Payment for Ecosystem Services Programme

Summary

Costa Rica’s Payment for Ecosystem Services Programme (PPSA) was established by the 1996 Forestry Law and began operating in 1997. It represents the evolution of forestry incentives in Costa Rica from their beginning with the Forest Fertiliser Certificate (CAF) in 1986. PPSA is perhaps the most successful national scheme of its kind in the world and will be the mechanism for distributing benefits under Costa Rica’s REDD+ programme.

Between 1997 and 2010, PPSA protected a total of 710,000 ha, of which 504,000 ha were still within the programme at year-end 2010. Costa Rica pays for the majority of the cost of PPSA; between 1997 and 2009 it contributed US$132.9 million while US$52.7 million came from external sources.

The Forestry Law defines the four ecosystem services that are purchased under PPSA: (i) emissions mitigation; (ii) protection of water sources; (iii) provision of scenic beauty; and (iv) protection of biodiversity. As a fund raising mechanism for PPSA, the National Forestry Financing Fund (FONAFIFO) can issue and sell Ecosystem Service Certificates (CSA), each representing 1 ha of forest within the PPSA. The largest transaction volume is in CSA for reforestation to protect water catchment areas and the main purchasers of these are large hydroelectric plants, which together fund approximately 3% of the total PPSA area.

Decree 25721 of 1997 regulating the Forestry Law of 1996 makes it clear that upon receipt of payments under PPSA, rights to fixed carbon pass from the land tenant to FONAFIFO. It is estimated that FONAFIFO has acquired 80 million tCO2e in this way since 1997.

FONAFIFO administers PPSA. The precise mix of activities supported by PPSA is set each year by the Ministry of Environment and Energy (MINAE) by Executive Decree. However in general, it funds private landowners for forest protection, regeneration or plantations for different amounts and for five or ten years depending on the modality. By far the largest modality is forest protection (80% of the offer in 2013).

MINAE Executive Decree 36660 of 2013 set out seven modalities with their respective areas for 2013:

1. Reforestation: 6,000 ha (600 of which with native species), maximum payment US$980/ha (US$1,470/ha for native species) over five years;

2. Natural regeneration: 3,000 ha, maximum payment US$410/ha over ten years;

3. Protection of existing forest: 52,928 ha, maximum payment US$640/ha over ten years;

4. Protection of forest in conservation gaps: 1,000 Ha, maximum payment US$750/Ha over ten years;

5. Protection of water resources: 5,000 Ha, maximum payment US$800/HA over ten years;

6. Forest Management: 500 Ha, maximum payment US$500/HA over ten years; and

7. Agroforestry systems: 1,315,000 trees, maximum payment US$1.95/tree over three years.

PPSA will form the core of the country’s REDD+ programme, which will constitute the third generation of incentives to reduce deforestation in Costa Rica. Under REDD+, Costa Rica aims to recruit a further 342,000 ha to PPSA, focused on inducing early regeneration in private land and Indigenous Reserves and on extra areas for protection of old growth forests.

In September 2013, Costa Rica became the first country to have an Emission Reductions Payment Agreement​ (ERPA) with the Forest Carbon Partnership’s (FCPF) Carbon Fund. The Carbon Fund committed to buying US$63 million worth of emissions reductions accruing from the beginning of the Emissions Reduction programme in 2010 until 2020. Costa Rica aims to certify an earlier vintage of credits from the beginning of its REDD+ activities in 2005 until 2010 with the Voluntary Carbon Standard Jurisdictional Nested REDD+ (VCS-JNR). From 2021, Costa Rica will need the majority of its avoided deforestation carbon credits to offset its own emissions and meet its target of becoming a carbon neutral country.

As part of the discussions around REDD+, both indigenous and smallholder agro-forestry organisations have proposed creating new PPSA modalities. Proponents of an Indigenous PPSA want it to support traditional productive systems including cultural practices, whilst advocates of a Peasant PPSA are looking for recognition of the mitigation impact of improved agricultural practices.