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Taking Stock: Assessing Ecosystem Services Conservation in Costa Rica

Cameron Walker

Costa Rica's payments for ecosystem services program (known by the acronyms PES or PSA) has led the way in establishing a system to compensate landowners for protecting habitat. As the program enters its second decade, researchers are looking at how well it's working.

Costa Rica's payments for ecosystem services program (known by the acronyms PES or PSA) has led the way in establishing a system to compensate landowners for protecting habitat. As the program enters its second decade, researchers are looking at how well it's working. In the middle of last century, Costa Rica's forests were disappearing more quickly than almost anywhere else in the world; between 1940 and 1970, the country lost as much as half of its forests. "In those days, we were facing deforestation rates that were shameful," says Franz Tattenbach, director of FUNDECOR, a nonprofit aimed at stopping deforestation. In 1996, the country started an innovative program to address deforestation—paying farmers and landowners to keep forests intact. During the past decade, other countries have looked to Costa Rica as an inspiration as they develop their own programs to protect ecosystem services. And, through some lenses, the program appears to be a model for addressing deforestation; research done by FUNDECOR, an organization which focuses on Costa Rica's Cordillera Volcí¡nica Central region, points to the PSA's success in reducing forest loss. Yet a study in press at the journal Conservation Biology suggests Costa Rica's payments for ecosystem services program has not significantly affected deforestation rates. "The PSA is a fantastic program to promote conservation in Costa Rica," says Arturo Sanchez-Azofeifa, an earth scientist at the University of Alberta and co-author of the study. "But we cannot say that the PSA is the main cause of decreasing deforestation in Costa Rica."

A Critical Time

Research into Costa Rica's PSA program comes at a critical time. Last June, the World Bank approved a $30 million loan and a $10 million grant to help fund PSA work. With this backing, Costa Rica plans to transform the payments system during the next three years, says Carlos Manuel Rodriguez, regional vice president and director of Conservation International's Mexico and Central America program. Forestry law 7575, passed in 1996, set up the PSA. Now the program covers 500,000 hectares—more than 10 percent of the country—and has between 8,000 and 10,000 people enrolled. The goal of FONAFIFO, the national forestry fund, is to expand the payments' area of influence to one million hectares. The program's first decade focused on setting up the mechanism, building capacity and educating people about environmental services. "Now, we are moving forward into something more action-oriented," says Rodriguez. The new vision for Costa Rica's payments program will recognize environmental services from forests, tree plantations and agro-forestry, while incorporating rural development into conservation goals. "By paying for environmental services for agro-forestry systems, we are helping…transform those traditional production activities into something more sustainable, more environmentally friendly," he says.

