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Joint Implementation and the Clean Development Mechanism

Joint Implementation and the Clean Development Mechanism. John Paul Miller Natsource World Bank Carbon Forum Moscow April, 2008. Some new thinking from Natsource. More growth. Less pollution. Overview. Comparison of CDM and JI Duration of Risks Side By Side Comparison

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Joint Implementation and the Clean Development Mechanism

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  1. Joint Implementation and the Clean Development Mechanism John Paul Miller Natsource World Bank Carbon Forum Moscow April, 2008 Some new thinking from Natsource. More growth. Less pollution.

  2. Overview • Comparison of CDM and JI • Duration of Risks • Side By Side Comparison • Buyer (Investor) Preferences: Track I and II • Conclusions Some new thinking from Natsource. More growth. Less pollution.

  3. Comparison of CDM and JI I and II Some new thinking from Natsource. More growth. Less pollution.

  4. Duration of Risks • All projects involve investment in activities that must persist over time, therefore all projects entail inherent technology/performance risk • Distinction between CDM and JI relates to regulatory and country risks • CDM • Major regulatory risks “ends at registration” • Host country approval is irrevocable • Potential tax liability/credit retention may continue • JI Track I • Major regulatory risk “ends at country acceptance” • Country risk continues • JI Track II • Country risks persist throughout crediting period • Major JISC/AIE risks “end at final determination” Some new thinking from Natsource. More growth. Less pollution.

  5. Side by Side Comparison Some new thinking from Natsource. More growth. Less pollution.

  6. Buyer (Investor) Preferences: Track I and II Track I • Strength of sovereign guaranty (perceived and actual) • Reliability of project/ technology and counterparty • Relatively short payback (short carbon revenue window from 2008-12) Track II • Same as Track I, but take account of JISC risk • Project activities with existing methodologies Some new thinking from Natsource. More growth. Less pollution.

  7. Conclusions • Once issued CERs, ERUs, likely fungible • Differential value function of when investment is made and who carries risk • At present JI carries more uncertainty (therefore risk) than CDM and this will be reflected in pricing, all else being equal • Track II carries more risk than Track I • Risk is attractive to investors that understand how to mitigate • JI is thus viewed as a value opportunity Some new thinking from Natsource. More growth. Less pollution.

  8. For Additional Information: JP Miller/Tim Atkinson Natsource nts@natsource.com +44-208-439-9515 www.natsource.com

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