1. Joint Implementation and the Clean Development Mechanism
Ben Feldman
Managing Director
Natsource LLC
UNFCCC Technical Workshop on Joint Implementation
Bonn, Germany
February 14, 2007
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
Major Risk(s)
Minor Risk(s)
CDM
Project
Registration
Issuance
Host Country*
JI (I)
Country
JI (II)
JISC/AIE
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
CDM
Mature process, though significant risks remain due to EB’s project by project approach
JI Track I
Limited experience
Counterparties experience risk differently
(government to government vs. government to private)
JI Track II
JI risk plus JISC issues
Some new thinking from Natsource.
More growth. Less pollution.

6. Buyer (Investor) Preferences: Track I and II
Strength of sovereign guaranty (perceived and actual)
Reliability of project/ technology and counterparty
Relatively short payback (short carbon revenue window from )
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:
Ben Feldman
Managing Director
Natsource LLC