Reforestation
Costa Rica's Experimental Environmental Services Program: Paying a Fee For What Forests Do For Free March 2001

A bold and controversial forest-conservation
experiment is underway in Costa Rica, which,
if it succeeds, may prove to be a workable,
long-term answer to the problem of rampant
tropical deforestation worldwide. Called the
Environmental Services Program, the initiative
aims to encourage landowners to protect or
manage sustainably the forests they own and
to reforest land that has already been shorn of trees.

The encouragement comes by way of cash payments
to those landowners who sign contracts with the
environment ministry's National Forestry Financing Fund
(FONAFIFO, in its Spanish acronym).

According to Sonia Lobo, a forester with the ministry,
the contracts stipulate that:

Landowners who protect their forests receive $226
per hectare (2.47 acres) over five years,
with the option to enter into another contract
after five years.

Landowners who sustainably manage their forests
- who submit a plan to extract only a certain number
of trees, as defined by a professional forester so as
to not damage the ecological integrity of the forest
-- receive $352 per hectare over five years, but at the
end of five years must agree to continue managing
their forests for at least five more years.

Landowners who plant trees on deforested land
-- again, following the plan of a professional forester
-- receive $580 per hectare over five years, but at the
end of five years must agree to sustainably manage
the reforested land for at least 10 more years.

FONAFIFO director Jorge Mario Rodríguez
says the amounts paid are based on the
environmental services forests and tree plantations
provide -- including absorption of Earth-warming
carbon dioxide, safeguarded biodiversity,
scenic beauty, and clean rivers and streams,
which may provide potable water or
feed hydroelectric plants.

The payments are funded through a nationwide tax on
fuel, international donations, and money collected by
charging for the forests' environmental services.
For example, Rodríguez says that in July 2000
FONAFIFO signed a contract with the national power
and light company, which stipulates the company will
pay $53 per hectare annually in exchange for
the landowner's continued protection of a watershed
that provides water for a hydroelectric plant.

Costa Rica has collected additional funding through
the sale of "carbon bonds" to foreign countries and
utility companies. The bonds are guarantees that Costa
Rica will protect an agreed upon number of acres
of carbon dioxide-absorbing trees; utility companies
are among the largest producers of carbon dioxide.

According to the environmental ministry, nearly
645,000 acres (260,000 hectares) of land are currently
enlisted in the Environmental Services Program,
of which 85 percent are protected forests,
9 percent are managed forests, and 6 percent are
reforestation projects.
To help bolster the program, the German government
and the Global Environmental Facility (GEF), a fund
managed by the World Bank and United Nations,
have donated about $17 million.
The World Bank also provided a $33 million dollar loan
that will help ensure that FONAFIFO can meet its
contracts with landowners. GEF's recent $8 million grant
will be used only for contracts with landowners
who want to protect their forests, explains
World Bank natural resources economist
John Kellenberg.
Nearly a third of the grant must be spent on contracts in
three priority areas -- Tortuguero, in the northeast;
Barbilla, a forested region on the Caribbean slope;
and the Osa Peninsula, in the south.
The GEF grant also requires that there be a
30 percent increase in the number of women or
women's cooperatives involved in the Environmental
Services Program and a 100 percent increase
in the number of indigenous communities enrolled.
The GEF grant may help quiet one of the main
complaints about the program.
Quírico Jiménez, a scientist with the Technology
Institute of Costa Rica, says that while the initiative
can help protect the last forest remnants in the
country, he points out that
" Payments are not going to the people who
really deserve it, the people who are protecting forest."
He says that a number of contracts have been awarded to
large enterprises that are managing forests.
Since these landowners already profit from the forests
-- through sale of the timber they extract
-- they shouldn't receive a higher payment than
those who are truly protecting their forests,
he reasons. In addition, enrolling in the
Environmental Services Program is expensive,
because forest technicians must be hired to gather
and present all the required information.
" Small landowners end up using much of the money
they receive from the program to pay the technicians,"
Jiménez says. To really make the program work,
he believes that payments for forest protection
must be higher.

