National Payment for Environmental Services Programs

Costa Rica: Environmental Services Payments Program (ESPP)

Costa Rica is one of the pioneer countries where PES schemes have been successful at a national scale. The Environmental Services Payments Program was launched by The National Financing Fund (FONAFIFO) in 1997 to benefit small and medium-sized landowners whose included forests are suitable for forestry activities, with the aim of promoting the conservation and recovery of the country’s forest cover. The ESPP program started investing US$ 14 million in payments for environmental services, which resulted in: reforestation of 6,500 ha, sustainable management of 10,000 ha of natural forests and, the preservation of 79,000 ha of private natural forests (Nasi et al. 2002). PES in Costa Rica provides subsidies to farmers for plantations and agroforestry systems. The tax on fossil fuels is the main source of funding (80%), and the other 20 % comes from international sale of carbon from public protected areas. (Montagnini et al., 2005)

COSTA RICA: Environmental Services Payments Program (ESPP)

Costa Rica is one of the pioneer countries where PES schemes have been successful at a national scale. The Environmental Services Payments Program was launched by The National Financing Fund (FONAFIFO) in 1997 to benefit small and medium-sized landowners whose included forests are suitable for forestry activities, with the aim of promoting the conservation and recovery of the country’s forest cover. The ESPP program started investing US$ 14 million in payments for environmental services, which resulted in: reforestation of 6,500 ha, sustainable management of 10,000 ha of natural forests and, the preservation of 79,000 ha of private natural forests.[i] PES in Costa Rica provides subsidies to farmers for plantations and agroforestry systems. The tax on fossil fuels is the main source of funding (80%), and the other 20 % comes from international sale of carbon from public protected areas.[ii]

FONAFIFO’s main objective is to “finance small and medium-sized producers, through loans and other mechanisms, to promote the management of forests, both intervened and natural forest, in order to encourage forest plantation and reforestation processes, the establishment of forest nurseries and agroforestry systems, the rehabilitation of deforested areas, and also to benefit from technological advances in the use and industrialization of forest resources. FONAFIFO also mobilizes funds to pay for the environmental services provided by forests, forest plantations and other activities to strengthen the development of the natural resources sector.”[iii]

FONAFIFO is a decentralized body within the organizational structure of the State Forest Administration. The aforementioned Law 7575 grants it relative autonomy, instrumental legal status and the authority to engage in any type of licit non-speculative legal transaction, including the establishment of Trust Funds, to guarantee the effective administration of its patrimonial resources.[iv]

FONAFIFOs funding comes from:

-          The Ordinary National Budget, as stipulated in the Fiscal Simplification and Efficiency Law No. 8114;

-          forestry tax revenues;

-          revenues generated in accordance with Law No. 8058, with the Approval of the Loan Contract between the World Bank and the Government of Costa Rica; and

-          financial contributions of the German Government, through the KfW Bank, ratified by Law No 8355.

-          At the local level, FONAFIFO receives resources from water protection agreements signed with waterfirms; and Environmental Services contracts signed with the National Power and Light Company (Compañia Nacional de Fuerza y Luz- CNFL) and Florida Ice & Farm.

The Heredia Public Water Company (Servicios Públicos de Heredia) charges the consumers an additional tax based on water consumption. The taxes are then used to pay farmers who own land where the water company operates for forest protection and reforestation and to purchase affordable land holding water reservoirs.[v] The Matamoros Hydroelectric Company pays US$15 per hectare annually to FONAFIFO after signing a voluntary agreement in 1991. This payment is used to finance conservation or reforestation activities within the Matamoros basin over a period of five years. Since 1997, FONAFIFO has agreements with other companies: Energía Global, Hidroeléctrica Platanar, Compañía Nacional de Fuerza y Luz, y  Florida Ice and Farm.[vi]

