OECD Environmental Performance Reviews: Costa Rica 2023

Report

OECD Environmental Performance Reviews

6 October 2023

Assessment and recommendations

Abstract

The Assessment and Recommendations present the main findings of the OECD Environmental Performance Review of Costa Rica. They identify 52 recommendations to help the country make further progress towards its environmental objectives and international commitments. The OECD Working Party on Environmental Performance discussed and approved the Assessment and Recommendations on 12 May 2023.

1. Environmental performance

The economy has grown strongly in the last decade, but social and environmental outcomes have been uneven

Costa Rica has earned a worldwide image of a green and sustainable country. Its environmental and natural resources are a pillar of the country’s development model. The economy grew faster than on average in Latin America and the Caribbean (LAC) and the OECD in the last 20 years, underpinned by openness to trade and foreign direct investment (OECD, 2023_[1]). However, Costa Rica’s per capita income remains less than half the OECD average. Despite significant social advances, poverty and inequality are persistently high, and about 45% of employment is informal (INEC, 2022_[2]; OECD, 2023_[3]). The population grew to reach about 5.2 million inhabitants in 2022. Urbanisation has intensified, with the Greater Metropolitan Area (GAM) around San José hosting about 73% of the population.1 Increased population, urbanisation and tourism have been straining water, waste and transport infrastructure and services.

Costa Rica is known globally as the first tropical country to have reversed deforestation (Section 3). It produces all its electricity from renewable energy sources. The country has made some progress in decoupling environmental pressures from its fast economic growth. Energy use, greenhouse gas (GHG) emissions and domestic material consumption continued to increase but at a slower rate than gross domestic product (GDP) in the last 15 years. However, other pressures, such as waste generation, nitrogen oxides (NO_x) emissions, nitrogen balance and water abstractions grew in line with or faster than GDP (Figure 1). In addition, the reforestation rate has declined in recent years (Section 3). Pressures on the environment are likely to increase with rising income and consumption, population, urbanisation, tourism, energy use and transport demand. Further efforts are needed to consolidate results and reinforce decoupling trends to meet the country’s climate mitigation target and the Sustainable Development Goals (SDGs) to 2030.

Efforts to build resilience to climate change impact have intensified but more investment is needed

Costa Rica is highly vulnerable to the consequences of climate change. Some key agricultural regions are exposed to both drought and extreme rainfall. About one-third of the country’s forest-covered areas is at high risk of wildfires (IEA/OECD, 2023_[4]). The lack of adequate land-use plans and urban planning exacerbates the impact of natural disasters on infrastructure and settlements, increasing the population’s vulnerability to climate-related events (Section 3). Nearly 80% of the population live in areas at high risk from multiple hazards, including those related to climate (World Bank Group, 2021_[5]). The National Adaptation Policy 2018-30 indicates the costs of climate-related extreme weather events could reach 1.6‑2.5% of GDP by 2025, including costs to repair damaged water and transport infrastructure.

Nature-based solutions (NbS) are among the main lines of action of the National Climate Change Adaptation Plan (PNACC) 2022-26. This is welcome as NbS – including the sustainable management of forest, marine and freshwater ecosystems – may be more cost effective and flexible than traditional approaches such as “grey” infrastructure. Further extending the use of NbS would provide multiple benefits, including reducing GHG emissions and biodiversity loss, as well as creating employment and income opportunities for local communities. However, additional investment will be needed to build climate‑resilient infrastructure, retrofit existing infrastructure and protect the most vulnerable communities and ecosystems. In 2021, the Ministry of Environment and Energy (MINAE) released three technical guidelines to support local governments in developing their plans to prepare for and adapt to climate change impacts.

