National RE DD+ systems: what can we learn from Costa Rica

Redd-net, February, 2010

The concept of Payments for Environmental Services (PES) has been much discussed as an approach for implementing RE DD+ at the international, national and local levels. PES is based on the principle that those using an environmental service (e.g. clean water; carbon emission reductions etc.) pay others to provide the service (e.g. through forest conservation to protect watersheds or prevention of carbon emissions). PES is a form of contractual conservation, in which a contract is agreed between the buyer and seller of the service and payments are made once it has been delivered (Wertz-Kanounikoff et al. 2008). This bulletin looks at how the existing Costa Rican national PES system may be incorporated into the national RE DD+ strategy and the lessons that can be learnt in terms of how incentives are delivered and their equity implications.

Policy conclusions:

The evolution of policies that fight deforestation shows that Payments for Environmental Services (PES) systems are a powerful instrument, but not the only factor for achieving a reduction in deforestation and forest recovery. They require a strong political and institutional setting with coherence among other sectoral policies.

The Costa Rican national PES system is based on a fiscal system which has been financed with tax collection and funds; in which a political institution like FONA FIFO is responsible for the allocation and distribution of these funds as PES. The Costa Rican system has been successful on the basis of PES managed by a political institution, not by a market institution.

Costa Rica started fighting deforestation with direct regulation, fiscal forest incentives and the protected area system. In a second phase, since the 1990s, it has continued with the concept of PES, and REDD will become the third phase of this environmental policy. However, PES has been oriented mainly towards conservation, with very little management, and it has weakened the forest sector. Therefore, in order to be successful in the long run PES systems implemented as part of the REDD+ strategy will have to find ways of incorporating forms of sustainable forest management in addition to purely conservation based approaches.

The REDD+ mechanism in Costa Rica has become a major opportunity for accelerating the institutional and legal changes required for improving the performance of the PES and the forest sector.