Maintaining Environmental Resources in the International System: A Comparison of Contractual Arrangements

Objectives. State A may control an environmental resource that has value for other actors in the international system. The objective of this article is to compare different contractual arrangements between State A and other agents for preservation of this resource. I concentrate on direct purchase schemes and dynamic (stream–of–payment) schemes. Methods. The problem is analyzed by constructing a model of the returns to State A from exploiting the resource; its public goods value; and transfer payments from other agents. Results. Among the main results are that continual transfers may be better than a one–off buyout and, if the resource does not have a public goods value for the owner, compensation may not be effective. Conclusions. Generally, the analysis points out the gains to be made from paying attention to the type of contractual arrangement. Most of these results would not have been intuitively clear. I also show that rental schemes may be the least risky option.