Figure 1. Costa Rica has made progress in decoupling some environmental pressures from economic growth

The PNACC acknowledges the urgent need to generate robust information on climate and hydrological risks and impacts, as well as to enhance the institutions’ capacities to develop adaptation measures based upon scientific knowledge. Some progress has been made with establishment of the national system to monitor climate change (SINAMECC), which also maps adaptation actions. This system could provide the basis for monitoring the effectiveness of adaptation actions. Improved collaboration with the private sector, scientific institutions and local communities would help generate quality information to support climate adaptation policy and raise public awareness.

Costa Rica needs to strengthen the policy mix to achieve its ambitious climate targets by 2030 and 2050

Forests have helped mitigate growing GHG emissions from other sectors

Costa Rica’s GHG emission profile differs from that of most other OECD countries. Thanks to its zero‑emission power generation mix, GHG emissions from energy industries are a minor share of total emissions. Transport, nearly exclusively by road, is the largest emission source making up 42% of emissions in 2017.2 Agriculture accounted for 20% of emissions, reflecting its large economic role. Waste management followed with 15% of total emissions due to the reliance on landfills for disposal (see below).

According to International Energy Agency (IEA) data, GHG emissions from fuel combustion have continued to increase since 2000, although at a lower rate than GDP, with a drop in 2020 due to the pandemic (Figure 2). Emissions from road transport grew by over 30% in 2010-19 (OECD, 2023_[6]). Overall, Costa Rica’s gross GHG emissions (i.e. excluding land use, land-use change and forestry, or LULUCF) grew by 12% in 2010-17. However, when considering LULUCF, net GHG emissions declined by 13% in the same period. This trend is the result of increased carbon removals by forests thanks to a zero net deforestation rate in 2012-19 (Figure 2). The long-standing Programme of Payment for Environmental Services and the network of protected areas have been key to achieving this outcome. These are also the pillars of the Costa Rica strategy for reducing carbon emissions from deforestation and forest degradation (REDD+) (Section 3).

Figure 2. Costa Rica aims to be carbon neutral by 2050

Climate mitigation action has improved, but the policy mix is limited in scope and stringency

Costa Rica has intensified its efforts to curb emissions from energy use in the last decade. However, the range of implemented policies targeting emissions from industry, building and transport is limited and not sufficiently stringent.3 In addition, information gaps persist, with the national GHG emission inventories being released with a time lag of several years. At the time of writing, Costa Rica was updating the GHG emission inventory and preparing its reporting obligations under the Paris Agreement.

The climate policy mix relies heavily on regulations and voluntary approaches (rather than markets) and governance tools (such as target setting and reporting). Market-based instruments are limited to fuel taxes, which apply mainly to the transport sector (Section 2). Measures in the buildings and industry sectors focus on energy performance standards and labels. Policies in the agriculture sector focus on encouraging innovation, as well as on training and assisting farmers to adopt practices that can reduce GHG emissions.

These include two Nationally Appropriate Mitigation Actions (NAMAs) for coffee production and livestock (Section 3). Another NAMA aims to curb emissions from waste disposal. The Sustainable Landscape Initiative 2022-30 builds on guidance and voluntary measures to reduce emissions from agriculture, forestry and other land uses in line with Costa Rica's commitment under the 2021 Glasgow Declaration on Forests and Land Use.

Costa Rica has raised its ambition towards a net-zero economy

The updated Nationally Determined Contribution (NDC) commits the country to keep its cumulative net GHG emissions within 106.53 million tonnes of carbon dioxide equivalent (MtCO₂eq) in 2021‑30, and to reach 9.1 MtCO₂eq in 2030 (equivalent to about 20% below its 2017 level). The 2030 target is in line with the pathways to reach the 2050 net-zero goal, as set by the National Decarbonisation Plan (PND) 2018‑50 (Figure 2).

