Costa Rica is a global biodiversity hotspot where an estimated 4% of all known species can be found. Over the past decades the government has piloted a number of progressive financing mechanisms, which have helped to reverse forest loss and conserve biodiversity. A Payment for Ecosystem Services Programme was established in the 1990s which provides compensation to farmers for land left aside for forest conservation, contributing to the country's expansion of forest coverage. There are over 160 protected areas, comprising over 13% of the national territory. Costa Rica has been a pioneer in Payment for Ecosystem Services. Starting in 1996, the programme focused on four ecosystem services including carbon sequestration, hydrological services, sustainable biodiversity management and the conservation of natural landscapes for tourism. Costa Rica has already invested USD14 million in PES and nearly one million ha of forest have been covered by the programme. The benefits of PES went beyond environmental conservation, having positive impact on empowering minority groups such as women and indigenous groups.
Prioritized Finance Solutions
Based on the evaluation of the menu of available finance alternatives, the following finance solutions have been prioritized, the implementation of which will be supported during Phase II of the BIOFIN initiative:
1. Issuance of a green bond for the acquisition of lands for protected areas, from the securitization of future income cash flows of the national system of conservation areas, for the mobilization of resources aimed to regularize the rights over lands that the CR State has expropriated for conservation purposes, but have not been paid yet.
2. Establishment of a green lending facility for corporate sustainability, to support small and medium manufacturing companies willing to implement more environmentally friendly technologies for their productive processes.
3. Development of a concessions platform for non-essential services in protected natural areas as a mechanism for strengthening protected areas, increasing financing for biodiversity preservation and promoting a more sustainable, inclusive and equitable development.
4. Implementation of the Sustainable Tourism Impact Fund as a financing mechanism to channel technical cooperation, financing and equity investment, to support the development of sustainable tourism projects in protected natural areas, biological corridors and buffer zones, as a mechanism to strengthen those protected areas, increase employment, reduce poaching of wildlife, prevent the loss of cultural and natural capital and achieve more inclusive and equitable development for communities in areas of high importance for the protection of biodiversity.
5. Establishment of the Costa Rica ABS Challenge Fund, in order to promote the availability of a funding source for the development of new ABS projects by research institutes and other public and private organizations interested in the use of the biochemical and genetic elements and resources of biodiversity, and the sharing of benefits arising from their utilization.
6. Implementation of a crowdfunding initiative in order to provide financing for ecological monitoring and research, forest fire fighting and control of invasive alien species.
7. Restructuring of the Payment for Environmental Services System (PSA 2.0) to strengthen its financial sustainability and expanding the scope of application to go beyond the forestry approach that currently prevails, towards an ecosystem services approach.
8. Establishment of a Sustainable Fishing Program to facilitate technological improvement and blue financing of working capital for the fishing of large pelagic species. This finance solution contemplates the acceptance by the beneficiaries of the program, of the use of satellite tracking devices that guarantee respect to the marine protected areas and the exclusive economic zones of other nations.
The study on the institutional framework of Biodiversity in Costa Rica identified a total of 190 policies and practices, as well as a total of 131 institutional actors that directly affect 14 sectors of Biodiversity (Agriculture, Forestry, Aquaculture and Fisheries, Mining, Water Management, Waste Management, Tourism, Energy, Transport and Infrastructure, Industrial Production, Conservation, Territorial Planning, Climate and Financial Change).
Some relevant findings on the current institutional framework point to the lack of inter-institutional coordination, scarce assurance of resources and economic valuation for policy execution, and the limited participation of private sector stakeholders in the design and implementation of policies, among others.
The first phase identified in the development of the country's institutional framework on biodiversity, begins with the policies for the creation of national parks, biological reserves and conservation areas that initiated in the early 1970s and concluded in the early 1990s, when about one third of the continental territory of Costa Rica was made up of national parks and reserves. The report refers to this as the "conservationist" phase due to the protective territorial approach that prevailed during its development.
The second phase was developed from the early 1990s with the establishment of a legal framework led by Wildlife Conservation Law No. 7317 of 1992; Organic Law of the Environment No. 7554, passed in 1995; Forestry Law of Costa Rica No. 7575, passed in 1996; Biodiversity Law passed in 1998, and the provisions that led to setting the conditions that would later result in the first National Biodiversity Strategy developed in 1998 (2000-2005), together with further efforts to strengthen the conservationist phase, a series of enhanced environmental management instruments extended to strategic sectors such as water, energy and transport, and under the auspices of important international conventions signed and ratified by Costa Rica. This management phase, lasting about twenty years, has been identified as "institutional" due to the high number of legal instruments that were established for biodiversity management.
