costa rica: markets of environmental
services and the privatization of
resources
During the
70’s, 80’s and the beginning of the 90’s,
forests suffered severe deforestation in
Costa Rica. Considering that most of the
country is privately owned, the government
took action and developed initiatives aimed
at stimulating the recovery of forests on
private lands.
In 1996, The Forest Law 7575 renewed the
basic concept upon which private forests
were managed. The original scheme of forest
incentives was transformed into the
Payments for Environmental Services (PSA)
system meaning that environmental services
provided by forests and plantations were
paid for. The state recognized
environmental services as the conservation
of biodiversity, water basins and water
resources, the provision of aesthetical
values and the ability of a forest to
function as a carbon sink. The PSA was a
simple way of making forests in privately
owned hands pay for themselves and
attribute the costs to the whole society.
To develop and administer the PSA system,
the National Fund for Forest Financing
(FONAFIFO) was created. On average, Costa
Rica has been allocating about $7-8 million
per year to payments for environmental
services paid for by a selective tax on
fuel.
The PSA system was developed as a
political, technical and financing tool
used to plan and fund the conservation of
vital resources in private areas. However,
since the very beginning, the PSA system
has been subject to ideological pressures
that try to drive it towards a much more
mercantilist stance, oriented by the
illusion of markets and privatization of
environmental services.
achievements, potentials and
limitations
FONAFIFO, together with the forest and
lumber industry, state that the PSA system
has to be given credit for the regeneration
of the forest cover in the country, which
has benefited both the forest industry and
people in rural areas through employment.
However, a study carried out by FONAFIFO in
2002, concluded that PSA had no effect as a
poverty reduction strategy in rural areas
of the country. To add to this, in 2003 the
Institute for Economic Research in the
University of Costa Rica, published a
report stating that the PSA system had no
real impact on the improvement of
environmental services being paid for, it
was concentrated in few landowners’ hands,
and it didn’t contribute to eradicating
rural poverty.
In spite of this, environmental
organizations recognize its potential as a
tool that can channel resources to forest
owners. Positive experiences with peasant
and Indigenous Peoples organizations in the
management of PSA resources, have developed
new practices and knowledge on community
forest management and the restoration of
tropical forests. Further work is being
carried out to turn PSA into a resource
that motivates and facilitates greater
appropriation and control of forest
resources by local communities, and into a
tool for forest restoration in areas where
bio-diversity is degraded.
commodification vs. honest
strengthening of PSA
Regardless of the positive experiences
and future potential, the PSA system is
presently at a crossroads. Either it
establishes and strengthens itself as an
honest tool to protect forests and their
biodiversity, to maintain and improve the
condition of water basins, and to
strengthen local organizations, their
knowledge and management capacities of
forest resources. Or, it becomes
commodified and remains limited to the
logic of the market, handing over control
of vital resources to big corporations.
Some political sectors at the national
and international level are strongly
pushing for the latter. An example of this
is the Eco-markets project, a fundraising
initiative for the PSA system, implemented
by the Costa Rican government and financed
in 2001 with a World Bank loan and a
donation from the Global Environment
Facility (GEF). The project clearly focused
on “supporting the development of markets
and private suppliers of the environmental
services offered by private forests”. Its
main goal has been to sell environmental
services related to the maintenance of
biodiversity, the reduction of greenhouse
gases and water conservation in the global
market.
The drive to create new markets for
biodiversity related services, carbon
credits and water, poses several important
questions. For example, who is going to buy
these services and what are the rights they
acquire over national biodiversity, forest
and water resources? Moreover, how will
national sovereignty over biodiversity
interface with this new market? In
answering these questions it must be
recognized, that it is fully legitimate for
a country to take responsibility for the
costs of protecting and maintaining its own
natural resources, for the purposes of food
security, healthcare and its ethical
relation with biodiversity.
carbonization?
