filed with applicable securities regulatory authorities and included in the
Companys annual reports, including its annual report on Form 20-F.

The Committee shall review and discuss
with management (and, to the extent the Committee deems it necessary or
appropriate, the independent auditor) the Companys quarterly financial
statements, including disclosures made in managements discussion and analysis,
and recommend to the Board whether such financial statements should be filed
with applicable securities regulatory authorities.

The Committee shall review and discuss
with management and the independent auditor significant financial reporting
issues and judgments made in connection with the preparation of the Companys
financial statements, including the independent auditors assessment of the
quality of the Companys accounting principles, any significant changes in the
Companys selection or application of accounting principles, any major issues as
to the adequacy of the Companys internal controls and any special steps adopted
in light of material control deficiencies.

At least annually and prior to the
publication of annual audited financial statements, the Committee shall review
and discuss with management and the independent auditor a report from the
independent auditor on:

all critical accounting policies and
practices used by the Company;

all alternative accounting treatments
of financial information that have been discussed with management since the
prior report, ramifications of the use of such alternative disclosures and
treatments, the treatment preferred by the independent auditor, and an
explanation of why the independent auditors preferred method was not adopted;
and

other material written communications
between the independent auditor and management since the prior report, such as
any management letter or schedule of unadjusted differences, the development,
selection and disclosure of critical accounting

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estimates, and analyses of the effect
of alternative assumptions, estimates or GAAP methods on the Companys financial
statements.

Prior to their filing or issuance, the
Committee shall review and discuss with management the Companys Form 20-F
Report, quarterly and annual earnings press releases, and other financial press
releases, including the use of pro forma or adjusted non-GAAP information.

The Committee shall review and discuss
with management the financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be specific or it may be in
general regarding the types of information to be disclosed and the types of
presentations to be made.

Conduct of the Annual Audit. The Committee shall oversee
the annual audit, and in the course of such oversight the Committee shall have
the following responsibilities and authority:

The Committee shall meet with the
independent auditor prior to the audit to discuss the planning and conduct of
the annual audit, and shall meet with the independent auditor as may be
necessary or appropriate in connection with the audit.

The Committee shall ascertain that the
independent auditor is registered and in good standing with the Canadian Public
Accounting Board and the Public Company Accounting Oversight Board and that the
independent auditor satisfies all applicable Canadian independence standards,
Independence Standards Board Standard No. 1, and SEC Regulation S-X, Section
2-01.

The Committee shall discuss with the
independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the audit, including

the adoption of, or changes to, the
Companys significant auditing and accounting principles and practices as
suggested by the independent auditor, internal auditors or management;

the management letter provided by the
independent auditor and the Companys response to that letter; and

any difficulties encountered in the
course of the audit work, including any restrictions on the scope of activities
or access to requested information, and any significant disagreements with
management.

The Committee shall obtain from the
independent auditor assurance that the audit was conducted in a manner
consistent with Section 10A of the Securities Exchange Act of 1934 and that, in
the course of conducting the audit, the independent auditor has not become aware
of information indicating that an illegal act has or may have occurred or, if
such an act may have occurred, that the independent auditor has taken all action
required by Section 10A(b) of the Securities Exchange Act of 1934.

The Committee shall make such inquiries
to the management and the independent auditor as they deem necessary or
appropriate to satisfy themselves regarding the efficacy of the Companys
financial and internal controls and procedures and the auditing process.

Compliance and Oversight.

The Committee shall meet periodically
with management and the independent auditor in separate executive sessions. The
Committee may also, to the extent it deems necessary or

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appropriate, meet with the Companys
investment bankers and financial analysts who follow the Company.

The Committee shall discuss with
management and the independent auditor the effect of regulatory and accounting
initiatives as well as off-balance sheet structures on the Companys financial
statements.

The Committee shall discuss with
management the Companys major financial risk exposures and the steps management
has taken to monitor and control such exposures, including the Companys risk
assessment and risk management policies.

At least annually and prior to the
filing of the Form 20-F, the Committee shall review with management and the
independent auditor the disclosure controls and procedures and confirm that the
Company (with CEO and CFO participation) has evaluated the effectiveness of the
design and operation of the controls within 90 days of the date of filing of the
Form 20-F report. The Committee also shall review with management and the
independent auditor any deficiencies in the design and operation of internal
controls and significant deficiencies or material weaknesses therein and any
fraud involving management or other employees who have a significant role in the
Companys internal controls. As a part of that review, the Committee shall
review the process followed in preparing and verifying the accuracy of the CEO
and CFO annual certifications required to be included in the Form 20-F Report.