A Satellite's Eye View

Sanchez-Azofeifa became interested in payments for ecosystem services during the late 1990s. After he finished his PhD., he returned to Costa Rica—and the government asked him to analyze the country's total forest cover. To do this, Sanchez-Azofeifa used remote sensing to create maps that show the country's forested areas in 1986 and 1997. He then used these maps to figure out the country's deforestation and reforestation rates between 1986 and 1997. He later expanded this work once at the University of Alberta, conducting forest cover inventories for 2000 and 2005 as well. "Then we said, well, where are the payments?" says Alex Pfaff, an environmental economist at Columbia University and co-author of the forthcoming Conservation Biology paper. In Costa Rica, each farm that signs up for the PSA program also becomes part of a geographic map, so that researchers and policymakers can see where payments go. The payments' location, Pfaff says, can matter a lot to whether they impact forests. The researchers, who drew on the efforts of a larger, NSF-funded field team integrating ecological field research with remote sensing and land-use economics, put these payments maps together with those they had created to track and understand deforestation and factors that affect it. According to their research, between 1987 and 1990, forests disappeared at a rate of about 0.1 percent; during the next seven years, that rate dropped to .06 percent, suggesting deforestation had already dwindled before the payments kicked in. When the researchers combined all the maps, they found that payments from 1997 to 2000 seemed to be targeting areas that with lower-than-average expected deforestation rates. As a result, the program itself can't be responsible for decreasing deforestation, says Sanchez-Azofeifa. Instead, he says, declining deforestation comes from a combination of long-term policies. Until fairly recently, clearing trees was considered an improvement to the land because it made room for agriculture. Sanchez-Azofeifa says that in his grandparents' time, the only way for people to claim land was to "improve" it—to cut forests and convert them to pasturelands. Costa Rica's approach to forests began to change in 1969, when the government passed the first in a series of laws trying to protect forests. In 1979, the first forestry incentive, given for planting trees, was put in place. Throughout the 1980s, other loans and programs also encouraged tree planting. Earlier changes in forestry law, economic incentives for tree-planting, and the increasingly important tourist industry have done more to increase forest conservation and reforestation than PSA payments have, says Carlos Leí³n, director of Costa Rica's Fundacií³n Neotrí³pica. In addition, a population shift from rural to urban areas has transformed Costa Rica's environmental problems. "The truth about these payments for environmental services," he says, is that the program "probably is not the silver bullet that many people thought." Protecting environmental services now requires new approaches, he says. Costa Rica's earlier efforts to address deforestation have been fantastically successful, Pfaff says. Throwing another program on top of this without paying attention to its impact, he says, might not be the best use of money aimed at conservation. But even if most PSA payments have not reduced deforestation, there's no reason that Costa Rica's large, sophisticated conservation institution couldn't refocus the program and increase its impact, Pfaff says.

FUNDECOR's Work

Franz Tattenbach and his colleagues at FUNDECOR disagree about the program's impact on deforestation. In 1991, the organization began working with a group of 20 farmers to protect 1,600 mountain- and waterfall-filled hectares in Costa Rica's Cordillera Volcí¡nica Central. Two years ago FONAFIFO wanted to find the answer to what Tattenbach calls "a very challenging question"— namely, they wanted to determine if the program's efficiency at reducing forest-cutting and generating ecosystem services could be measured. "Costa Rica devotes $12 million per year to this program," says Tattenbach, an economist. "There's a lot of expectations." The FUNDECOR team started working in October 2005, relying on satellite images, hydrological maps and on-the-ground forest measurements. In each of 12 forest types, the group looked at the ecosystem services produced and at the density of roads, among other things, as a way of measuring productivity. They combined this with an econometric model of deforestation, which used observations from 19 sites within nearly 90,000 hectares of private forests, to project how much deforestation would take place under both present and future use of the payment system. According to FUNDECOR's research, which has not been published, the program has been effective at reducing deforestation. The group estimates the program's efficiency will continue during the next five years. Conservational International's Rodriguez thinks Tattenbach and his team are on the right track. The payments have been "quite successful," says Rodriguez, who was Costa Rica's minister of energy and the environment during the time this research was done. "Most of the other studies have been done by someone from abroad without doing much fieldwork," he says. Rodriguez is collaborating with Sanchez-Azofeifa and Pfaff on a future paper.

Other Views

Other research has suggested that, in terms of preventing deforestation, payments may have made little, if any, difference. Last year, University of Texas at Austin geographers Rodrigo Sierra and Eric Russman published one of the first studies on the Costa Rican PSA program's conservation results in Ecological Economics. Using survey data, Sierra and Russman studied a small group of participating and non-participating farms on the Osa peninsula. Even though one might expect that farms receiving payments have more forests, says Sierra, "what we found is that there is no [statistical] difference in forest cover between farms that have and don't have payments." In interviews, some farmers expressed interest in starting new businesses, such as driving taxis or owning restaurants. While researchers don't know how farmers invest their PSA payments, Sierra says, they do know that if the money is invested elsewhere, it could fund activities that affect ecosystems, and ecosystem services, in other areas. The payments program may be attracting sellers who never planned to cut trees on their land in the first place. "The fundamental problem is that sellers would know what they would do with their land, but buyers don't," says Paul Ferraro, an environmental economist at Georgia State University. Ferraro was part of a three-member panel that evaluated the World Bank's Ecomarkets Project, a project that provided additional funding for Costa Rica's payments program between 2001 and 2005. The panel noted that much of the land in the payments program might not have been used for farming, even if the payments weren't in place. "Most of the evidence suggests that it's not generating additional ecosystem services, at least in terms of [avoided] deforestation," Ferraro says. As each group that has studied the PSA program's efficiency has used different methodologies—and looked at different regions and time periods—their results are not directly comparable, says World Bank economist Stefano Pagiola. Now Pagiola is coordinating efforts by several of these teams to revise and extend their analyses. "Hopefully our current efforts will throw more light on this issue," he says.

