The Use of Market Instruments to Pay for Environmental Services in Costa Rica

presented byLuis GamezAdvisor, Ministry of Environment of Costa Rica

Beijing, ChinaApril 22, 2001

COSTA RICA

Caribbean Sea

Pacific Ocean

Area: 51,100 km2GDP/capita: $ 2,610Population: 3,500,000

Export values from forestry and selected agricultural products. Tourism revenues.Costa Rica 1950-1997Adaptado de: Watson, V etal. Making space for butter forestry. Policy that works for forest and people. No. 6. CCT, IIED, JUNCAFORCA.1998

Loss of Dense Forest Cover in Costa Rica 1940-1990

Evolution of Trends

Sustainable Development ChallengesAppropriate legal & institutional frameworkConsolidation of well established national system of protected areas (state)

but, how to induce change in behavior to conserve forest in private lands?

Forestry: sustainable management, reverse deforestation & increase forest coverinvolve & increase private sector and civil society participation in cost & benefits of conservationEconomic instruments: value of environmental $ervice$

1

FORESTRY LAW DRIVES THE INTERNALIZATION OF ENVIRONMENTAL SERVICES INTO DIRECT & TANGIBLE ECONOMIC COMPENSATION FOR FOREST OWNERS

BENEFIT INTERNALIZED BY:

TYPE OF BENEFIT *

LANDOWNER

COUNTRY

GLOBAL

Sustainable wood production

(

Water supply

Watershed protection

Hydropower potential

x

Payments for Environmental Services (PES)Government of Cost Rica

Greenhouse Gas Fund

5% Fossil Fuel Tax Forestry Law#7575

National Forestry Financing Fund

CDMAIJ investors

CTOs

OFFSETS

Reforestation

(Private Owners)

Forest Management

(Private Owners)

Conservation

(Private Owners)

CO2 H2O

H2O

CO2 H2O

CO2 H2O

OFFSETS

$

$

1

FONAFIFOLAND OWNERSREFORESTATIONFOREST MANAGEMENTFOREST PROTECTIONGASOLINE TAXMINISTRY OF FINANCEFINANCIAL INSTRUMENT IN BNCRSINACCOSTA RICANS & THE GLOBAL COMMUNITYENV. SERVICESPAYMENTSIDENTIFICATION OF PRIORITY AREASCONTRACT MONITORINGVOLUNTARY AGREEMENTS

Grazing land is the major competitor to forest conservationWhat is the OCL for dairy and cattle ranching? Measure ~ cost of rental 1 Ha. for pastureMarket value = acceptable income / Ha. of benefits foregone

Determining Levels of PaymentBased on the Opportunity Cost of LandPayment >= OCL

Modalities &Distribution of Payment (2001)

Contract Type

Total Payment (US$)

Distribution by year

1

2

3

4

5

Forest Conservation

210

20%

20%

20%

20%

20%

Sustainable Forest Management

327

50%

20%

10%

10%

10%

Reforestation

537

50%

20%

15%

10%

5%

Types of Forest Conservation Contracts

Contract

Maximum Area (ha)

Land Owner Type

Individual

300

Individual land owners

Community

300 by land owner

There is no limit for NGOs

Small and medium land owners associated

with a local NGO

Indigenous Reserve

600

Indigenous Reserve Development Association

Total Area and Number of Contracts by Modality and Year

Year

Forest Conservation

Sustainable Forest Mgt.

Reforestation

Total

Number of contracts

1997

88,829.8

9,324.5

4,629.4

102,783.7

1,531

1998

47,803.8

7,620.4

4,172.5

59,915.7

1,021

1999

55,776.0

5,124.8

3,156.0

64,782.0

925

2000

26,583.2

0

2,456.8

29,040.0

501

2001

20,629.0

3,997.0

3,281.0

27,997.0

483

Total

239,621.8

26,066.7

17,695.7

283,384.2

4,461

%

84.6%

9.2%

6.2%

Reforested areas and managed/protected areas under incentives in Costa Rica

INCENTIVE TYPE* Income tax*CAF*FDF* CAFMA* CPB*forest regime for protection

Results of the PESHigh demand and acceptanceContributes to reduce & revert deforestationIncreases forest cover in private land

Chart8

43.556.5

Fuente: Fonafifo, CCT y CIEDES. 1998. En: Ortiz, E. 2000. Bermdez, et al. 2000. Tesis para optar al grado de Licenciatura en Ciencias Forestales. UNA.

