Creating a Green Republic: Payments for Environmental Services in Costa Rica, 1994–2005

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Abstract 

In 1994, Costa Rica's new minister of the environment, René Castro, faced a difficult task. The finance ministry was planning to cut the funding of a subsidy program that had started to reverse decades of forest loss, and Castro urgently needed a new policy that would sustain the program's progress. First, Castro built a broad-based coalition to press for a revamped national forestry law. The coalition persuaded the legislature to ban the conversion of forested land to other uses and to create incentives for landholder compliance. In 1997, Costa Rica implemented the world's first countrywide payments for environmental services program, which recognized the continuing economic contribution of forests in terms of greenhouse gas mitigation, biodiversity conservation, water protection, and scenic beauty. Funded by a new fossil fuel tax, carbon credit sales, and money from companies that benefited from the forests, the program offered landowners financial incentives to preserve and expand tree cover on their properties. The program helped reduce the destruction of primary forest and encouraged reforestation of degraded land. From 1997 to 2005 Costa Rica's forest cover increased to 51% of total land area from 42%.

Blair Cameron drafted this case study based on interviews conducted in Costa Rica in December 2014. The case was funded by the Norwegian Agency for Development Cooperation in collaboration with the Science, Technology, and Environmental Policy program of the Woodrow Wilson School of Public and International Affairs. Case published July 2015.

Keywords 
deforestation
SINAC
biodiversity
carbon sequestration
carbon tax
environmental reform
conservation
forestry law
coalition building
bureaucratic structure
monitoring
institutional capacity
ecosystem
financing mechanism
Focus Area(s): 
Natural Resources
Critical Tasks: 
Common pool resources & public goods
Conserving forests
International conventions & charters
Resource monitoring
Resource protection & enforcement
Country of Reform: 
Costa Rica
Type: 
Case Studies
Author: 
Blair Cameron