At least annually and prior to the
filing of the Form 20-F, the Committee shall review with management and the
independent auditor managements internal control report and assessment of the
effectiveness of the internal controls and procedures, and the independent
auditors report on and attestation to managements assessment.

The Committee shall establish
procedures for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.

The Committee shall discuss with
management and the independent auditor any correspondence with regulators or
governmental agencies and any employee complaints or reports which raise
material issues regarding the Companys financial statements or accounting
policies.

At least annually, the Committee shall
meet with the Companys legal counsel and discuss any legal matters that may
have a material impact on the financial statements or the Companys compliance
policies.

The Committee shall prepare all reports
required under applicable laws, regulations and stock exchange requirements.

Related Party Transactions.

The Committee shall review for fairness
to the Company proposed transactions, contracts and other arrangements between
the Company and its subsidiaries and any related party or affiliate, and make
recommendations to the Board whether any such transactions, contracts and other
arrangements should be approved or continued. The foregoing shall not include
any compensation payable pursuant to any plan, program, contract or arrangement
subject to the authority of the Companys Compensation Committee.

As used herein the term related party
means any officer or director of the Company or any subsidiary, or any
shareholder holding a greater than 5% direct or indirect financial or voting

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interest in the Company, and the term
affiliate means any person, whether acting alone or in concert with others,
that has the power to exercise a controlling influence over the Company and its
subsidiaries.

Structure and Membership

Number and qualification. The Committee shall consist of
three persons unless the Board should from time to time otherwise determine. All
members of the Committee shall meet the experience and financial literacy
requirements of Multilateral Instrument MI 52-110 (MI 52-110). At least one
member of the Committee shall be a financial expert as defined in Section 16.A
of Form 20-F.

Selection and Removal. Members of the Committee shall be
appointed by the Board, upon the recommendation of the Nominating and Corporate
Governance Committee. The Board may remove members of the Committee at any time
with or without cause.

Independence. All of the members of the Committee shall
be independent as required for audit committees by MI 52-110 and Securities
and Exchange Commission Rule 10A (SEC Rule 10A). The relevant portions of the
foregoing are attached to this Charter as exhibits.

Chair. Unless the Board elects a Chair of the Committee,
the Committee shall elect a Chair by majority vote.

Compensation. The compensation of the Committee shall be
as determined by the Board.

Term. Members of the Committee shall be appointed for
one-year terms. Each member shall serve until his or her replacement is
appointed, or until he or she resigns or is removed from the Board or the
Committee.

Procedures and Administration

Meetings. The Committee shall meet as often as it deems
necessary in order to perform its responsibilities, but not less than quarterly.
The Committee shall keep minutes of its meetings and any other records as it
deems appropriate.

Subcommittees. The Committee may form and delegate
authority to one or more subcommittees, consisting of at least one member, as it
deems appropriate from time to time under the circumstances.

Reports to the Board. The Committee shall report (orally
or otherwise) regularly to the Board following meetings of the Committee with
respect to such matters as are relevant to the Committees discharge of its
responsibilities, and shall report in writing on request of the Chairman of the
Board.

Charter. The Committee shall, at least annually, review
and reassess the adequacy of this Charter and recommend any proposed changes to
the Board for approval.

Independent Advisors. The Committee shall have the
authority to engage such independent legal and other advisors as it deems
necessary or appropriate to carry out its responsibilities. Such independent
advisors may be regular advisors to the Company. The Committee is empowered,
without further action by the Board, to cause the Company to pay appropriate
compensation to advisors engaged by the Committee.

Investigations. The Committee shall have the authority
to conduct or authorize investigations into any matters within the scope of its
responsibilities as it deems appropriate, including the authority to request any
Officer or other person to meet with the Committee and to access all Company
records.

Annual Self-Evaluation. The Committee shall evaluate its
own performance at least annually.

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Additional Powers

The Committee shall have such other duties as may be delegated
from time to time by the Board of Directors.

Limitation of Audit Committees Role

While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Companys financial statements and disclosures
are complete and accurate and are in accordance with GAAP and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.

Exhibit A

Audit Committee Member Independence and
Financial Literacy Requirements

Section 1.4 of MI 52-110

Meaning of Independence:

(1)        A member of an
audit committee is independent if the member has no direct or indirect material
relationship with the issuer.

