PAYMENT FOR ENVIRONMENTAL SERVICES (PES)- Costa Rica

The Payment for Environmental Services Program (PES) consists of a financial recognition by the State, through the National Forestry Financing Fund (FONAFIFO), to owners and holders of forests and forest plantations for the environmental services they provide and that have a direct impact on the protection and improvement of the environment. Pursuant to Article 64 of the Regulations to Forestry Law 7575, FONAFIFO is authorized to negotiate agreements or contracts for the purchase and sale of environmental services that include a percentage of administrative and technical expenses according to the nature of the obligations acquired therein. The objective of the Payment for Environmental Services is to contribute to the protection and maintenance of environmental services in the farms of owners or possessors and includes natural forest, forest plantations, agroforestry systems, natural regeneration and sustainable forest management.

Overview

Type of instrument:

Economic and fiscal instruments›Payments as rewards/for ecosystem services, subsidies, incentives

Challenges addressed

Ecologic connectivity
Soil quality
Water management (e.g. reuse)
Green space management (e.g. accessibility)
Watershed restoration/water quality
Flood risk: pluvial and fluvial / soil permeability
Heat stress and heat island effect
Landslide risk
Nature appropriation / stewardship

Consideration of nature-based solutions:

This instrument promotes the reforestation and conservation of the green fabric as a tool for the mitigation of greenhouse gas emissions. The protection of the forest has an impact on the conservation of biodiversity and natural resources as well as on the protection of water resources within the watersheds where the environmental service is generated.

Targeted (peri-)urban areas:

Green areas for water management

Derelict areas

Good practice characteristics:

Effective

Multifunctional NBS support

Sustainable in the long-term

Locally appropriate

Potential to be replicated / upscaled

Innovative

Governance

Government body/bodies

Initiating body:

National Forestry Financing Fund- FONAFIFO

Instrument design:

Details about how the instrument was designed:

The development of the PES included several years of participatory work involving multiple sectors, including public institutions, NGOs from the forestry and environmental sectors, academia and private forestry companies. In order to implement the PES program, the necessary legal provisions were taken to safeguard the right of all inhabitants to enjoy a healthy and balanced environment and several agreements signed by the country were ratified, as well as multiple consultations in the various regions of the country.

Involvement of non-governmental actors:

Public sector institution (e.g. school or hospital)

Researchers, university

Citizens or community groups / NGOs

Type of actor involvement:

Co-planning or co-design of instrument (e.g. boards, advisory role)

Instrument implementation:

Type of involvement:

Since its inception, the Payment for Environmental Services Program (PPSA) has facilitated and promoted the inclusion of different stakeholders with an interest in the development of the Costa Rican forestry sector. In this way, the adoption of a novel financial scheme was made possible, which integrates various institutions, including: the National Conservation Areas Agency (SINAC), FONAFIFO, the National Forestry Office (ONF), the Forestry Regents, the College of Agronomists, cooperatives, cantonal agricultural centers, non-governmental organizations in the sector and beneficiaries in general. FONAFIFO is the financial backbone of the PES. Within MINAE, FONAFIFO works in coordination with SINAC, thus integrating the State Forestry Administration (AFE), which defines national policies for the investment of resources in PES priority areas. It also takes into account elements derived from the framework of the Mesoamerican Biological Corridor - Costa Rica Section, as well as other ecosystem and biodiversity conservation commitments. FONAFIFO currently has eight Regional Offices in strategic areas for the development of its activities. In recent years, as a result of the expansion of the Program's coverage, management and operational capacities have been gradually developed to guarantee the efficient management of the investment resources assigned to the institution, in order to adequately meet the requirements of the current regulations on financial administration and public budgets, as well as to maintain a productive dialogue with the country's financial authorities.

Targeted actors:

Public sector institution (e.g. school or hospital)

Private: household, real estate developer, business , financial

Citizens or community groups (CBOs), NGOs, NGOs, etc.

Financing

Sources of funding:

Public national budget

Budget:

Unknown

Details about instrument financing:

The largest amount of resources for payment for environmental services comes from 3.5% of the fuel tax paid by Costa Rican citizens. In addition, there is a 25% from water use fees paid by water source concessionaires and, to a lesser extent, by organizations and citizens who make donations, sign agreements with FONAFIFO to offset the environmental or carbon footprint of their activities, or purchase carbon credits. Article 47 of the current legal framework (Forestry Law) establishes other potential sources of resources to strengthen the programs developed by the institution, such as: financial contributions received from the State through ordinary and extraordinary budgets of the Republic or other mechanisms, donations or credits received from national and international organizations, credits obtained by the National Forestry Financing Fund, as well as resources obtained through the issuance and placement of debt securities. Additionally, FONAFIFO has encouraged the participation of international entities such as the World Bank, the Global Environment Facility and the German government, among others.

