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Pooling sovereignty risks: The case of environmental treaties and international debt

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  • Mohr, Ernst
  • Thomas, Jonathan P.

Abstract

A model is analysed in which a sovereign country has independent obligations to repay a creditor bank and to keep an environmental treaty. It is shown that the linkage of both obligations through a cross-default contract may reduce the sovereign risk attached to both the debt and the environmental contracts. Moreover, such a linkage will create an incentive for the sovereign and the bank to engage in a debt-for-natureswap, the anticipation of which increases the initial incentive for a cross-default contract to be entered into.

Suggested Citation

  • Mohr, Ernst & Thomas, Jonathan P., 1993. "Pooling sovereignty risks: The case of environmental treaties and international debt," Kiel Working Papers 568, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:568
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    References listed on IDEAS

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    1. Parkash Chander & Henry Tulkens, 2006. "Theoretical Foundations of Negotiations and Cost Sharing in Transfrontier Pollution Problems," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 123-134, Springer.
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    5. Harold L. Cole & Patrick J. Kehoe, 1991. "Reputation with multiple relationships: reviving reputation models of debt," Staff Report 137, Federal Reserve Bank of Minneapolis.
    6. Occhiolini, Michael, 1990. "Debt for nature swaps," Policy Research Working Paper Series 393, The World Bank.
    7. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
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    10. repec:bla:econom:v:60:y:1993:i:239:p:281-93 is not listed on IDEAS
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    Cited by:

    1. Josef Janssen, 1999. "(Self-) Enforcement of Joint Implementation and Clean Development Mechanism Contracts," Working Papers 1999.14, Fondazione Eni Enrico Mattei.
    2. Frank Stähler, 1996. "On International compensations for environmental stocks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(1), pages 1-13, July.
    3. Heister, Johannes & Stähler, Frank, 1994. "Globale Umweltpolitik und joint implementation: Eine ökonomische Analyse für die Volksrepublik China," Kiel Working Papers 644, Kiel Institute for the World Economy (IfW Kiel).
    4. Michèle Breton & Lucia Sbragia & Georges Zaccour, 2010. "A Dynamic Model for International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 25-48, January.
    5. Barbara Buchner & Carlo Carraro & Igor Cersosimo & Carmen Marchiori, 2002. "Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation," CESifo Working Paper Series 688, CESifo.
    6. Matteo Roggero & Leonhard Kähler & Achim Hagen, 2019. "Strategic cooperation for transnational adaptation: lessons from the economics of climate change mitigation," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 19(4), pages 395-410, October.

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