Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279283 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10533
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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.
Subjects: 
environmental conservation
sovereign debt
sustainability-linked bonds
default
hyperbolic discounting
time inconsistency
Document Type: 
Working Paper
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