Monitoring, evaluation and impacts

Is a monitoring framework in place?:

Yes

This monitoring is carried out with the support of technological tools and trained personnel through various activities: visits by PES Area and Regional Office personnel to PES farms, review of regency reports provided by the Forest Regents, audits of FONAFIFO and the PES Program. Follow-up and monitoring is carried out through geographic information systems (GIS), which, together with the computer platform, allows the management of all PES contract information, combining different elements such as technical criteria, legal, geographic and financial aspects to ensure the transparency and legitimacy of the PES Program. The PES program has made it possible to achieve objectives, in combination with other actions of the Government of the Republic, which have had a positive impact on: - Reduction of the deforestation rate. - Recovery of forest cover and degraded lands. - Effective mechanism to combat illegal logging. - Promotion of non-traditional production and exports and exploitation of potential markets. - Promotion of the forest industry. - Contribution to rural development. - Contribution to national poverty reduction strategies. - Contribution to the fulfillment of global environmental goals.

Did an evaluation take place?:

Achieved outcomes and impacts:

From 2010 to 2021, 571,814 hectares of forest have been protected, 4774 hectares of forest have been managed, 29748 hectares have been reforested, natural regeneration of 25074 hectares, and 5,455,734 hectares of agroforestry systems. A total of 10,317 contracts for payment of environmental services have been signed in this period of years. Some examples of these are: Reforestation with fast-growing species ₡ 719,995 per hectare €975.60. Distributed over the first 5 years Contract term: 10 years From 1 to 300 hectares Species: Gmelina arborea, Acacia mangium, Vochysia guatemalensis and Vochysia hondurensis Reforestation with medium growth species ₡ 811,811 per hectare €1100.01 Distributed over the first 5 years Contract term: 16 years From 1 to 300 hectares Species: Tectona grandis, Pinus sp, Cordia alliodora, Vochysia ferruginea, Eucalyptus sp and Cedrela odorata Reforestation with native species ₡ 1,217,718 per hectare € 1650.02 Distributed over the first 5 years Contract term: 16 years From 1 to 300 hectares Forest Plantations with Reduced Rotation Rotations ₡ 387,383 per hectare € 524.91 Distributed over the first 4 years Contract term: 6 years From 1 to 300 hectares Agroforestry Systems ₡ 997 per tree € 1.35 Distributed over the 5 years of the contract From 500 to 10,000 trees Mixed Agroforestry Systems for smallholders ₡ 36,498 per hectare per year (Forest Protection) €49.45 ₡ 23,381 per hectare per year (Natural Regeneration) € 31.68 ₡ 296 per tree per year (SAF) € 0,40 Distributed over the 5 years of the contract Forest protection 364,981 per hectare € 860.40 Distributed over the 10 years of the contract From 2 to 300 hectares Natural regeneration 116,908 per hectare €158.41 Distributed over the 5 years of the contract From 2 to 300 hectares Forest Management ₡ 142,572 per hectare € 193.18 Distributed over the 5 years of the contract From 2 to 300 hectares Water resource protection a total of ₡ 456,231/ha Mixed agroforestry systems for smallholders in forest protection modality ₡182,490/ha Mixed agroforestry systems for small producers in natural regeneration mode ₡116,905/ha Mixed agroforestry systems for small farmers ₡1480/tree

Success factors and lessons learned:

From 2010 to 2021, 571,814 hectares of forest have been protected, a total of 4774 hectares of forest management, reforestation of 29748 hectares, natural regeneration of 25074 hectares, and 5,455,734 hectares of agroforestry systems. A total of 10,317 contracts for payment of environmental services have been signed in this period of years. Some PES success factors are : 1. The economic incentive and the sensitization received by landowners, which influences their decision to conserve. 2. The credibility of all the institutions involved in the PES that support the landowners who decide to make a differentiated management of their farms. The country's green image and conservation policies that give credibility at the international level for external actors to participate in PES.

Sources and further information

References

List of references:

https://www.fonafifo.go.cr/es/servicios/estadisticas-de-psa/ https://www.fonafifo.go.cr/es/informacion-general/preguntas-frecuentes/ https://www.fonafifo.go.cr/es/servicios/actividades-y-sub-actividades/ https://www.revistas.una.ac.cr/index.php/ambientale

Interview(s):

Miranda M , UNDP

Photos

G Pucci 2020