Costa Rica is among the few LAC countries that submitted detailed long-term strategies to achieve the net-zero goal. The PND, based on extensive public consultations, is more ambitious and comprehensive than previous plans and strategies. It lays out priorities to decarbonise the economy and the policy and institutional reforms needed to achieve them (e.g. a green fiscal reform, see Section 2). Key objectives include electrification of transport; increased public transport use; upgraded electricity grids; improved energy efficiency; increased waste recycling and composting; completion of the sewer system coverage; and improved farming practices. Continuing to increase forest coverage plays a key role in the country’s net-zero strategy (Section 3). Costa Rica met most of the targets of the first PND implementation phase, which ended in 2022. However, the targets related to transport and waste were missed.

To reach its 2030 NDC and carbon neutrality goal by 2050, Costa Rica needs to address planning, regulatory and political economy barriers, in addition to securing the necessary funding. Achieving the PND targets would require massive investments, estimated at USD 37 billion in 2020-50, and would provide more than USD 40 billion in net benefits (Groves et al., 2020_[7]). Implementing the PND would also yield numerous co-benefits, including health improvements from reduced pollution, fuel cost savings from electrification, and ecosystem services from preserved and enhanced forests. Engaging the private sector and mobilising alternative sources of finance are of paramount importance (Section 3).

Sourcing power from renewables helps decarbonisation, but reducing energy consumption is a priority

Costa Rica has made important strides towards the clean energy transition…

The country’s electricity generation has been fully sourced from renewables, mostly hydropower, since 2015. Overall, renewables hovered around half of total energy supply in the last decade, well above the OECD average.4 However, half of energy supply is still based on fossil fuels, mostly oil used for transport (Figure 3).The government plans to expand production and use of biofuels from agricultural organic waste to replace transport fuels. In 2019, the government suspended oil exploration and exploitation projects on its territory until 2050.

Expanding and diversifying the renewable electricity generation capacity will be crucial to maintain clean electricity generation and decarbonise energy use. Electrification of transport, industry and buildings is a pillar of Costa Rica’s PND and of the National Energy Plan 2015-30. With its large renewable power base, Costa Rica is also in a good position to produce and deploy green hydrogen to fuel transport vehicles and industry. In line with the net-zero goal, electricity demand is expected to increase nearly four-fold by 2050.

While the country has an excess electricity generation capacity, climate change is projected to severely affect hydropower production by the end of the century (IEA, 2021_[8]). In addition, most of the remaining potential from hydro and geothermal power is in protected natural areas or on indigenous land. Power generation capacity from wind and biomass has increased in recent years. Further diversifying the renewable electricity mix will require upgrading electricity grids and improving the operating efficiency of power systems to integrate rising generation from variable renewable sources. It is essential to lighten regulatory barriers such as the restrictions on private sector participation and foreign ownership to encourage investment and innovation in the sector (OECD, 2023_[1]). Legislation to remove these restrictions was under development at the time of writing.

Figure 3. Costa Rica is a leader in using renewables

… but greater effort is needed to improve energy efficiency

Energy consumption trends are a concern, especially in the transport, residential and commercial sectors. Measures to improve energy efficiency have been limited. They include minimum energy performance standards (MEPS) or labels for some appliances and industrial motors, as well as some fiscal incentives to purchase high-efficiency equipment. There are no MEPS for buildings, but voluntary labelling for sustainable buildings has been implemented since 2020. A regulation for sustainable social housing, including energy efficiency parameters, was under development at the time of writing. Costa Rica is on track to achieve the target of 1 million smart meters installed by 2026 (or about 60% of households) set by the National Strategy for Smart Grids 2021-31.5 Smart metering will also help consumers understand their energy use and adapt their consumption to prices. Yet, a broader set of regulatory, fiscal and education measures is needed to encourage energy savings.

Decarbonising transport is essential to meet national climate mitigation goals and improve quality of life

Costa Rica’s heavy reliance on road transport has led to rising environmental pressures

Energy use for road transport and related GHG emissions grew by over 30% in 2010-19 (before dropping with the pandemic). Transport, nearly exclusively by road, was close to half of total energy consumption and three-quarters of GHG emissions from fuel combustion in 2020 (OECD, 2023_[6]). Road vehicles are also a major source of other air pollutants such as carbon monoxide (CO), hydrocarbons, NO_xand fine particulate matter (PM) (see below). Private cars account for most of fuel use and related emissions (Figure 4). The vehicle fleet has grown by about 60% in the last decade, but most vehicles are over ten years old.