(2)        For the
purposes of subsection (1), a material relationship means a relationship which
could, in the view of the issuers board of directors, reasonably interfere with
the exercise of a members independent judgement.

(3)        Despite
subsection (2), the following individuals are considered to have a material
relationship with an issuer:

(a)        an individual who
is, or has been, an Employee or executive officer of the issuer, unless the
prescribed period has elapsed since the end of the service or employment;

(b)        an individual whose
immediate family member is, or has been, an executive officer of the issuer,
unless the prescribed period has elapsed since the end of the service or
employment;

(c)        an individual who
is, or has been, an affiliated entity of, a partner of, or employed by, a
current or former internal or external auditor of the issuer, unless the
prescribed period has elapsed since the persons relationship with the internal
or external auditor, or the auditing relationship, has ended;

(d)        an individual whose
immediate family member is, or has been, an affiliated entity of, a partner of,
or employed in a professional capacity by, a current or former internal or
external auditor of the issuer, unless the prescribed period has elapsed since
the persons relationship with the internal or external auditor, or the auditing
relationship, has ended;

(e)        an individual who
is, or has been, or whose immediate family member is or has been, an executive
officer of an entity if any of the issuers current executive officers serve on
the entitys compensation committee, unless the prescribed period has elapsed
since the end of the service or employment;

(f)        an individual who

(i)        has a relationship
with the issuer pursuant to which the individual may accept, directly or
indirectly, any consulting, advisory or other compensatory fee from the issuer
or any subsidiary entity of the issuer, other than as remuneration for acting in
his or her capacity as a member of the board of directors or any board
committee, or as a part-time chair or vice-chair of the board or any board
committee; or

(ii)       receives, or whose
immediate family member receives, more than $75,000 per year in direct
compensation from the issuer, other than as remuneration for acting in his or
her capacity as a member of the board of directors or any board committee, or as
a part-time chair or vice-chair of the board or any board committee, unless the
prescribed period has elapsed since he or she ceased to receive more than
$75,000 per year in such compensation.

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(g)        an individual
who is an affiliated entity of the issuer or any of its subsidiary entities.

(4)        For the
purposes of subsection (3), the prescribed period is the shorter of

(a)        the period
commencing on March 30, 2004 and ending immediately prior to the determination
required by subsection (3); and

(b)        the three year
period ending immediately prior to the determination required by subsection (3).

(5)        For the purposes
of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner
whose interest in the internal or external auditor is limited to the receipt of
fixed amounts of compensation (including deferred compensation) for prior
service with an internal or external auditor if the compensation is not
contingent in any way on continued service.

(6)        For the
purposes of clause (3)(f), compensatory fees and direct compensation do not
include the receipt of fixed amounts of compensation under a retirement plan
(including deferred compensation) for prior service with the issuer if the
compensation is not contingent in any way on continued service.

(7)        For the
purposes of subclause 3(f)(i), the indirect acceptance by a person of any
consulting, advisory or other compensatory fee includes acceptance of a fee by

(a)        a persons spouse,
minor child or stepchild, or a child or stepchild who shares the persons home;
or

(b)        an entity in which
such person is a partner, member, an officer such as a managing director
occupying a comparable position or executive officer, or occupies a similar
position (except limited partners, non-managing members and those occupying
similar positions who, in each case, have no active role in providing services
to the entity) and which provides accounting, consulting, legal, investment
banking or financial advisory services to the issuer or any subsidiary entity of
the issuer.

(8)        Despite
subsection (3), a person will not be considered to have a material relationship
with the issuer solely because he or she

(a)        has previously acted
as an interim chief executive officer of the issuer, or

(b)        acts, or has
previously acted, as a chair or vice-chair of the board of directors or any
board committee, other than on a full-time basis.

Exhibit B

SEC Rule 10A-3

In order to be considered independent for the purposes of SEC
Rule 10A-3, a director must meet the following independence standards.

(i)        Each member of
the audit committee must be a member of the board of directors of the listed
issuer, and must otherwise be independent.

(ii)       In order to be
considered to be independent, a member of an audit committee may not, other than
in his or her capacity as a member of the audit committee, the board of
directors, or any other board committee:

(A)        Accept directly or
indirectly any consulting, advisory, or other compensatory fee from the issuer
or any subsidiary thereof, provided that, unless the rules of the national
securities exchange or national securities association provide otherwise,
compensatory fees do not include the receipt of fixed amounts of compensation
under a retirement plan (including deferred compensation) for prior service with
the listed issuer (provided that such compensation is not contingent in any way
on continued service); or

(B)        Be an
affiliated person of the issuer or any subsidiary thereof.

