THE STRUCTURE OF AN ENVIRONMENTAL TRANSACTION - THE DEBT-FOR-NATURE SWAP

The structure and occurrence of debt-for-nature swaps are examined emp irically. Contracts executing debt-for-nature swaps are studied to ass ess the role of transaction costs in determining how these agreements are structured. The emerging contract form is a product of weak enforc ement of legal claims to environmental resources in developing countri es, high costs for delineating and monitoring environmental outcomes, and nominal government ownership of the resources involved. The occurr ence of swaps in individual countries is significantly related to host country attributes, including the presence of tropical land and threa tened species, democratic political institutions, and large debt burde ns.