Porcentaje del pas con cobertura boscosa

Porcentaje del pas sin cobertura boscosa

Percentage

Percentage of the territory with forest cover. 1999.

43.5

56.5

Sheet1

GrupoPorcentaje descrito

Plantas87

Vertebrados81

Otros invertebrados25

Insectos18.3

Algas13

Hongos3.1

Virus1.6

Bacterias y otros0.8

GrupoPoblaciones amenazadasPoblaciones en peligro de extincin

Anfibios45.51.12

Reptiles123.5

Aves9.61.8

Mamferos65.5

Plantas120.54

GrupoPoblaciones reducidasPoblaciones en peligro de extincin

N especies1303589191

Porcentaje100.4

total10552

Especies endmicas en Costa Rica

GruposN Especies endmicas% de Endemismo con respecto al nmero de especies totales por grupoN Especies descritas*

Reptiles3616228

Anfibios3620178

Peces de agua dulce1914135

Aves70.8864

Mamferos62.5236

Plantas11461110552

*Se utilizan los promedios del Cuadro 2.Se us como promedio para mamferos 236 especies, 228 para reptiles, 178 para anfibios y 864 especies de aves

Sheet1

00000000

Plantas

Vertebrados

Otros invertebrados

Insectos

Algas

Hongos

Virus

Bacterias y otros

Grupos taxonmicos

% descrito

Fig. 3. Porcentaje de especies descritas por grupo taxonmico, con respecto a lo esperado.

25

18

Sheet2

00

00

00

00

00

%

Reptiles

Mamferos

Poblaciones amenazadas

Poblaciones en peligro de extincin

Fig. 4. Porcentaje de especies de vertebrados con poblaciones amenazadas y en peligro de extincin.

Sheet3

1979-19951997-2000

IncentivosPSA

Proteccin de bosque22,000.00220,652.42

Reforestacin139,161.0015,748.05

Manejo de bosques22,120.0022,817.03

Plantaciones establecidas0.001,022.17

183,281.00260,239.67

PerodoPNRNVSRes.ForestalRes. Biol.Zona Protect.HumedalRes. Nat. Abs. y Mon. Nal.Totales

1955-196020000002

1961-197031200017

1971-198011066100134

1981-19901911131026

1991-199983321812165

Total254311831133134134

6 sin decretoNo manglaresNo 10 fincas del Estado ni estacion Horizontes.

Se toma ao de creacin como ultima categoria de manejo definida.Total ASP:151

Fuente: Folleto SINAC (calendario). 1999.

Perodo

Categora de manejo ASP1955-19601961-19701971-19801981-19901991-1999Totales

Parque Nacional23111825

Refugio Nacional de Vida Silvestre193343

Reserva Forestal261211

Reserva Biolgica6118

Zona Protectora1013831

Humedales11213

Reserva Natural Absoluta y Monumento Nacional1113

134

PerodoTotal ASP

1955-19602

1961-19707

1971-198034

1981-199026

1991-199965

Totales134

Categora de manejoArea total (ha)Nmero% Territorio nacional

Monumento nacional232.0410.03

Reserva natural absoluta1,330.452

Reservas biolgicas21,737.5080.43Incluye monumento y reserva natural

Humedal (incluye manglares)76,177.00141.49

Zona Protectora157,097.00313.07

Refugio nacional de vida silvestre175,466.00493.43

Reservas forestal282,660.00115.53

Parques nacionales567,941.002511.11

Total1,282,640.9914125.1

Humedales son nmero dado en SINAC, Calendario, 1999. No incluye numero de manglares.

No incluye rea marina, ni fincas propiedad del Estado.

Fuente: SINAC. Octubre 1999. Tenencia de la tierra en las reas silvestres protegidas. Versin actualizada. Mimeografiado. Pp. 2

Reptiles

Mamferos

Sheet3

0000

0000

Proteccin de Bosque

Reforestacin

Manejo de bosques

Plantaciones establecidas

Sheet4

0

0

0

0

0

* Se incluyen solo las reas que tienen el decreto respectivo.