"Under the current plan, a landowner needs
175 hectares minimum to earn an adequate living.
A person who has only five hectares could die from
hunger." A landowner with five hectares of forest,
or 12 acres, would receive about $1,100 over
five years, under the current scheme.

Environmentalist Susana Salas represents SelvaTica,
an organization that owns 1730 acres of forest that
connects to a national park on the Caribbean slope
of Costa Rica.
She says that SelvaTica signed a contract with the
Foundation for the Protection of the Central Volcanic
Range that, for a fee, handled all the studies and
paperwork required for the environmental services.
The payments bring in enough money, she says, to cover
the costs of guarding the forest.
She acknowledges that Selva Tica's U.S. owners
do not depend on the land to provide their incomes,
but believes their intention to protect the forest they
purchased warrants the payment.

People's good intentions are key to the success of the
Environmental Services Program. There's a risk that
landowners may renege on their obligations, or that
after five years of payments for protection they then
decide to log their forests.

FONAFIFO director Rodríguez points out that the
country's forestry law would prohibit this, but
Jiménez counters that the law is full of loopholes,
plus the country has a high rate of illegal logging.

But Guido Chávez of the environment ministry
believes there are mechanisms in place to ensure
compliance, including follow-up visits to lands
enrolled in the Environmental Services Program,
annual inspections, surprise visits to forestry
operations, such as sawmills, and check points on
the highways to stop logging trucks and verify
their permits. Vigilance by private citizens who
need to file official complaints is also important,
he says, and "these complaints require appropriate
judicial response." In spite of the risks, World
Bank economist Kellenberg thinks it's worth giving
the program a chance to work.
" Costa Rica has done an admirable job so far,
he says. "The country has a forest-conservation
program that is unparalleled, 15 years ahead of its time."
Other countries are beginning to investigate
environmental services programs of their own.

One example is the efforts of a nonprofit group in
Guatemala called Fundación Solar.
With funds from a US Agency for International
Development-supported conservation project
called Regional Environmental Program for
Central America/Protected Areas System,
and from the Dutch aid agency Hivos,
the group has been working for the past year to
evaluate the monetary worth of the services provided
by the forests around Lake Atitlán.
The lake is a popular tourist attraction, generating
millions of dollars annually from visitors,
while the lake's harvested fish are worth
hundreds of thousands. Fundación Solar wants to
determine the monetary value of Atitlán's forests
-- which keep the lake from silting up, furnish potable
water, absorb carbon dioxide, and provide scenic beauty.
Oscar Coto of Fundación Solar says that project
staff have worked closely with residents of Lake Atitlán,
most of whom support the idea of receiving payment
for conserving forests. Others worry about having
their activities restricted. He thinks that for an
Environmental Services Program to work in Guatemala,
the government "must clearly and precisely explain
its benefits" to the public. For the moment,
"everyone's eyes are on Costa Rica,"
says Kellenberg. "The success of the program here
has important implications for forest conservation
in other countries."
If the Environmental Services Program doesn't work
in Costa Rica, he concludes, it's unlikely that
international funding for similar programs will be
available elsewhere.

Contacts:

Puriscal Properties
contact@realestatepuriscalcr.com
Telephone: (506) 416 - 3724
Fax and phone: (506) 416 - 3753

Jorge Mario Rodríguez
FONAFIFO
Apdo 594-2120 San José, Costa Rica
tel 506/257-8475 fax 506/257-9695
maraya@racsa.co.cr

Guido Chavez Sonia Lobo
MINAE
Casa Italia 300 sur San José, Costa Rica
tel 506/283-8004
guidocha@minae.go.cr slobo@ns.minae.go.cr
http://www.minae.go.cr/

Quírico Jiménez
Apdo 22-3100 Santo Domingo Heredia, Costa Rica
tel 506/244-0690
qjimenez@inbio.ac.cr

John Kellenberg
tel 506-255-4011 fax: 506-222-6556
Jkellenberg@worldbank.org

Susana Salas
Selva Tica
Apdo 87-5655 Monteverde, Costa Rica susalas@expreso.co.cr

Oscar Coto
Fundación Solar
15 Avenida 18-78 Zona 13 01013 Guatemala
tel 502/360-1172
ocoto@intelnet.net.gt