Payments in Costa Rica:
One of the first national efforts to assess forest ecosystem services is represented by Costa Rica. In 1996, Costa Rica issued Forestry Law No. 7575, which recognizes four core national forest services, hydrological services, carbon capture, beautiful landscapes, and biodiversity protection.
The Forestry Law sets out the framework for paying landowners for ecosystem services, defined in a program called Pagos por Servicios Ambientales (PSA), managed by the FONAFIFO -National Forestry Financing Fund.
Landowners are rewarded for providing ecosystem services through conservation-restoration sustainable management and reforestation. Payments to the owner of the land are made for five years. So far, they have waived their rights to ecosystem services. Under the contract, the homeowner promises to manage or protect the forest under a 20-year management plan. This commitment is enshrined in conservation measures and applies to all future land buyers.
The Costa Rican government acts as an intermediary between the potential buyers and landowners. The company rewards owners by selling carbon offset and watershed protection payments to local and international buyers. However, the main source of funding is the fuel sales tax. 5% of fuel sales go to forestry through FONAFIFO. The Forestry Act also prohibits forest conversion and all treated forests must be subject to an approved management plan.
The semi-autonomous organization between sellers and buyers is FONAFIFO. In 2004, eleven different companies contracted with FONAFIFO. Now, the agreement of FONAFIFO is increased with many more companies.
This program has other benefits also like the empowerment of indigenous groups and females.
PSA has been criticized for its significant flaws. In its current format, the PSA payment system uses a fixed cash payment for all participating landlords. As a result, most areas of high environmental values were not included in the program due to higher opportunity costs associated with land-use changes that were not adequately compensated by the flat-rate payment system.
Prioritized Finance Solution:
Based on an assessment of available funding alternatives, the next financial decision to support Phase 2 implementation of the BIOFIN initiative will be a priority.
From securing future cash flows from the revenues of the national protected areas system to mobilizing resources to regulate land rights that Costa Rica has not paid for protection purposes, it issues green bonds to buy land in the protected areas.
They support small and medium-sized enterprises that wanted to use cleaner technologies in their manufacturing processes by creating green corporate lending facilities to ensure sustainability.
They developed concession platforms for promoting more sustainable, and equitable and inclusive development, increased funding for biodiversity conservation, and non-essential services in nature reserves as a mechanism to strengthen protected areas.
As a mechanism to strengthen the protected areas, the implementation of the Sustainable Tourism Impact Fund as a financing mechanism to manage financing, technological cooperation, and capital investments to support the development of sustainable tourism projects in reserves, bio-corridors, and buffer zones was done.
Increased employment, reduction in wildlife hunting, preventing the loss of local, cultural, and natural capital, and promoting more inclusive and equitable development of communities in areas critical to biodiversity conservation are done.
Funding for the development of a new ABS project that shares biodiversity resources generated from its use with research institutions and other public and private organizations interested in establishing an ABS Fund in Costa Rica to exploit and share the benefits of biochemical and genetic factors.
Implementing large-scale initiatives to fund environmental monitoring and research, bushfire control, and invasive species control was done.
Restructuring the payment system for environmental services increases financial sustainability and extends its reach beyond the existing forest approach to the ecosystem services.
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