February - March 2001

Costa Rica's Experimental Environmental Services Program: Paying a Fee for What Forests Do for Free

A bold and controversial forest-conservation experiment is underway in Costa Rica, which, if it succeeds, may prove to be a workable, long-term answer to the problem of rampant tropical deforestation worldwide. Called the Environmental Services Program, the initiative aims to encourage landowners to protect or manage sustainably the forests they own and to reforest land that has already been shorn of trees.

Illustration by Allan Núñez ("Nano")

The encouragement comes by way of cash payments to those landowners who sign contracts with the environment ministry's National Forestry Financing Fund (FONAFIFO, in its Spanish acronym). According to Sonia Lobo, a forester with the ministry, the contracts stipulate that:

• Landowners who protect their forests receive $226 per hectare (2.47 acres) over five years, with the option to enter into another contract after five years.
• Landowners who sustainably manage their forests -- who submit a plan to extract only a certain number of trees, as defined by a professional forester so as to not damage the ecological integrity of the forest -- receive $352 per hectare over five years, but at the end of five years must agree to continue managing their forests for at least five more years.
• Landowners who plant trees on deforested land -- again, following the plan of a professional forester -- receive $580 per hectare over five years, but at the end of five years must agree to sustainably manage the reforested land for at least 10 more years.

FONAFIFO director Jorge Mario Rodríguez says the amounts paid are based on the environmental services forests and tree plantations provide -- including absorption of Earth-warming carbon dioxide, safeguarded biodiversity, scenic beauty, and clean rivers and streams, which may provide potable water or feed hydroelectric plants.

The payments are funded through a nationwide tax on fuel, international donations, and money collected by charging for the forests' environmental services. For example, Rodríguez says that in July 2000 FONAFIFO signed a contract with the national power and light company, which stipulates the company will pay $53 per hectare annually in exchange for the landowner's continued protection of a watershed that provides water for a hydroelectric plant. Costa Rica has collected additional funding through the sale of "carbon bonds" to foreign countries and utility companies. The bonds are guarantees that Costa Rica will protect an agreed upon number of acres of carbon dioxide-absorbing trees; utility companies are among the largest producers of carbon dioxide.

According to the environmental ministry, nearly 645,000 acres (260,000 hectares) of land are currently enlisted in the Environmental Services Program, of which 85 percent are protected forests, 9 percent are managed forests, and 6 percent are reforestation projects.

To help bolster the program, the German government and the Global Environmental Facility (GEF), a fund managed by the World Bank and United Nations, have donated about $17 million. The World Bank also provided a $33 million dollar loan that will help ensure that FONAFIFO can meet its contracts with landowners.

GEF's recent $8 million grant will be used only for contracts with landowners who want to protect their forests, explains World Bank natural resources economist John Kellenberg. Nearly a third of the grant must be spent on contracts in three priority areas -- Tortuguero, in the northeast; Barbilla, a forested region on the Caribbean slope; and the Osa Peninsula, in the south. The GEF grant also requires that there be a 30 percent increase in the number of women or women's cooperatives involved in the Environmental Services Program and a 100 percent increase in the number of indigenous communities enrolled.

The GEF grant may help quiet one of the main complaints about the program. Quírico Jiménez, a scientist with the Technology Institute of Costa Rica, says that while the initiative can help protect the last forest remnants in the country, he points out that "Payments are not going to the people who really deserve it, the people who are protecting forest." He says that a number of contracts have been awarded to large enterprises that are managing forests. Since these landowners already profit from the forests -- through sale of the timber they extract -- they shouldn't receive a higher payment than those who are truly protecting their forests, he reasons.

In addition, enrolling in the Environmental Services Program is expensive, because forest technicians must be hired to gather and present all the required information. "Small landowners end up using much of the money they receive from the program to pay the technicians," Jiménez says. To really make the program work, he believes that payments for forest protection must be higher. "Under the current plan, a landowner needs 175 hectares minimum to earn an adequate living. A person who has only five hectares could die from hunger." A landowner with five hectares of forest, or 12 acres, would receive about $1,100 over five years, under the current scheme.