The following definitions apply to the determination of
independence under Rule 10A-3:

(1)       
(i)        The term affiliate of, or a
person affiliated with, a specified person, means a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.

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(ii)       A person will be
deemed not to be in control of a specified person for purposes of this section
if the person:

(1)        Is not the
beneficial owner, directly or indirectly, of more than 10% of any class of
voting equity securities of the specified person; and

(2)        Is not an executive
officer of the specified person.

(iii)      The following will be
deemed to be affiliates:

(A)        An executive
officer of an affiliate;

(B)        A director who
also is an employee of an affiliate;

(C)        A general
partner of an affiliate; and

(D)        A managing
member of an affiliate.

(iv)       For purposes of
paragraph(1)(i) of this section, dual holding companies will not be deemed to be
affiliates of or persons affiliated with each other by virtue of their dual
holding company arrangements with each other, including where directors of one
dual holding company are also directors of the other dual holding company, or
where directors of one or both dual holding companies are also directors of the
businesses jointly controlled, directly or indirectly, by the dual holding
companies (and, in each case, receive only ordinary-course compensation for
serving as a member of the board of directors, audit committee or any other
board committee of the dual holding companies or any entity that is jointly
controlled, directly or indirectly, by the dual holding companies).

(2)        In the case
of foreign private issuers with a two-tier board system, the term board of
directors means the supervisory or non-management board.

(3)        In the case
of a listed issuer that is a limited partnership or limited liability company
where such entity does not have a board of directors or equivalent body, the
term board of directors means the board of directors of the managing general
partner, managing member or equivalent body.

(4)        The term
control (including the terms controlling, controlled by and under common control
with) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.

(5)        The term
dual holding companies means two foreign private issuers that:

(i)        Are organized in
different national jurisdictions;

(ii)       Collectively own and
supervise the management of one or more businesses which are conducted as a
single economic enterprise; and

(iii)      Do
not conduct any business other than collectively owning and supervising such
businesses and activities reasonably incidental thereto.

(6)        The term
executive officer has the meaning set forth in § 240.3b -7.

(7)        The term
foreign private issuer has the meaning set forth in § 240.3b -4(c).

(8)        The term
indirect acceptance by a member of an audit committee of any consulting,
advisory or other compensatory fee includes acceptance of such a fee by a
spouse, a minor child or stepchild or a child or stepchild sharing a home with
the member or by an entity in which such member is a partner, member, an officer
such as a managing director occupying a comparable position or executive
officer, or occupies a similar position (except limited partners, non-managing
members and those occupying similar positions who, in each case, have no active
role in providing services to the entity) and which provides accounting,
consulting, legal, investment banking or financial advisory services to the
issuer or any subsidiary of the issuer.

(9)        The terms listed
and listing refer to securities listed on a national securities exchange or
listed in an automated inter-dealer quotation system of a national securities
association or to issuers of such securities.

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Exhibit C

Audit Committee Financial Literacy Requirements MI 52-110

Section 3.1(4) states that each audit committee member must be
financially literate. Section 1.5 defines the meaning of financial literacy as
follows:

For the purposes of this Instrument, an individual is
financially literate if he or she has the ability to read and understand a set
of financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
the issues that can reasonably be expected to be raised by the issuers
financial statements.

Exhibit D

Form 20-F Definition of Financial Expert

For purposes of this Item, an audit committee financial expert
means a person who has the following attributes:

i.      
 An understanding of generally accepted accounting principles and financial
statements;

ii.      
The ability to assess the general application of such principles in connection
with the accounting for estimates, accruals and reserves;

iii.     
Experience preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the small business issuers financial statements, or
experience actively supervising one or more persons engaged in such activities;

iv.       An understanding of
internal control over financial reporting; and

v.        An understanding of
audit committee functions.

A person shall have acquired such attributes through:

i.        Education and
experience as a principal financial officer, principal accounting officer,
controller, public accountant or auditor or experience in one or more positions
that involve the performance of similar functions;

ii.       Experience actively
supervising a principal financial officer, principal accounting officer,
controller, public accountant, auditor or person performing similar functions;

iii.     
Experience overseeing or assessing the performance of companies or public
accountants with respect to the preparation, auditing or evaluation of financial
statements; or

iv.       Other relevant
experience.

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