Total ASP

Establecimiento de Areas Silvestres Protegidas (ASP) en Costa Rica. Total de reas includas=134*

Distribucin porcentual de las reas silvestres protegidas (ASP) por categora de manejo. 1999.

fuente: documento de tenencia de la Tierra. SINAC, 2000

Categora% Territorio NalCobertura boscosa %(fuente: tesis Damaris)

Parques nacionales11.1153.7

Reservas forestales5.5379.2

Refugios3.4350.6

Zonas protectoras3.0571.3

Humedales (con manglares)1.4958.9

Reservas biolgicas0.4381.1

Otras categoras0.0339.5

Territorio nacional sin ASP74.9058.6

25.07

% territorio nacional% Cobertura boscosa respectiva

Total ASP25.1041.4

Territorio nacional sin ASP74.6058.6

Porcentaje de cobertura boscosa nacional total: 43.5% (incluye bosques primarios,

secundarios, manglares, yolillales y plantaciones forestales)

Porcentaje del pas con cobertura boscosa43.5

Porcentaje del pas sin cobertura boscosa56.5

Parque Nacional

Refugio Nacional de Vida Silvestre

Reserva Forestal

Reserva Biolgica

Zona Protectora

Humedales

Reserva Natural Absoluta y Monumento Nacional

Perodos

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

000

000

000

000

000

000

000

000

00

00

Porcentaje del territorio nacional

% Cobertura boscosa

reas silvestres protegidas en Costa Rica

74,6%

25,1%

00

Fuente: Fonafifo, CCT y CIEDES. 1998. En: Ortiz, E. 2000. Mimeografiado.

Porcentaje del pas con cobertura boscosa

Porcentaje del pas sin cobertura boscosa

Porcentaje

Fig. 6. Porcentaje del pas con cobertura boscosa.

Vertebrados de Costa Rica

Grupo% de especies descritas en el mundo que se encuentran en el pas

Aves9.6

Mamferos5.1

Peces4.8

Anfibios4.2

Reptiles3.6

Total5.6

000000

Aves

Mamferos

Peces

Anfibios

Reptiles

Total

Porcentaje de las especies descritas en el mundo que estn en Costa Rica

Fig. 4. Representatividad mundial de los vertebrados de Costa Rica.

ObstaclesFinancial bottlenecks subject to central government administration by the Ministry of Finance (detoured)only one third of dedicated fuel tax revenues are assigned yearlyEvaluation & targeting: competing conservation vs. forestry sector goals limited participation possibilities / transaction costs Monitoring understaffed / overload of duties certification problems / corruption

Alternative, Private SchemesDescentralized / local empowermentComplementary, but independentUpstream - downstream relation Watershed managementHydropower sectorPublic utilities / water supply / industry

Structure of the Environmentally adjusted water fee for the Public Utilities Company of Heredia. 1999 (/m3)Exchange rate: 1 US$= 334 colones

Additional revenues raised for reinvesting into local catchment areaLow financial impact on end userLow cost investment/ high benefit Locally supported and funded

Category

Catchment function value

Protection value

Current fee (mo.)

Post service treatment cost

Total

Residential

2.70

4.89

50.35

18.13

76.25

Commerce

2.70

4.89

168.33

32.26

208.18

Industry

2.70

4.89

217.65

38.82

264.06

Preferential

2.70

4.89

41.74

21.86

71.19

Governmental

2.70

4.89

145.46

32.78

185.83

Watershed environmental service

Lessons PES can become driver for positive impactsIncrease & protect forest cover in private land while generating additional revenues for landownerStimulates management and reforestationShows potential in economic opportunities for public-private partnerships in achieving conservation goals.Drives public interest and awareness in conservationIncreases perception of the economic value of environmental servicesEnables interest and participation in payments & compensationCreative sources of funding

A New Paradigm of Environmental ServicesPublic and Private PES schemes are highly complementary and not mutually exclusive.Therefore coexistance must be enabled but coordinated. The role of the government environmental authority is as promotor.Direct payment schemes assist in local solution of conservation problems by sharing costs & benefits with end-users of environmental services like water.Success dependent upon for political openess to NGO and private sector participation.Major weaknesses are related to complex and centralized government financial managementPES should be conceived within a wider environmental finance strategy, but not as substitute