The road network is extensive and has received the bulk of land transport funding in the last decade. However, quality of road infrastructure is generally poor, suffering from years of underspending on maintenance due to weak governance, planning and execution (Section 2). Inadequate public transport services, chaotic building development and poor road design and quality have led to heavy congestion on the main national roads and in the GAM. Driving restrictions based on licence plates have been the only tool to manage congestion and air pollution in the capital city of San José, with little effectiveness.

Figure 4. A massive electrification of road vehicles is required to help reduce CO₂ emissions

Decarbonising transport requires changes in mobility patterns and land-use planning

Improving public transport, as well as walking and cycling conditions, is of outmost urgency to reduce car dependence and extend access to employment and social opportunities. The PND aims to reach 32.5% of passenger travels covered by public transport by 2035 (from 25% in 2018). It also seeks to increase the share of travels by walking and cycling to 4% by 2035. Roads are mostly not safe for walking and cycling due to the lack of sidewalks and bicycle lanes. Historically, settlements have developed in an unplanned manner and without considering access to public transport. Urban areas are sprawling, with much of the new built area at their fringes. On average, settlements built between 2016 and 2019 were nearly 2 kilometres from a bus stop (compared to a commonly accepted walking distance of 400‑500 metres), with a large variability between the GAM and rural zones (CONARE, 2021_[9]).

In the GAM, heavy congestion affects public transport performance and attractiveness. The share of passenger travel by buses has declined over time in the metropolitan area (from 41% to 34% between 2007 and 2017). Urban and interurban railways services are limited. The GAM has no integrated public transport system, with most bus lines passing through San José city centre and interconnecting only there, if at all. Nearly 90 private bus companies operate based on concession contracts. Frequency of buses is inadequate to serve demand, especially at the outskirts of the metropolitan areas, where most low-income people live.

In the last few years, actions have been taken to modernise bus transport in the GAM and improve walkability and cycling conditions. These include setting priority bus lanes and assigning some bus concessions by sector (area) of the city rather than by route. In 2020, the Ministry of Public Infrastructure and Transport launched a plan to implement an integrated public transport system in the GAM. However, progress has been slow and fragmented. The experience of other countries shows that establishing metropolitan transport authorities can help co‑ordinate planning, investment and operation of transport infrastructure and services across neighbouring municipalities.

Efforts to electrify transport are welcome, but they should prioritise public transport to help reduce car dependence and avoid regressive impacts

The PND puts great emphasis on electrifying public and private transport. It aims to achieve 30% of electric vehicles (EVs) in the fleets of both buses and light vehicles (including cars) by 2035, and much higher shares by 2050. The number of EVs has increased in the last few years, but it still represented 0.5% of the vehicle fleet in 2021 (Figure 4). Costa Rica shares with other emerging economies some challenges to develop electromobility, including weak electricity grids and reliance on second-hand vehicles (IEA, 2022_[10]). The government has put in place the regulatory framework for EV promotion and installation of the charging network. Private EVs benefit from several tax exemptions and other incentives such as green plates and free parking spaces. The experience of the leading EV markets shows that EV purchase subsidies should be combined with stringent vehicle efficiency and/or CO₂ standards – which Costa Rica lacks – and higher taxation of internal combustion engine vehicles (Section 2).

As in other emerging economies, electrification of road transport should prioritise two/three-wheelers and urban buses, which are the most cost-competitive vehicle categories (IEA, 2022_[10]). As lower-income households rely on public transport for their mobility needs, investing in an extended, integrated and electricity-based public transport would help reduce car dependence and avoid exacerbating inequality.