Tropical countries not obliged to reduce
emissions under the Kyoto Protocol had
their expectations raised with the
introduction of the Clean Development
Mechanism and the carbon credit market. It
gave them the chance to attract investments
and funds, through the establishment of
reforestation and forestation projects,
which would act as carbon sinks.
Costa Rica, with quite some technical
experience in financing and management of
plantations, has been in the vanguard of
this group of countries and has been
preparing to host these kinds of projects.
This is despite the fact that plantations
damage the very environmental services for
which they get paid, such as the protection
of soil and water as well as the
conservation of biodiversity.
In spite of Costa Rica’s forest
experience, the definition of a Kyoto area
remains unresolved and the determination of
their potential for carbon fixation still
presents difficulties. More importantly,
the development of these carbon markets
raises serious ethical questions. According
to recent estimates of the International
Panel on Climate Change (IPCC), far greater
reductions in the emission of greenhouse
gases are needed than those established
under the Kyoto Protocol if we want to have
a significant impact on the mitigation of
global warming in the coming 100 years.
Furthermore, the CDM has not only
demonstrated the uncertainty of its real
effectiveness in reducing emissions and on
climate change, but it has also turned out
to be a very complex mechanism, the
discussion of which, has delayed the
negotiations of the Kyoto Protocol.
In the case of Costa Rica, it has been
estimated that these mechanisms could
generate enough funds to double the area of
plantations. Even worse, models for carbon
reduction through CDM projects have
indicated that they are only cost effective
when the projects involve thousands of
hectares. For Costa Rica, where the average
farm size is about 60 hectares per family,
this implies a serious threat of land
concentration in a few hands.
certificates for environmental
services
FONAFIFO has been trying to promote the
national and international market for
environmental services through the
Certificates for Environmental Services
(CSA) scheme. Through CSAs the generation
of basic environmental services is ensured
for the functioning of a company. Moreover,
a CSA can be used to provide the company
with a good image, given that it is
cooperating with the protection of forests;
and the investment can be deducted from
gross income for tax purposes by presenting
it as operational costs.
For example, a CSA can be obtained by a
company, which wants to protect a forest
linked to a specific water basin where they
have interests. A case in point is the
certificate that has been issued to Meliá
Conchal Hotel in the Dry Pacific, a region
in the northeast, where water has been a
limitation for large agricultural and
tourism projects.
The company has been in conflict with
the local communities who regard the huge
water demands of the hotel as a threat to
their aquifers. The company’s strategy has
been to buy land in water replenishment
areas. These areas are submitted to PSA
programs that will be financed with the
funds coming from the CSA, which the
company has bought.
This example illustrates how this new
market for environmental services presents
the risk of transforming the PSA system
into an instrument of control over vital
resources in the hands of big corporations.
It also implies the risk of shifting the
focus, goals and plans of the PSA system
from one of conservation of natural
resources, to one that only deals with the
interests of those that are profiting from
those resources and have the funds to buy
them.
conclusion
The mercantilist orientation that some
sectors want to give the PSA system are not
only threatening its ethical integrity,
given that they mix it up with the
marketing of carbon credits and the
accompanying threat of monoculture tree
plantations, but they are threatening to
turn the PSA system into a control tool and
a means by which corporations can
appropriate natural resources. These
threats are magnified even more with the
proposals in the free trade agreement with
the US, which will facilitate the opening
up of environmental services markets.
Friends of the Earth Costa Rica will
continue campaigning for the PSA system to
evolve increasingly towards an
environmentally healthy and socially just
system; so that it can become independent
from the old incentive schemes for
mono-culture plantations; so that it can be
strengthened as a tool in the struggle
against rural poverty and avoid the
concentration of resources in the hands of
big land owners; so that local peasant and
indigenous organizations get support to
deal with the bureaucratic requirements,
and so that it can begin to complement
processes of capacity building and
participatory research on forests and its
resources. The PSA system must not be
transformed into the waiting room for the
privatization of resources.
more information
Coecoceiba Friends of the Earth Costa Rica
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