5 - Contracting for Credit in Agriculture

Summary

Japan contains one of the largest deposits of geothermal energy in the world, yet has an extraordinarily small number of electrical plants to exploit it. It has few plants because their wells would threaten the hot springs resort industry. Electrical utilities would like to commit to compensating the hot springs hotels for any damages they might cause – but given the difficulty of showing causation in court, cannot do so credibly. The hot springs hotels would like to negotiate in good faith – but given that each hotel potentially has a right to hold up the entire plant, cannot credibly promise that all subsequent hotels will negotiate in good faith. The developers who have succeeded in this industry over the last two decades are disproportionately those with roots in the community itself.