Tag: environmental project financing

Carbon Offsets are a Bridge Too Far in the Tradable Property Rights Revolution

By Tyler McNish

Tradable property rights-based carbon offsets are widely used as a policy tool for combating the greenhouse gas emissions that cause climate change. However, academics, non-governmental organizations, and market participants have criticized carbon offset mechanisms’ economic inefficiency and dubious environmental benefits. This Article traces these criticisms to the microeconomic structure of the offset market. Offsets were envisioned as a way to use self-regulating market forces to stimulate investment in emissions mitigation projects efficiently, but tradable property rights are inherently ill-suited to that task. Consequently, policymakers ended up designing a Rube Goldberg-esque scheme that is neither efficient nor self-regulating. The financial intermediation industry through which offsets are certified and traded consumes approximately thirty percent of all carbon offset funding, such that less than seventy cents out of each dollar invested in international greenhouse gas mitigation reaches its target. At the same time, the private sector-led system inappropriately cabins the authority of public sector regulators — the only market participants with an incentive to ensure the environmental quality of the assets exchanged. Systemic risk is also a concern: the offset mechanism’s substitution of abstract, tradable securities for simpler contract-based lending bears an uncanny resemblance to developments in the securitized mortgage lending industry prior to the 2008 crisis. Direct subsidies issued to emissions-reducing projects by a publicly administered fund could likely achieve better environmental outcomes at lower cost.

Cite as: Tyler McNish, Carbon Offsets are a Bridge Too Far in the Tradable Property Rights Revolution, 36 Harv. Envtl. L. Rev. 387 (2012).

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Debt, Nature, and Indigenous Rights: Twenty-five Years of Debt-for-Nature Evolution

By Jared E. Knicley

Debt-for-nature swaps are an innovative and potentially powerful mechanism for addressing the significant issues of indebtedness and environmental degradation in the developing world. Over the past twenty-five years, debt-for-nature swaps have evolved across many dimensions to their present-day typology of bilateral fund-generators that capitalize projects fairly describable as both “environmental” and “developmental.” Through a study of four representative debt-for-nature swaps, this Article analyzes the original conception of the debt-for-nature swap and the evolution of swap typologies as they relate to the conception and realization of indigenous rights. It further argues that while the trend in debt-for-nature swaps has been the increased participation of indigenous groups, the actual level of participation envisioned under debt-for-nature statutes is ambiguous and, thus, the level of protection of indigenous rights varies from swap to swap. The Article concludes by providing several procedural recommendations for improving the realization of indigenous rights under debt-for-nature swaps and by critically analyzing the potential evolutionary trajectory of debt-for-nature swaps with regard to impacts on indigenous rights.

Cite as: Jared E. Knicley, Debt, Nature, and Indigenous Rights: Twenty-five Years of Debt-for-Nature Evolution, 36 Harv. Envtl. L. Rev. 79 (2012).

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