Transcript The Use of Market Instruments to Pay for Environmental Services in Costa Rica presented by Luis Gamez Advisor, Ministry of Environment of Costa Rica Beijing,

The Use of Market Instruments to Pay for
Environmental Services in Costa Rica
presented by
Luis Gamez
Advisor, Ministry of Environment of Costa Rica
Beijing, China
April 22, 2001
Export values from forestry and selected agricultural products.
Tourism revenues.Costa Rica 1950-1997
800
700
600
Coffee
Banana
Meat
400
Forestry
Tourism
300
200
100
0
Year
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
1965
1962
1959
1956
Adaptado de: Watson, V etal. Making space for butter forestry. Policy that works for forest and people. No. 6. CCT, IIED, JUNCAFORCA.1998
1953
1950
US$ Millions
500
INSTITUTO NACIONAL
DE BIODIVERSIDAD
(5 0 6 ) 2 4 4 -0 6 9 0
Fa x (5 0 6 ) 2 4 4 -4 6 5 4
Loss of Dense Forest Cover in Costa Rica 1940-1990
Evolution of Trends
4000
Forest Cover (ha.)
Protected Areas (ha.)
Population (No. habit.)
3500
1941 Laws for landuse change
1960 Extensive cattle-raising for
3000
Hectares w/ no. inhabitants X 1000
exports
1969 Forestr Law (4465)
1977 Ntl. Park Service Law (6084)
1979 Forestry Incentives
1986 Creation of Min. Environment
1989 ECODES e INBio
1990 II Forestry Law (7174);
2500
2000
1500
(Forestry Action Planl)
1992 Wildlife Law (7317)
1995 Envionment Law (7554)
1996 New Forestry Law &
1000
Environmental Services (7575)
1998 Biodiversity Law (7788)
500
0
1940
1950
1960
1970
1980
1990
2000
Years
Source:
- MIDEPLAN. Principales indicadores de Costa Rica. San José. Costa Rica. 1998
- Watson, U. etal. Making space for better forestry. Policy that works for forest and people. No 6. CCT, IIED, JUNAFORCA.1998
- MINAE - FONAFIFO, Costa Rica hacia la sostenibilidad de sus recursos forestales.1998
Sustainable Development Challenges
• Appropriate legal & institutional framework
• Consolidation of well established national system of
protected areas (state)
but, how to induce change in behavior to conserve forest in private lands?
• Forestry: sustainable management, reverse deforestation &
increase forest cover
• involve & increase private sector and civil society
participation in cost & benefits of conservation
• Economic instruments: value of environmental $ervice$
1
FORESTRY LAW DRIVES THE INTERNALIZATION OF
ENVIRONMENTAL SERVICES INTO DIRECT & TANGIBLE
ECONOMIC COMPENSATION FOR FOREST OWNERS
BENEFIT INTERNALIZED BY:
TYPE OF BENEFIT *
Sustainable wood production
Water supply
Watershed protection
Hydropower potential
LANDOWNER
COUNTRY GLOBAL