Steps have been taken in this direction with the piloting of electric buses on two routes in the GAM. High investment and maintenance costs and lax emission standards are among the main barriers to the uptake of electric buses.

A large part of the population is exposed to air pollution, posing risks to human health

Emissions of most air pollutants have grown over the last 20 years in Costa Rica. Energy use, especially in road transport, accounts on average for 70-95% of total emissions of air pollutants. NO_x emissions from transport have almost doubled since 2000. The impact of the vehicle fleet on air pollution in the GAM is significant. Motorcycles are a major source of CO and hydrocarbon emissions. Vehicle emission standards are lenient. The entry into force of stricter Euro 6 or Tier 3 emission standards was postponed to 2027. Many vehicles continue to circulate even after failing the mandatory technical inspections (which also checks engine emissions) due to lax enforcement.

Air quality limits are set in legislation, but there is no penalty for exceeding them. More than 88% of the population is exposed to harmful levels of air pollution (OECD, 2023_[11]). Average annual concentrations of PM are above the OECD average. Since 2013, when the GAM started monitoring PM_2.5, the annual average concentration at all sites has always been above 15 microgrammes per cubic metre (µg/m³), exceeding the 2021 World Health Organization Air Quality Guidelines of 5 µg/m³ (MoH et al., 2020_[12]). This poses a risk to human health. The average number of premature deaths caused by PM_2.5 exposure increased slightly during the last decade in Costa Rica (OECD, 2023_[13]).

The lack of data on air emissions and quality is of serious concern and hampers the country’s ability to take informed policy decisions. The monitoring network is too limited to generate sufficiently frequent and consistent data on air quality and exceedances of thresholds. Expanding capacity for air quality monitoring will help improve systems to warn the population of high exposure to air pollution. Some progress has been made to disseminate information on air quality with development of a webpage and mobile application.

Waste management needs to be improved to move towards a circular economy

Waste infrastructure and services are inadequate to address rising waste flows

Generation of municipal waste is among the lowest in the OECD but has gradually increased since 2016. It is likely to grow further with the expected increase in population and income. Costa Rica still relies on landfills for waste disposal, more than most other OECD countries (Figure 5). Despite progress in closing illegal dumpsites, waste disposal in inappropriate sites remains considerable, especially in some rural regions. Nearly 10% of households still burn or bury their waste (INEC, 2022_[14]). This waste, including lots of plastics, ends up in fields, rivers, wetlands and oceans. Estimates indicate that, due to illegal disposal, the actual amount of waste generated could be some 25% higher than shown in official statistics. All this calls for urgent action to increase waste collection, sorting and recovery to divert waste from landfills, as well as to improve waste data collection. Enhancing circularity will also contribute to abate GHG emissions, given the large share of emissions generated by the waste sector (see above).

Waste collection rates vary widely across municipalities, which are responsible for waste management. About 80% of municipalities have the integrated waste management plan required by law. However, many municipalities lack the financial and administrative capacity to invest in waste treatment infrastructure and provide sound waste management services. Only 24 municipalities offer separate waste collection services with a limited coverage of their resident households (CGR, 2021_[15]). Consequently, less than half of households in the country properly separate their organic waste, glass, plastics, cardboard and aluminium.

Incentives are needed to encourage timely waste collection, sorting and recovery beyond the deterrent of fines for non-compliance. In most municipalities, waste collection fees do not cover the costs of the service and are not structured to incentivise waste sorting. Municipalities could improve waste service delivery and encourage job creation by integrating informal waste pickers and public-private initiatives such as “Ecoins” into their waste management plans.6 Costa Rica has launched education campaigns on waste sorting and recycling in schools. This is a step in the right direction, but broader and more regular education, training and awareness-raising campaigns are needed to encourage households and businesses to change behaviours.

