Thursday, June 9, 2016

Costa Rica 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.


Jonathan Pfeifer said...

Jonathan Pfeifer
PES (Payments for Environmental Services) sounds like a good idea for conserving natural land in Costa Rica. At the same time the program might only work in certain areas like Costa Rica. t seems like a good idea for places that can use land for tourism or farming. Costa Rica as a country is able to use this program since they use a fuel tax. the United States and other countries already have a tax on fuel to pay for road repairs. a tax write off would work better since the government would not have to pay out money. PES does not even fix the major problem. Costa Rican Minister of the Environment said that it is becoming more difficult to conserve land. in general it sounds like a good program but might have to be refined so it can work in the long run.

Austin McGrayne said...

I really like the idea of PES, it kind of reminds me of a bag & tag-curbside pick up program for recycling. I think both kinds of programs can prove helpful to the health of the environment and citizens of the globe. However I can see where it has some difficulties. I agree with Jonathan, in that such a program may be difficult to enact in places that don't have natural beauty that brings tourism from all over. But I think Dr. Schuhmann eluded to the answer to this (and the answer to many environmental problems) in the third paragraph of the post. Education is the key here. If people are well informed, they realize the cost and benefits of actions that affect the environment, in my opinion, generally people will make the environmental friendly choice even if it is not the most beneficial to them. I may be giving the common person to much credit here but I really think that programs such as PES and education to go along with them are the best solutions to today's environmental problems.

Ryan Grim said...

PES is a good idea for Costa Rica and the whole world. Using Pigou's idea of paying with a tax worked great in Costa Rica but that may not work in every country. Any rise in gas prices or taxes in the US brings large public protests, and less developed countries may not be able to generate enough revenue for PES. There needs to be a global market for Carbon emissions so countries like Costa Rica can absorb emissions from countries like China and make a profit to continue conservation. All countries need to work on their emissions but this PES system seems like a good way to start restoring some of our planet and fighting global warming.

Logan Plummer said...

I do agree that PES could be very beneficial to the environment and could help restore some on the resources and biodiversity we have today. This will not be the way to have people change their views on the benefits of the natural resources. The resources will be looked at more and more in terms of only costs and less of natural benefits.

Patricia Pierce said...

I think the Payments for Environmental Services system is a great way for countries like Costa Rica to be able to conserve their land. It is also a good example to show the rest of the world as a leader in conservation. However, I do not wish for money to be the only incentive to conserve. This is why I think the education aspect is so important as well. People need to know why it is important to conserve and should have an internal incentive to protect the environment. Yes, money is a better way of adding to the number of people conserving. But if you are doing something right for the wrong reasons, is it still right?

Dr. Peter Schuhmann said...

Patricia - I agree that education has an important role to play, but its effect will be limited. Think about it... do you know anyone who is highly educated on things related to environment that lives a truly sustainable life?

Also, are you saying that saving or earning money a "wrong reason" to conserve? If so, please help me understand that perspective.

Nathan Smith said...

I have to agree with what Logan is saying about Payments for Environmental Services. First I believe it would absolutely help in conserving and possibly even restore the resources of today. Going along with what he was saying is that I also agree that just because we save a little money I don't think it will get individuals to change their mind about the benefits of the resource. It will be looked at as more of a just saving money or cost thing, than to actually educate the public on the amount of good that a specific resource has. Looking at resources as a cost might not necessarily translate into people seeing the value in the resource.

Haley Larabee said...

Payment for Environmental Services (PES) programs seem like they would be very beneficial if instituted in other countries. In Costa Rica it has increased the forest cover tremendously, which in turn increases the carbon sequestration services of the forest. The money being used to pay the farmers and land owners to conserve the land comes from a system of fees imposed on fossil fuels.

The Pax Natura (Peace with Nature) website mentions that, "The PES Program is credited with stopping the destruction of the Costa Rican rain forest and recapturing 26 percent of the country’s land-mass-to-forest cover from 1987 to 2000." They have shown over the years how you CAN successfully pursue a system like the PES program and an international exhange system for dealing with carbon. The only downfall is that this can only sustain for so long before it is no longer sustainable; at some point the costs will be more than the benefits because other countries are not participating. It is impossible for the forests of Costa Rica to sequester the carbon pollution of the world when we are expending it more and more.

Marc Monace said...

PES is a great idea as it has incorporated the great ideas advocated by Pigou. I don't think it will work for the whole world though as different countries have their own unique circumstances.