x<——
x<——


Scenic beauty
Biodiversity & ecosystems
x<——
x<——

Carbon sequestration
x<——
x<——

* Ley Forestal # 7575 del 22 de abril, 1996
E2/BB
Payments for Environmental Services (PES)
Government of Cost Rica
CTOs
$$
OFFSETS
OFFSETS
Greenhouse Gas
Fund
5% Fossil Fuel
Tax Forestry
Law#7575
National Forestry
Financing Fund
¢
O
H2
¢
2
CO
Reforestation
(Private Owners)
¢
CDM
AIJ investors
$
$
CO2 H2O
Energy
Transportation
projects
Forest Management
(Private Owners)
H2O
Local Private
Hidroelectric Plants
¢
C
O
2
¢
H
2O
Conservation
(Private Owners)
COSTA RICANS & THE
GLOBAL COMMUNITY
SINAC
FONAFIFO
ENV. SERVICES
FINANCIAL
INSTRUMENT
IN BNCR
IDENTIFICATION
OF PRIORITY
AREAS
CONTRACT
MONITORING
LAND OWNERS
MINISTRY
OF FINANCE
REFORESTATION
FOREST MANAGEMENT
PAYMENTS
GASOLINE TAX
VOLUNTARY
AGREEMENTS
FOREST PROTECTION
Determining Levels of Payment
Based on the Opportunity Cost of Land
Payment >= OCL
•Grazing land is the major competitor to forest conservation
•What is the OCL for dairy and cattle ranching?
•Measure ~ cost of rental 1 Ha. for pasture
•Market value = acceptable income / Ha. of benefits foregone
Modalities &
Distribution of Payment (2001)
Contract
Type
Forest
Conservation
Sustainable
Forest
Management
Reforestation
Total
Payment
(US$)
Distribution by year
1
2
3
4
5
210
20%
20%
20%
20%
20%
327
50%
20%
10%
10%
10%
537
50%
20%
15%
10%
5%
Types of Forest
Conservation Contracts
Contract Maximum Area
(ha)
Individual
300
300 by land owner
Community
Indigenous
Reserve
There is no limit
for NGOs
600
Land Owner Type
Individual land owners
Small and medium land owners
associated
with a local NGO
Indigenous Reserve
Development Association
Total Area and Number of
Contracts by Modality and Year
Year
Forest
Conservation
Sustainable
Reforestation
Forest Mgt.
Total
Number of
contracts
1997
88,829.8
9,324.5
4,629.4
102,783.7
1,531
1998
47,803.8
7,620.4
4,172.5
59,915.7
1,021
1999
55,776.0
5,124.8
3,156.0
64,782.0
925
2000
26,583.2
0
2,456.8
29,040.0
501
2001
20,629.0
3,997.0
3,281.0
27,997.0
483
Total
239,621.8
26,066.7
17,695.7
283,384.2
4,461
%
84.6%
9.2%
6.2%
Reforested areas and managed/protected areas
under incentives in Costa Rica
INSTITUTO NACIONAL
DE BIODIVERSIDAD
(5 0 6 ) 2 4 4 -0 6 9 0
F a x (5 0 6 ) 2 4 4 -4 6 5 4
1997
1995
1993
Year
1991
1989
Protected / managed forest
Reforestation
1987
1985
1983
1981
1979
0
10000
20000
30000
40000
50000
Hectares
60000
70000
80000
90000
INCENTIVE TYPE
* Income tax
*CAF
*FDF
* CAFMA
* CPB
*forest regime for
protection
Results of the PES
•High demand and acceptance
•Contributes to reduce & revert deforestation
•Increases forest cover in private land
Percentage of the territory with forest
cover. 1999.
56.5
43.5
0
20
40
60
Porcentaje del país
sin cobertura
boscosa
Porcentaje del país
con cobertura
boscosa
Percentage
Fuente: Fonafifo, CCT y CIEDES. 1998. En: Ortiz, E. 2000. Bermúdez, et al. 2000.
Obstacles
• Financial “bottlenecks”
– subject to central government administration by the
Ministry of Finance (‘detoured’)
– only one third of dedicated fuel tax revenues are
assigned yearly
• Evaluation & targeting:
competing conservation vs. forestry sector goals
limited participation possibilities / transaction costs
• Monitoring
– understaffed / overload of duties
– certification problems / corruption
Alternative, Private Schemes
•
•
•
•
•
•
Descentralized / local empowerment
Complementary, but independent
Upstream - downstream relation
Watershed management
Hydropower sector
Public utilities / water supply / industry
Structure of the Environmentally adjusted water fee for the
Public Utilities Company of Heredia. 1999 (¢/m3)
Category
Catchment
function
value
Protection
value
Current
Post service
fee (mo.) treatment cost
Total
Residential
2.70
4.89
50.35
18.13
76.25
Commerce
2.70
4.89
168.33
32.26
208.18
Industry
2.70
4.89
217.65
38.82
264.06
Preferential
2.70
4.89
41.74
21.86
71.19
Governmental
2.70
4.89
145.46
32.78
185.83
Exchange rate: 1 US$= 334 colones
Additional revenues raised for reinvesting into local catchment area
Low financial impact on end user
Low cost investment/ high benefit
Locally supported and funded
Watershed
environmental
service
Lessons
• PES can become driver for positive impacts
• Increase & protect forest cover in private land while
generating additional revenues for landowner
• Stimulates management and reforestation
• Shows potential in economic opportunities for publicprivate partnerships in achieving conservation goals.
• Drives public interest and awareness in conservation
• Increases perception of the economic value of
environmental services
• Enables interest and participation in payments &
compensation
• Creative sources of funding
A New Paradigm of Environmental Services
• Public and Private PES schemes are highly complementary
and not mutually exclusive.
– Therefore coexistance must be enabled but coordinated. The role
of the government environmental authority is as promotor.
• Direct payment schemes assist in local solution of
conservation problems by sharing costs & benefits with
end-users of environmental services like water.
• Success dependent upon for political openess to NGO and
private sector participation.
• Major weaknesses are related to complex and centralized
government financial management
• PES should be conceived within a wider environmental
finance strategy, but not as substitute