Payments for ecosystem services: Costa Rica’s recipe

Costa Rica has adopted a mix of economic and regulatory policies to protect its forests – the eclectic mix of ingredients could be judged a recipe for success, says David N Barton

Twenty years ago Costa Rica began to pioneer schemes that paid land owners to protect forests in return for the benefits they provide, such as conserving wild species, regulating river flows and storing carbon. Since 1997, nearly one million hectares of forest in Costa Rica have been part of these ‘payments for ecosystem services’ (PES) schemes at one time or another. Meanwhile, forest cover has returned to over 50 per cent of the country’s land area, from a low of just over 20 per cent in the 1980s.

The country’s experience is the subject of a new report I have co-authored, and which IIED has published today. It tells the story of how Costa Rica’s PES programme developed in its quest to balance equity, effectiveness and low implementation costs. The report shares the country’s experiment in adapting PES characteristics to ‘fit’ the international forest conservation agenda, as well as the realities of Costa Rica’s landscape and people, and a mix of policies all playing out at once.

Over two decades PES has become known as the main ingredient in a home-grown recipe for forest conservation. But PES is often ‘in the pot’ with a number of other ingredients determining its conservation flavour.

One beneficiary of the scheme living in the Osa Forest Reserve told me: “PES has helped us a lot and has given me the opportunity to ensure my economic future, not one hundred per cent, but I am not complaining.” But he added: “The paperwork to obtain PES is getting more difficult… I don’t know whether I will be eligible in the next period…if I am not eligible, I will probably start cutting, and SINAC [the conservation area authority] does not have the capacity to stop us.”

His mixed emotions reflect a sometimes complex mix of protected areas, agrarian development, and land tenure histories, and a continued experimentation with the PES scheme itself. He continued: “You should understand that during the last 25 years, under the banner of ‘protecting the environment’ the authorities have progressively taken our land rights, which IDA [Land Reform Institute] previously said were ours… so it’s natural that us locals are angry.”

PES – Paradox or practical mix?

Costa Rica’s PES programme is curiously successful at providing something that appeals to almost anyone’s views of forest conservation, irrespective of ideological or economic approach. The same 1996 Forest Law that establishes PES also bans land use change in forests. With the ban in mind, the Forest Laws have been seen by some as a paradox.

To some, they are just another name for the forest owner subsidy scheme Costa Rica abandoned in the mid-1990s as part of the IMF Structural Adjustment Program (see the IIED reports here and here). Others have argued that features of PES represent the onset of a neoliberal forest policy, despite the ban on changing land use. PES has also been called a national quid pro quo by some – a necessary concession to forest stakeholders to get them to accept a ban on forest land-use change in the Forest Law (examples here and here).

This debate, about whether PES in Costa Rica reflects a ‘neo-liberal’ conservation policy trend or not, should be seen in the light of PES simultaneously being pulled towards both incentives and regulation.

On the one hand, PES:

  • is trying to move away from tax-financing towards user financing, particularly through water user fees.
  • has largely fixed monitoring costs and competitive contracting which favours larger over smaller forest owners.
  • has abandoned group contracts in favour of individual contracts
  • is increasingly captured by anonymous legal entities, including companies

On the other hand:

  • In place of the initial first-come, first-served approach to enrolment, Costa Rica now uses national level priority-setting criteria to select contracts in line with PES conservation policy goals. These favour applications from indigenous territories, areas with low social development scores, and from properties under 50 hectares.
  • The PES programme has so far had relatively little success in attracting cooperation or finance from the private sector so most of the funds for PES in Costa Rica are still from public sources — as with most PES schemes around the world.

It’s not all about the money

Landowners don’t join the programme just for the money. Payment levels are administratively determined, rather than driven by supply and demand. Levels for forest conservation have been roughly maintained in nominal terms by presidential decree since the start of PES in 1996, but have fallen by more than half in real terms. Nevertheless, the number of contracts signed annually is higher now than when payments were at their highest in 1998. So, why do they continue to sign up and take part?

PES in Costa Rica is a useful example of the balancing act between the ‘commodification’ of nature and ‘fair development’

Land owners receive other important benefits from PES. While there was still an agricultural frontier in Costa Rica, as well as large immigration from poorer neighbouring countries, landless farmers occupied and cultivate unused land. The Forest Law and PES provides landowners with greater support from the public authorities to evict squatters. Some poorer landowners, who were once colonists, now borrow against future PES payments to pay for the paperwork to legalise their tenure. For many areas, the size of the payment is less important than tenure problems, weak conservation enforcement and high transaction costs, which together limit PES participation and effectiveness.

It’s not all about the money for Costa Rica’s public authorities either. To join the PES programme, landowners must have their property paperwork in order. This allows Costa Rica’s National Forest Fund (FONAFIFO), which administers PES, to also ensure applicants pay social security benefits to farm employees on time. Updated property registers also makes it easier for the municipalities and Ministry of Finance to collect taxes. PES has also provided additional legitimacy to Costa Rica’s protected areas by compensating landowners who had land ‘expropriated’ within National parks until the State can buy their land.

PES is a policy mix

PES in Costa Rica is a useful example of the balancing act between the ‘commodification’ of nature and ‘fair development’ as recently discussed by Karsenty and colleagues. There is a certain tension between the voluntary nature conservation and the desire for private funding of PES, and the public targeting, regulation of enrolment and still much needed public funding.

PES has changed along with changing tastes in conservation. Its flexibility has made it a politically viable policy for almost 20 years in Costa Rica. The PES programme has remained quite inexpensive and there is some evidence to show that PES has been as effective, or ineffective as the country’s national parks in conserving forest cover - depending on which conservation cuisine you prefer. PES is both an eclectic and successful policy mix in its own right, as well as a key ingredient in Costa Rica’s conservation recipe.

David N Barton is a senior researcher at the Norwegian Institute for Nature Research (NINA). This post originally appeared here.

Download the report Learning from 20 years of Payments for ecosystem services in Costa Rica

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