Environmentalist Susana Salas represents SelvaTica, an organization that owns 1730 acres of forest that connects to a national park on the Caribbean slope of Costa Rica. She says that SelvaTica signed a contract with the Foundation for the Protection of the Central Volcanic Range that, for a fee, handled all the studies and paperwork required for the environmental services. The payments bring in enough money, she says, to cover the costs of guarding the forest. She acknowledges that Selva Tica's U.S. owners do not depend on the land to provide their incomes, but believes their intention to protect the forest they purchased warrants the payment.

People's good intentions are key to the success of the Environmental Services Program. There's a risk that landowners may renege on their obligations, or that after five years of payments for protection they then decide to log their forests. FONAFIFO director Rodríguez points out that the country's forestry law would prohibit this, but Jiménez counters that the law is full of loopholes, plus the country has a high rate of illegal logging.

But Guido Chávez of the environment ministry believes there are mechanisms in place to ensure compliance, including follow-up visits to lands enrolled in the Environmental Services Program, annual inspections, surprise visits to forestry operations, such as sawmills, and check points on the highways to stop logging trucks and verify their permits. Vigilance by private citizens who need to file official complaints is also important, he says, and "these complaints require appropriate judicial response."

In spite of the risks, World Bank economist Kellenberg thinks it's worth giving the program a chance to work. "Costa Rica has done an admirable job so far," he says. "The country has a forest-conservation program that is unparalleled, 15 years ahead of its time."

Other countries are beginning to investigate environmental services programs of their own. One example is the efforts of a nonprofit group in Guatemala called Fundación Solar. With funds from a US Agency for International Development-supported conservation project called Regional Environmental Program for Central America/Protected Areas System, and from the Dutch aid agency Hivos, the group has been working for the past year to evaluate the monetary worth of the services provided by the forests around Lake Atitlán. The lake is a popular tourist attraction, generating millions of dollars annually from visitors, while the lake's harvested fish are worth hundreds of thousands. Fundación Solar wants to determine the monetary value of Atitlán's forests -- which keep the lake from silting up, furnish potable water, absorb carbon dioxide, and provide scenic beauty.

Oscar Coto of Fundación Solar says that project staff have worked closely with residents of Lake Atitlán, most of whom support the idea of receiving payment for conserving forests. Others worry about having their activities restricted. He thinks that for an Environmental Services Program to work in Guatemala, the government "must clearly and precisely explain its benefits" to the public.

For the moment, "everyone's eyes are on Costa Rica," says Kellenberg. "The success of the program here has important implications for forest conservation in other countries." If the Environmental Services Program doesn't work in Costa Rica, he concludes, it's unlikely that international funding for similar programs will be available elsewhere.

Contacts:

Jorge Mario Rodríguez
FONAFIFO
Apdo 594-2120
San José, Costa Rica
tel 506/257-8475
fax 506/257-9695
maraya@racsa.co.cr

Guido Chavez
Sonia Lobo
MINAE
Casa Italia 300 sur
San José, Costa Rica
tel 506/283-8004
guidocha@minae.go.cr
slobo@ns.minae.go.cr
www.minae.go.cr

Quírico Jiménez
Apdo 22-3100
Santo Domingo
Heredia, Costa Rica
tel 506/244-0690
qjimenez@inbio.ac.cr

John Kellenberg
tel 506-255-4011
fax: 506-222-6556
Jkellenberg@worldbank.org

Susana Salas
Selva Tica
Apdo 87-5655
Monteverde, Costa Rica
susalas@expreso.co.cr

Oscar Coto
Fundación Solar
15 Avenida 18-78 Zona 13
01013 Guatemala
tel 502/360-1172
ocoto@intelnet.net.gt