This article proposes a new theoretical explanation to the question of environmental governance failures,
combining micro and macro explanations in the long run. We put forward the concept of Transversal Transaction
Costs (TTCs) as a critical source of governance failures. TTCs are transaction costs induced by interlinkages
between public policies and property rights, an area under-investigated by the natural resources governance
literature. We emphasise that TTCs are consequential in limiting the ability of environmental governance to
coordinate natural resource uses. Drawing on institutional complementary and cluster literature, we argue that
TTCs increased significantly over the years shaping governance evolution at the macro level in the long run. We
show that institutional resource regimes tend to get locked into an Institutional Complexity Trap (ICT), which
prevents improvement in coordination capacity and explains the persistence of environmental governance
failures. Four cases substantiate our conceptual proposition of transversal transaction costs. In addition, the
process-tracing of six water governance cases in Europe from 1750 to 2004 provides empirical support to the
macro dynamics of institutional complexity trap.