Monday, September 14, 2015

Costa Rica and PES


One of the things we learn in natural resource economics is to look at problems in terms of their costs and benefits.  By asking questions about who gains and who loses (and when, and how) we can gain an important perspective on the causes of natural resource problems. 

When given access to private benefits from natural resources, people tend to take actions that promote their own well-being. This access comes in the form of our daily contact with open-access and common property resources as well as extraction and habitat conversion on private lands. We all pollute in numerous ways to promote our own benefits (comfort, convenience, standard of living), because it’s cheap and easy to do so. As individuals, the costs we pay for access to the world’s resources are low because they are shared by everyone. 

How do we change the calculus?  Let’s try everything and see what works. Education, an appeal to “do the right thing”, and legal mandates on acceptable use, all serve important roles.  Monetary incentives that affect individual costs and benefits also can be an effective tool in many situations. These incentives come in several forms, most of which we discuss in this course.
One incentive-based method that seems to be gaining favor in developing nations is PES. PES stands for Payments for Environmental Services. The basic idea of PES is to create incentives for conservation of natural resources by transferring dollars from those that benefit from conservation to those who bear the (opportunity) costs of conservation.  

In some PES arrangements government and/or NGOs pay landowners to engage in activities to conserve or restore biodiversity. This can be as simple as letting a cow pasture revert back to its natural state or setting aside lands that would otherwise be used for another purpose. 

Costa Rica is a leader in PES and a great example of the power of this approach. From the 1940s through the 1980s, Costa Rica had one of the highest rates of deforestation in the world.  As recently as 1987, forest cover in Costa Rica was as low as 21 percent of national territory, down from over 85 percent in the early 1900s. The principle causes of deforestation were incentives for the conversion of land to agricultural uses, such as preferable tax treatment for lands used to cultivate crops and support cattle, and heavier tax burdens for “unproductive” lands (i.e. lands not used to produce market benefits). People responded to the incentives they faced. Given the costs and benefits of land use it made sense to convert lands to other uses. 

In 1996, leaders in Costa Rica decided to try to reverse this path of biodiversity loss. The main idea was simple: reward landowners for conservation rather than rewarding them for land conversion. A series of forest laws were enacted, which gave favorable tax treatment to conservation and reforestation, banned the export of primary forest products, mandated that banks provide low-interest loans for reforestation, created a system of national parks and forest reserves and, in 1997, enacted a PES system.  

Costa Rica’s PES system involves direct payments to landowners in exchange for the adoption of land uses and management techniques that provide one or more of four services:  Greenhouse gas mitigation, provision of water or other hydrological services, conservation of biodiversity or provision of scenic beauty for recreation and tourism. Payments are provided by government. Revenues from a fuel tax (ala Pigou) are a primary source of funding. Other sources of funds include sale of carbon credits to other nations and international loans. Between 1997 and 2005, a half-million hectares of forest lands were enrolled in the program. Forest cover is now over 60 percent and rising.

While this progress is exemplary, the Costa Rican Minister of the Environment recently stated that it is getting increasingly difficult to conserve. Without a system of international carbon markets, such as that which might take place through large scale adoption of REDD and REDD+ schemes, he suggested that the Costa Rican path of conservation will soon be unsustainable.

Read more about Costa Rica’s PES experience here at PaxNatura.

Read more about PES here at UNEP and at Ecology and Society.


Tyler Hasspacher said...

I think Costa Rica is doing an excellent job with their reforestation project. It not only helps them out but also helps the world. If there were more programs like this in other countries to sequester carbon dioxide, it might help out with the global problem. The PES program is also a great idea because it gives private landowners the ability to reforest the agricultural lands while getting tax incentives. This again would be a great idea globally, even though things are better said than done.

Shelby White said...

It is interesting to see the success at which Costa Rica was able to implement the PES system. They have completely turned around the deforestation issue and provided external benefits globally by reducing emissions. It seems that with all of the restoration efforts worldwide, especially in tropical areas, this would be a wise system to use rather than throwing money at restoration efforts that may be too focused or broad in context. I like the idea that instead of converting these lands back to their previous state, which so many restoration projects aim to do, it gives land owners the opportunity to still use their land but with increased conservation awareness and practices. PES seems like a great way to start with reducing global emissions and raising conservation awareness.The difficulty, however, is found in how to get the appropriate amounts of money to pay land owners and relying on each country to take part in PES.

Rachel Allen said...

I think that this has great potential to be a basis for a global carbon market and Costa Rica is well ahead of the curve, we just need to figure out how to get other nations on board. The beauty of Costa Rica already implementing this program is that we have a real example of how this kind of program works. People are really incentivized to conserve and let their forests grow back, so there is little question of can we make this happen, the question is in getting developed industrialized nations to help take on this cost to off-set their carbon footprint. We obviously have the beginning steps for a global carbon market so we do have somewhere to start in working towards this goal. This could be something very interesting to watch in the next decade or so to see if we can get developed nations to help with this, seeing as it helps these nations environmentally and socially.

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