Next Steps

Even if the program is not transforming deforestation rates, Ferraro says, "in terms of an institution, it's phenomenal." One of the most difficult parts of setting up programs like these is putting the bricks and mortar of an institution in place, he says, and Costa Rica has done that. The World Bank and others are working on a system of differentiated payments that could improve the efficiency of incorporating additional biologically rich and economically valuable lands while making the payments themselves more efficient. Right now, the government pays an estimated $62 per hectare of land per year under the payments program. "Many times," says Gunars Platais, an environmental economist with the World Bank, "it's just not attractive enough." Landowners with valuable land might be able to earn more revenue without having to follow the strictures of the payment program. In other areas, he says, it's possible that payment prices could be reduced: landowners would likely accept less than the current payment price to protect forests that would be difficult to cut, such as ones on steep mountain slopes. A differentiated payment plan would offer different prices depending on the value of the land that is entering the payments program. The city of Heredia, near San Jose, Costa Rica, has already starting doing this. To preserve a forest tract that shelters the source of municipal water, Platais says, the city chipped in to nearly double the price of payments. How Costa Rica's payment program works is becoming even more important as interest swells in countries like Brazil and Venezuela. "The Costa Rican experience is unique to Costa Rica," says Sanchez-Azofeifa, and can't be reproduced outside of the country. Other countries may have to tailor their own programs—and the debates that follow—to their own needs. When Mexico began considering a program of its own, Costa Rica's example helped. "The Costa Rican case was very attractive because it had similarities with what we had in mind," says Carlos Muí±oz-Pií±a, director of research at Mexico's Instituto Nacional de Ecologí­a. Muí±oz-Pií±a, an economist, was a member of the multidisciplinary team that developed the Mexican national program, and participated in convincing the Mexican Congress to earmark a portion of the federal water fee to fund it. The Programa de Pago por Servicios Ambientales Hidrolí³gicos (PSAH) launched in 2003, and is now paying for stewardship of close to a million hectares. The PSAH differentiates payments based on forest type, with approximately $40 per hectare for cloud forests for $30 per hectare for other forests—a small amount, Muí±oz-Pií±a says, but one that is convincing many owners to keep forests intact. In 2005, Muí±oz-Pií±a and colleagues analyzed the program and found that, in its first two years, the program was not getting the best conservation value for its money. More than 70 percent of payment went to areas that INE predicted would not have been deforested in the first place. To adapt, the program instituted a point system in 2006 that selected applications based on the land's hydrologic value, the deforestation risk, and the landowner's poverty. This shift, Muí±oz-Pií±a says, greatly improved targeting to overexploited aquifers and impoverished areas; misunderstandings about implementation prevented a boost in payments in areas with high deforestation risk last year, but the group hopes to improve this in 2007. He and colleagues are also studying how enforcement of payment agreements might affect the program. "We definitely need to improve [the program] on several fronts," he says. As Mexico and other countries start to adjust their own programs to address deforestation, new ideas about how to make payments perform to their highest potential may emerge—and may even help PSA innovators in Costa Rica build on their momentum in protecting ecosystem services. Cameron Walker is a regular contributor to the Ecosystem Marketplace. She may be reached through her website: www.cameronwalker.net First published: May 21, 2007 Please see our Reprint Guidelines for details on republishing our articles.

Please see our Reprint Guidelines for details on republishing our articles.