Rather than a CDS, imagine a derivative security on the prospect of an endangered species:
Under their plan, the government would determine the cost of
protecting a species if it becomes endangered. That money would be set
aside to fund contracts with payouts pegged to species health. The
contracts would be sold to landowners and developers whose actions
directly affect the animals, though the contracts could be freely
Should animal numbers fall beneath a predetermined threshold,
contracts would be voided, and money devoted to anticipated recovery
programs. If the species thrives, investors would be rewarded, with
profits growing in direct proportion to species health.
"If there's a 99 percent chance that a species is going to survive," said
Mandel, "you could trade that like a high-ranking bond. You know it's
going to pay out."
I thank Adam Winski for the pointer.