The third phase, which we will describe here as the "ecosystemic" one, currently has an incipient development and constitutes a transition from the need to mainstream an integrating vision of the ecosystems, which begins to characterize the current strategies. Both the international and national public opinion call to enhance coordination amongst all sectoral efforts in favor of Biodiversity. This transition is reflected in several recent proposals, and it should consider economic valuation and sustainable use as a result of two major transformations: the first one from the national agricultural production matrix to technology, tourism and service sectors; the second one is characterized by the mobilization of new economic, social and political factors in the face of climate change, which will imply a more active participation of communities and individuals, as well as the articulation of all sectors of the Costa Rican society with respect to Biodiversity.
From the point of view of finances for biodiversity in Costa Rica, environmental expenditure has been distinguished as a mobilization of public and private financial resources allocated to environmental matters as a whole.
Traditionally, the expenditure allocated to biodiversity had been valued only in terms of the resources allocated to those entities whose primary function originated in the protection of biodiversity, as is the case of the National Commission for the Management of Biodiversity (CONAGEBIO) and the National System of Conservation Areas (SINAC).
As part of the contribution of the BIOFIN initiative, it was possible to evolve towards the identification of a "hard core institutionality" of biodiversity, which encompasses a wider universe of institutions relating to the management and use of biodiversity directly, according to the definition of Rio Markers.
Based on this new methodology, it is possible to identify that the expenditure on biodiversity made by Costa Rica for 2014 amounts to a value of about US $ 247.4 million, equivalent to 0.5% of GDP.
Of the four sectors comprising the twelve institutions linked to biodiversity management and use, the agricultural sector absorbs 48.4% of the allocated resources, followed by the conservation sector with 30.6%, the forestry sector with a 29.3%, and the aquaculture and fisheries sector with 1.7% of the total investment in biodiversity.
In an effort supported by the BIOFIN program, it was possible to update the National Biodiversity Strategy 2016-2025, Costa Rica, which establishes a roadmap for the actions needed to attain the national biodiversity objectives, with a special emphasis on the challenges that the country is facing in this area.
As part of this strategy, the main national tools are proposed to achieve adequate protection of the natural heritage, to maintain adequate levels of health and resilience of national ecosystems, and to have the capacity to rehabilitate those biodiversity elements that have already undergone some deterioration.
The National Biodiversity Strategy and its Action Plan 2016-2025 are part of the National Biodiversity Policy of Costa Rica 2015-2030 (NBP) and together constitute the public policy framework for conservation, sustainable use, and equitable distribution of the benefits of the biodiversity of Costa Rica.
The National Biodiversity Strategy of Costa Rica identifies its priorities based on seven strategic issues, 23 global medium-term goals (by 2025), 98 national goals (by 2020) and a portfolio of programs and projects where Costa Rica seeks to propose integrated efforts among government institutions, academia, municipalities and civil society-private sector (with special attention to interest groups such as local communities, indigenous peoples, women and youth) to achieve long-term effects and impacts.
The seven strategic issues raised by this strategy are:
- In Situ Conservation: sustainability, and connectivity-resilience of the National System of Protected Wild Areas.
- Restoration and reduction of the loss and/or deterioration of important elements of biodiversity: terrestrial, marine, fresh water-aquaculture ecosystems, wildlife, genetic resources, adverse impact, and legal compliance.
- Regularization of the State Natural Heritage and territorial and marine space planning.
- Inclusive sustainable landscapes.
- Governance, participation, education and cultural practices for biodiversity.
- Information management, monitoring and research on biodiversity.
- Capacities, finance resources and institutional arrangements for biodiversity.
Although part of the financing needed for the implementation of this strategy is available, there are goals that still require economic resources; and 18 profiles of new programs and projects have been identified that still require the allocation of additional resources. The 18 new profiles for which there is a financing gap are represented by the following programs:
- Profile 1: Consolidation, restoration, connectivity and resilience of the Natural Protected Areas System
- Profile 2: Information, research and monitoring of Biodiversity Program
- Profile 3: Biodiversity and Indigenous Peoples Program
- Profile 4: Forests, Soils and Water: Conservation, restoration and sustainable use of terrestrial ecosystems and their functions in the hydrogeological cycle
- Profile 5: Conservation, restoration and sustainable use of wetlands and marine ecosystems
- Profile 6: Strengthening national capacities for the protection, recovery and management of threatened species and wildlife in Costa Rica
- Profile 7: Biodiversity, food security, agriculture and health
- Profile 8: Strengthening capacities for the management of invasive species
- Profile 9: Sustainable productive practices and biodiversity
- Profile 10: Strengthening protection, prevention and control of fire
- Profile 11: Strengthening capacities for the prevention, protection and monitoring of biodiversity
- Profile 12: Strengthening of Natural Capital of the State regularization processes and land purchase in natural protected areas
- Profile 13: Strengthen ecosystem approach in the planning and implementation of development plans (regulator, rural, management plans) and strategic sectors
- Profile 14: Program for sustainable productive ventures and community-based adaptation (biological corridors, buffer zones, others)
- Profile 15: National Program of Biodiversity Education: Culture for Life
- Profile 16: Strengthening of the various governance models for the conservation and sustainable use of biodiversity
- Profile 17: Traditional knowledge and ABS for genetic and biochemical resources that contributes to the conservation of biodiversity of global importance.
