Debt-for-Carbon (D4C) Swaps: Key Design Considerations

This report examines how Debt-for-Carbon (D4C) swaps can combine sovereign debt treatment with carbon market transactions. It develops two design options: using carbon credits to settle debt obligations, and using debt relief to finance mitigation programmes that generate carbon credits. The authors explain the implications for governance, risk allocation, credit transfers and accounting, with illustrative examples and indicative contractual provisions.