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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.
    • Handle: RePEc:zbw:ifwkwp:568
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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.
    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.
    7. Michel Grabisch & Elena Parilina & Agnieszka Rusinowska & Georges Zaccour, 2025. "Formation of international environmental agreements and payoff allocation," Documents de travail du Centre d'Economie de la Sorbonne 25020, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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