Ecomarkets Project

The Ecomarkets Project strives to increase forest conservation in Costa Rica by supporting private suppliers and markets for the environmental services offered by private forests, such as protecting biological diversity, mitigating greenhouse-effect gases, and favoring water services.[vii]

The World Bank has recently loaned US$32 million to Costa Rica, in order to implement the Ecomarkets project. This loan was accompanied by a US$ 8 million grant from the Global Environment Facility (GEF).[viii] The funding is enough only to cover 15-30 % of the demand. In a study carried out by CATIE, it was found that most Costa Ricans agree to pay in the form of taxes for the environmental services provided by forests.[ix]

The Project will support the execution of environmental policies in the forestry and energy-producing sectors, and contribute to sustainable human development. In addition, the Project will strengthen relevant bodies within the Ministry of the Environment and Energy (MINAE), as well as local and regional nongovernmental organizations responsible for the execution, promotion, supervision and follow-up of the ESP Program.[x]

For more information on Payments for Environmental Services in Costa Rica visit: www.fonafifo.com

 

MEXICO: Payment for Hydrological Environmental Services Program

Mexico faces many environmental challenges, being deforestation and water scarcity the two most important. According to the National Water Commission, two thirds of the 188 most important aquifers in the country suffer from overexploitation.[xi]

The Payment for Hydrological Environmental Services Program was designed by the federal government to pay forest owners for the benefits of watershed protection and aquifer recharge in areas where commercial forestry is not currently competitive. It seeks to complement the forestry and water policy by providing economic incentives to avoid deforestation in areas where water problems are severe. Funding comes from a fee charged to federal water users, from which nearly $18 million USD are earmarked for the payment of environmental services.[xii]

This program consists on direct payments to landowners with primary forest cover given at the end of the year, once it has been proven that the forests were not deforested. Part of its innovative approach is that it is funded through an assigned percentage of the federal fiscal revenue derived from water fees, creating a direct link between those who benefit from the environmental services and those who provide them.[xiii]

For more information on Payments for Environmental Services in Mexico visit: www.ine.gob.mx


 

References          

 

[i] Nasi, R., S. Wunder, and J. J. Campos Arce. 2002. in Montagnini, F., D. Cusack, B. Petit and Markku Kanninen. 2005. Environmental Services of Native Tree Plantations and Agroforestry Systems in Central America.  Haworth Press, Inc, New York

[ii] Montagnini, F., D. Cusack, B. Petit and Markku Kanninen. 2005. Environmental Services of Native Tree Plantations and Agroforestry Systems in Central America.  Haworth Press, Inc, New York

 

[iii] “The National Financing Fund” available online at <www.fonafifo.com> (hereafter “FONAFIFO”)

 

[iv] Ibid

 

[v] Montagnini, F., D. Cusack, B. Petit and Markku Kanninen. 2005. Environmental Services of Native Tree Plantations and Agroforestry Systems in Central America.  Haworth Press, Inc, New York

 

[vi] Mayrand K. and M. Paquin. 2004. Payments for Environmental Services: A Survey and Assesment of Current Schemes. Unisfera International Centre for the Commission of Environmental Cooperation of North America, Montreal

 

[vii] FONAFIFO, op cit

 

[viii] Nasi, R., S. Wunder, and J. J. Campos Arce. 2002. in Montagnini, F., D. Cusack, B. Petit and Markku Kanninen. 2005. op cit

 

[ix] Montagnini, F., D. Cusack, B. Petit and Markku Kanninen. 2005. op cit

 

[x] FONAFIFO, op cit

 

[xi] Muñoz-Piña, C., Guevara, A., J.M. Torres, and J. Braña. 2005. Paying for the Hydrological Services of Mexico’s Forests: analysis, negotiations and results. Instituto Nacional de Ecologia, Mexico City, p.2

 

[xii]  Ibid

 

[xiii] Ibid p.4

 

 

   

 

 

 

This page was last updated on Wednesday December 20, 2006.