- Profile 18: Strengthening of institutional framework and capacities for Biodiversity management.
The institutions and organizations responsible for these programs must work, with the support of the BIOFIN initiative, to attain the resources needed for the implementation of these programs. The financial needs are estimated to be between US$25 million per year for a low profile scenario and US$50 million per year in the high profile scenario, over a nine years period.
The exercise to identify funding gaps was developed from the formulation of the National Biodiversity Strategy and complemented by BIOFIN as follows:
- during the process of developing the NBSAP in a participatory manner, the measurable, quantifiable and temporally-defined results that could be established as short, medium and long-term goals were identified, based on the axes and guidelines of the National Biodiversity Policy;
- medium-term goals for 5 years or less were discussed, and in turn, budget support was identified through an institutional program, alternative finance source (lending, trust, own income, etc.), or projects contributing to the achievement of the goals and it was quantified for the first years of implementation of the NBSAP;
- goals that did not have enough, regular or temporally defined financing were identified, and a portfolio of programs was proposed to address these gaps;
- BIOFIN quantified estimates of the amounts that could be required for implementation and the estimates to finance those gaps were developed based on such information;
- the search for finance solutions begins from the issues and programs without regular financing and consolidated institutional programs.
In this sense, the Biodiversity Finance Plan aims to identify a portfolio of initiatives, that is, a menu of finance alternatives, with the purpose of evaluating their implementation viability and feasibility, as well as their potential for the generation of finance resources aimed at filling the financing gap for the implementation of the National Biodiversity Strategy.
In this regard, the improvement of efficiency in the use of resources budgeted for the environment and biodiversity is especially relevant, as well as the strengthening of the management and administration of environmental projects funded with public investment.
Part of the evaluated finance alternatives include the analysis of the possible implementation of a prepayment system for entrance fees to national parks, the implementation of management models through public/ private partnerships, the promotion of the financial sector participation in granting loans for environmental projects and projects, the application of cleaner production technologies, the construction and acquisition of environmentally friendly houses, and the purchase of environmentally compatible durable goods, as well as the channeling of resources from international cooperation to the "development axis" called Environment and Territorial Planning, which incorporates specific considerations related to biodiversity and ecosystems elements comprising issues such as: i) environmental quality; ii) water resources; iii) biological diversity; and iv) climate change and agro-environmental management.
The finance plan also analyzes the possibilities of implementing other finance alternatives, such as green investment funds, in which the raised resources would be aimed at acquiring securities (debt or equity) issued by companies with an environmental component in their activities, finance securities with an environmental component such as bonds funding environmental services for carbon fixation or protection of water resources, securities issued by companies with environmental certifications such as carbon neutrality and environmental ISO, among others.
Likewise, the possible securitization of income-generating assets of green projects is evaluated, such as, for example, entrance fees to national parks or income resulting from concessions for the exploitation of biological reserves for tourism purposes, among others.
Therefore, the Biodiversity Finance Plan becomes a very valuable input for the identification of finance solutions that can positively impact the mobilization of the additional finance resources required to achieve the goals proposed by Costa Rica in its National Biodiversity Strategy.
As part of the activities of the program, the following finance alternatives (finance solutions) have been identified, through which it would be possible to promote the channeling of greater resources to support the implementation of the goals established in the National Biodiversity Strategy.
|Participants||Alternatives for Finance or Resource Mobilization|
|Central Government||Better use of budgeted resources|
|Green tax reform|
|Management of portfolios of investment projects with environmental impact|
|National System of Conservation Areas (SINAC)||Program of advance payment for entrance fees to National Parks|
|Public Sector/Private Sector||Public/Private Partnerships to finance specific projects through FONAFIFO|
|Payment for Environmental Services (PSA)|
|Sustainable Biodiversity Fund (SBF)|
|Private Sector||Projects with environmental and biodiversity impact|
|Foreign debt swap|
|Financial Sector||Mechanisms for attracting resources for green purposes|
|Green trust to generate scale economies of administration of environmental NGOs|
|Green Investment Funds|
|Structuring of Carbon Bonds|
|Venture capital financing|
|Processes of securitization of green projects|
|Strategies for placement in the stock market|
|Green tools for resource allocation|
|Analysis of environmental risk in credit portfolios|
|Mechanisms for rating green credits|
|Financing of renewable energy projects|
|Financing of environmentally sustainable construction|
|Financing of purchase of environmentally sustainable buildings|
|Financing of acquisition of durable assets with low energy consumption|
|International Cooperation||Sustainable Finance Platform for Environmental and Biodiversity Management|