The pitfalls and potential of debt-for-nature swaps: A US-Indonesian case study

The vital role of forests in limiting the likelihood of dangerous climate change has precipitated renewed interest in debt-for-nature swaps. This article uses evidence on past debt-for-nature deals and similar debt mechanisms to assess a recent second wave of such swaps. It outlines five typical shortcomings of this form of financial transaction: that they often fail to deliver additional resources to the debtor country and/or debtor government budget; often fail to deliver more resources for conservation/climate purposes; often have a negligible effect on overall debt burdens (and, as such, do not generate more ‘indirect’ benefits); and are often in conflict with principles of alignment with government policy and alignment with government systems (these two last shortcomings being important elements within the new aid delivery paradigm). Our analysis is applied to a recent debt-for-nature swap between the United States and Indonesia. We show that this case, which we consider a litmus test for current swap practice, performs unevenly across the five shortcomings. First, although the US-Indonesian swap does increase available resources to Indonesia at the country level, it does not generate extra budgetary room for the Indonesian government. Second, the extent to which the resources provided by the swap are additional to other donor support and reserved domestic budget lines for conservation goals is unclear. Third, the swap is too insignificant to create indirect (positive) economic effects. Regarding alignment issues, fourth, the swap is very much in line with current national policy, but, fifth, appears at odds with the new aid delivery paradigm's insistence on system alignment. We argue that if a second generation of debt-for-nature swaps is to be pursued then they need to avoid the common pitfalls associated with this form of finance. Moreover, there is a need to debate broader ways of linking debt service repayments to climate mitigation and adaptation.     

金华市的水资源核算与绿色利用新思路

计算表明,仅水资源一项自然资源折旧就可使金华市的GDP平均下降5.2%.指出金华市近几年GDP的快速增长是以牺牲资源和环境为代价的,也是水环境负债的一个主要原因.同时指出目前金华市的缺水不是水源型缺水,而是水质型缺水.配合金华市政府建设绿色金华的新构想,提出了金华市水资源绿色利用的新思路:采用绿色GDP;实施绿色政绩;发展绿色工业;推广绿色农业;强化绿色治理;实行绿色水价.     

Pasture, profit, and power: An environmental history of cattle ranching in Colombia, 1850-1950

This article examines the expansion of cattle ranching from 1850 to 1950 into lowland forests of Colombia. Although most attention to ranching as a source of deforestation in Latin America has focused on the second half of the 20th century, in Colombia it has a much longer history. The article also examines the role of introduced African grasses in the process of pasture development. While it discusses their ability to suppress secondary-forest regeneration, it underscores their contribution to productivity gains to help explain their wide diffusion. Lastly, the article suggests that paying greater attention to the costs and labor of pasture formation can serve as a springboard to reexamine a number of common stereotypes about ranching: that the logic of livestock was not about producing beef; that cattle were primarily a means to control territory; and that ranching ‘profits’ stemmed from extra-economic sources. Although there is some truth to these explanations, the dominance of cattle throughout the countryside cannot be explained without taking the economic and productive logic of ranching into account. This, in turn, should also help push us to better understand the nature of landed power and the dynamics of agrarian change in Colombia.     

Debt-for-climate swaps: Killing two birds with one stone?

The COVID-19 pandemic has further fuelled problems of debt sustainability in developing countries and has sapped the fiscal resources needed to finance climate mitigation and adaptation efforts. We examine whether “debt-for-climate” swaps, instruments whereby debtor countries are relieved from their contractual debt obligations in return for local climate-related spending commitments, may be helpful in tackling worrying debt levels and climate concerns simultaneously. We point out that debt swaps do not have a great historical track record but that common flaws such as their piecemeal nature, lack of additionality and creation of parallel implementation structures, could be overcome by scaling up and careful design. To realize swaps’ full potential, a distinction needs to be made between situations where debt is clearly unsustainable and where it is high but sustainable. In the former case, deep and comprehensive debt restructuring should be the primary focus, rather than closely matching debt service savings with increased climate spending; in the latter case, stand-alone debt swaps may be used to transfer resources from creditors to debtor countries that are committed to climate investments but lack fiscal space. Another helpful differentiation is that between middle-income debtor countries, where debt swaps could finance climate mitigation interventions, and low-income debtors, where investments in adaption deserve prioritization. Finally, debt swap proposals need to be mindful of creditor incentives, including positive reputational payoffs, achieving greater scale using a multi-creditor set-up, at the same time as carefully considering governance credentials in each country context.