Costa Rica scripts a new chapter in forest carbon finance

Thick cloudy skies subdued the sunlight on an autumnal day in Paris. That did not stop the group of representatives from the public and private sector attending the 5th Carbon Fund Meeting of the Forest Carbon Partnership Facility (FCPF) from making a decision that is a major milestone. Costa Rica is set to become the first country to access performance-based payments through the FCPF. This is the first time a national program is being supported by carbon funds in this global initiative of 54 countries and organizations, heralding a new phase in forest carbon finance.

This decision is a strong vote of support for Costa Rica’s ambitious plan to become the first “carbon neutral” country by 2021. Conserving forests and planting trees that capture carbon dioxide plays a large role in the national endeavor.

An interesting feature of Costa Rica’s proposal to the Carbon Fund is the quasi-national scope of the program that would be implemented in a mosaic approach on additional 341,000 ha of mainly privately owned land. Two-thirds of the targeted area is degraded land that the country aims to restore with reforestation, secondary growth and agroforestry, and one-third is old growth forest that will be protected from deforestation. The resulting emission reductions are estimated at 29.5 million tons of CO2. Close to half of these emission reductions (12.6 million tons of CO2) would be offered to the Carbon Fund, and would require an estimated financing of $63 million (assuming a price of $5 per ton of CO2).

Andreas Dahl-Jørgensen, Carbon Fund Participant representing the Government of Norway, said that “Costa Rica demonstrated again its global leadership on REDD+ and climate change. Their ambitious nation-wide REDD+ program will demonstrate how international carbon payments can contribute to green growth, offering a range of additional benefits including invaluable biodiversity, foreign investments, local livelihoods and water”.

Jorge Mario Rodriguez, Director General of the National Fund for Forest Finance (FONAFIFO), explained that “the strength of Costa Rica’s proposal is that it builds on a more than a decade-old program of Payments for Environmental Services (PES), under which the government compensates landowners for planting and protecting trees on their property, based on the potential of trees to protect watersheds, capture carbon and preserve the scenic beauty of the country.” The PES program is funded through a 3.5 percent tax on gasoline and pays about $25 million a year to around 8,000 property owners. Yet the demand for payments for environmental services is higher than can currently be met by the program. Costa Rica’s proposal to the Carbon Fund would help meet this demand by bringing in additional external funding to complement the existing public financing and double the size of the PES program.

International civil society organizations have long been skeptical about the impact that REDD+ programs can achieve. But Costa Rica’s proposal received strong support from the civil society representatives participating in the 5th Carbon Fund meeting in Paris, not least because about 10 percent of the target area would be on communal land held by Indigenous Peoples.

As the Carbon Fund meeting winds down here in Paris, the Costa Rican country representatives will fly home with the task of having to clarify a number of highly technical aspects, but the prospect of being the first country to be included in the pipeline of the FCPF Carbon Fund gives a boost to Costa Rica on its path to achieving national carbon neutrality.

Next week forested tropical countries will gather in Brazzaville for the 13th FCPF Participants Committee Meeting and 5th Participants Assembly. Countries will eagerly look to learn from Costa Rica’s progress as they exchange experience on progress made with REDD+ Readiness in their own country contexts. Other countries that have manifested an intention to participate in the Carbon Fund include the Democratic Republic of Congo and Vietnam.