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Conservation by Lending

Author

Listed:
  • Bård Harstad
  • Kjetil Storesletten

Abstract

This project analyzes how a principal can motivate an agent to conserve rather than exploit a depletable resource. This dynamic problem is relevant for tropical deforestation as well as for other environmental problems. It is shown that the smaller is the agent's discount factor (e.g., because of political instability), the more the principal benefits from debt-for-nature contracts compared to flow payments (in return for lower deforestation). The debt-for-nature contract combines a loan to the agent with repayments that are contingent on the forest cover.

Suggested Citation

  • Bård Harstad & Kjetil Storesletten, 2023. "Conservation by Lending," CESifo Working Paper Series 10533, CESifo.
    • Handle: RePEc:ces:ceswps:_10533
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10533.pdf
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    References listed on IDEAS

    as
    1. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
    2. Bård Harstad, 2020. "Technology and Time Inconsistency," Journal of Political Economy, University of Chicago Press, vol. 128(7), pages 2653-2689.
    3. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    4. Bård Harstad, 2023. "The Conservation Multiplier," Journal of Political Economy, University of Chicago Press, vol. 131(7), pages 1731-1771.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    environmental conservation; sovereign debt; sustainability-linked bonds; default; hyperbolic discounting; time inconsistency;
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