Costa Rica’s payment for ecosystem services: feel-good measures or substantive change?

If you ask Carlos Manuel Rodriguez, Regional Vice President for Conservation International, what he thinks the world’s most pressing needs are, he might rhapsodize about the protection of 4 billion hectares of natural resources over the next 20 years.  Deserts, tropical forests, temperate forests, freshwater ecosystems and mangroves – 4 billion hectares whatever way you cut it, and then the rehabilitation of degraded wastelands so they return to providing ecosystem services.

About 40 people gathered at the Lee Kuan Yew School of Public Policy for yesterday’s lunchtime seminar entitled “The Environmental Services Payment Program – A Success Story of Sustainable Development in Costa Rica.”  Starting off by explaining how the financial/economic crises are only a symptom of broader, unsustainable patterns of consumption and production, Rodriguez referred to the global economy as a sick patient who ignores the doctor’s advice.  “You cannot continue doing business as usual,” he intoned.  “Economic growth has caused us to be unhealthy.”  A few Worldmapper charts and several chuckles later (rescaling country size by the prevalence of fast food restaurants leaves the US bloated and Africa non-existent), he eventually shifted to the Central American context where the Ministers of Environment are all lovely and huggable people, but unfortunately carry no clout against the Ministers of Finance who have alternate plans.

The conversation flows as follows: (Ministers of Environment) – Let’s build a biodiversity corridor and protect our region’s endangered species.  A monkey should be able to swing from tree to tree without ever having to touch the ground.  (Ministers of Finance) – Actually, we’ll be financing the construction of transnational networks of dams, roads, and transmission lines to accelerate economic growth and alleviate poverty.  Rodriguez shared his revelation that the MOE needs to speak MOF’s language before funds for environmental protection are unlocked.

Enter the Payment for Ecosystem Services (PES) scheme, or Pagos por Servicios Ambientales.  Costa Rica, which in 1996 passed a forestry law that bans deforestation, is probably the best-known case of a country adopting PES.  As the then-Minister of Environment, he successfully lobbied other ministries to support a $50 million Ecomarkets project, backed by the World Bank, that would put a market price on the various services that ecosystems provide when left intact. Trees and grassland storing carbon, mangroves purifying water resources, and forests protecting against floods would be just some examples.

Rodriguez describes it as a financial instrument between providers and users of ecosystem services, with the government in the middle setting policies, rules, procedures, the institutional administration, and the political will to internalize those services.  He showed pictures of one indigenous community receiving a check for $52,000 for the sequestration services their forest provided.  Instead of blowing the relative windfall on alcohol or prostitutes, as has been the case elsewhere like Papua New Guinea or Canada (surprise?), the community used the money to build a new access road, rehabilitate the school, and construct new homes.  According to Rodriguez, the PES was not only supporting social development among some of the country’s poorest, but also reversing the long tide of deforestation that began in the 1940s.  Costa Rica registered even higher forest cover rates as the 1990s/2000s progressed.

Time ran out and no space remained to elaborate on some of the program’s shortcomings.  But analysis from Resources for the Future, a DC-based think tank focusing on environmental and natural resource issues, will not leave you with that fuzzy, feel-good feeling.  The task of valuing these various ecosystem services and determining all the factors that affect their actual quality and quantity is significantly more complicated than counting the number of trees and multiplying by some coefficient.  As RFF says:

…the contribution of a hectare of forest to aquifer recharge depends on the flora, soil, hydrology, and weather in the forest. Given the challenges involved in measuring ecosystem services, most PES programs use relatively coarse estimates, or “proxies.” 

They also raise the issue of targeting.  Since the payment scheme is voluntary, landowners who had no intention to deforest/stripmine/convert/etc. can still enroll, which enlarges the total volume of financial flows, but without having accomplished any environmental benefits.  According to this RFF discussion paper by Robalino et al., only 0.4% of the parcels of land enrolled in the 2000-2005 period would have been deforested in the absence of a payment scheme.  Building the counterfactual is necessary in understanding whether or not the policy has been effective, but the researchers also say that the parcel selection process can be further improved to increase the PES scheme’s effectiveness by targeting areas at greatest risk of deforestation.

Read the RFF paper and some of the other PES resources available at the Convention on Biological Diversity’s site for more information.