Costa Rica’s Payments for Environmental Services Program (PES) is a financial mechanism that promotes forest ecosystem conservation and combats land degradation – the first scheme of its type in the country and the region.
In this program, landowners receive direct payments for the environmental services that their lands produce when adopting sustainable land-use and forest-management techniques. The program is funded through Costa Rica’s fuel tax and water charge, as well as its own initiatives, such as Certificates of Conservation of Biodiversity, carbon credits, and strategic alliances with the public and private sector.
Key facts
- To date, more than 18,000 families have benefited from the program, with an investment of USD 524 million in the PES projects and more than 1.3 million hectares under PES contracts.
- The PES Program is the first scheme of this type developed in the country and in the region.
The challenge
Costa Rica experienced one of the highest rates of deforestation worldwide during the 1970s and 1980s. In 1950, forests covered more than one-half of Costa Rica; by 1995, forest cover had declined to 25% of the national territory. Deforestation was principally driven by inappropriate policies including cheap credit for cattle, land-titling laws that rewarded deforestation, and rapid expansion of the road system. These policy incentives have since been removed and Costa Rica has become one of the world’s leading proponents of environmentally sustainable development.
The solution
Costa Rica’s Payments for Environmental Services Program is a financial mechanism of the State to the owners and holders of forests and forest plantations, for the environmental services they provide.
The programme bundles together the provision of four main environmental services: carbon sequestration, biodiversity protection, water regulation and landscape beauty. It makes direct cash transfers to private landowners for five or 10-year contracts for different activities of forest protection, reforestation, sustainable forest management and agroforestry.
Helping the planet
The Program, which is executed through the Fondo Nacional de Financiamiento Forestal (FONAFIFO), protects primary forest, allows secondary forest to flourish, and promotes forest plantations to meet industrial demands for lumber and other wood products.
The private or public Agreements with national and international investors can be directed to financing specific Payment for Environmental Services and especially to compensate for impacts of the company's productive activities, which can be air, soil, water, communities or biodiversity. The agreements are adaptable, as they allow for the establishment of different conditions to those participating in the PES Program as long as they comply with the legal framework. They offer the opportunity to pay a differentiated amount to owners of farms or according to the strategic importance of the environmental service provided by the property.
Helping people
More than 18,000 families have benefited from the PES Program from 1997 to 2019, including 2,788 women, 6,888 men, 19 indigenous communities (303 projects), and 8,712 family associations. Indigenous Territories have special conditions to enter the Program and it promotes the participation of these communities in the protection of forests. Around 100,000 indigenous people in total benefit from the incentive received through the Program.
Currently, in Forest Protection projects, an additional item was included, giving a score to those farms that have female owners, with the objective of making visible the participation of women in the formalization of contracts and enjoyment of the mechanism. Within the Forest Harvesting Plantations (PPAF) scheme, thanks to FONAFIFO and the innovative financing system, people can have access to forest credit, where in no other financial entity could they be subject to a credit of this type. The payment by results has allowed them to cancel between 40-65% of the credit.
The beneficiaries use the money received by the PES Program to improve quality of family life, such as school, medicine, food, and to carry out important projects in their communities. For example, in indigenous communities, repairs or construction of educational centers, streets and health centers are carried out.
A new PES scheme called Mixed Systems aimed at small farmer producers, owners of farms less than or equal to 10 hectares, is currently underway.
Spillover effect
Fonafifo facilitates the transfer of knowledge: the Institution receives delegations from different countries of the world who want to know about the PES Program, for example with Morocco (2015) and currently with Peru. The Dominican Republic is also in the process of implementing a similar Payment for Environmental Services Program, for which it was benefited by the successful experience received from Costa Rica.
Images owned by the activity partners, all rights reserved.