Figure 5. Costa Rica has one of the highest shares of landfilled waste in the OECD

Despite recent progress, barriers to increasing waste recovery remain

With adoption of the 2010 Integrated Waste Management Law, Costa Rica established the policy and regulatory framework for integrated waste management, setting targets on waste prevention and recovery. It has made efforts to increase the recycling rate of materials. Plastics and metals are recovered and exported. Extended producer responsibility schemes cover 14 types of products. However, they do not cover major waste streams (e.g. construction waste, packaging) and lack compulsory recovery targets (Soto Córdoba, 2019_[16]). In 2021, only 7% of total waste generated was recycled or composted, far below the OECD average (Figure 5) and the 15% waste recovery target set in the 2016-21 National Strategy for Waste Separation, Recovery and Valorisation.

Poor waste sorting and the lack of demand for, and low prices of, recovered materials are among the main factors limiting the country’s recovery and recycling rates. Incentives for use of recovered and recycled

materials as inputs in production processes are needed to develop a domestic market. Work is in progress to update the National Waste Management Plan and develop the National Circular Economy Strategy, with a view to preparing Costa Rica’s transition towards a circular economy. The government has been promoting the principles of the circular economy in local governments and businesses through technical guidelines, organisational standards and training.

More investment in water infrastructure is urgently needed to deliver access to services and improve water quality

Improving water quality and reducing high water losses are major challenges

Costa Rica benefits from abundant freshwater resources, but high levels of water losses from public water supply and irrigation networks are problematic. Freshwater withdrawals have steadily increased in 2010‑20, although abstractions as a share of total renewable resources remain below the threshold for water stress. Water losses as a share of total withdrawals for irrigation sharply declined in 2018, but they were still 40% in 2021. For public water supply, water losses remained relatively high over the period, rising to just over 65% in 2021, underscoring the need for renewal and upgrading of ageing infrastructure. The Non-Revenue Water Reduction and Energy Efficiency Optimisation Project diagnosed challenges related to water losses and developed an action plan to address them.

Water pollution and deterioration of water quality in rivers are among the major environmental challenges in Costa Rica (CONARE, 2022_[17]). Monitoring of water quality remains at early stages and is not sufficient to provide an accurate and comprehensive understanding of the state and evolution of water quality. Most river basins are monitored, but many water bodies only have a few monitoring sites and data are not collected consistently across sites and pollution parameters. Enforcement of violations of wastewater discharge standards should be strengthened. In many cases, inspections are a reaction to pollution incidents or complaints (Section 2). Sanctions imposed for non-compliance should be increased.

Investment in water infrastructure lags far behind, and new approaches to financing are needed

There is an urgent need to scale up investment to expand water and sanitation services, and wastewater treatment; upgrade public water supply and irrigation networks; and ensure resilience to the impacts of climate change. In 2020, about 80% of the population benefited from access to safely managed drinking water,7 although progress to increase access has stagnated (Figure 6). Access to safely managed sanitation has deteriorated from 35% of the population with access to such services in 2010 to 30% in 2020 (UNICEF, 2023_[18]). The lack of wastewater treatment is also a major issue, with implications for public health and water quality. Only about 15.5% of the sewage collected receives some type of treatment (CONARE, 2022_[17]), a low share compared to OECD countries and others in the region. A large share of wastewater from homes and industries flows into rivers without treatment. The majority of Costa Rica’s population has independent wastewater treatment (septic tank), while 24% are connected to a public sewage collecting network and less than 10% to public wastewater treatment plants . Septic tanks usually only capture a small share of wastewater from households (mainly sewage), while the remaining wastewater drains into water bodies untreated. Further, the construction, operation and maintenance of septic tanks are not supervised (MINAE, 2013_[19]). Unless carefully managed and monitored, septic tanks can leak into the soil and groundwater, resulting in contamination.

Costa Rica has a dedicated programme to scale up investment in sanitation and wastewater treatment. However, the pace and scale of investment are not commensurate with the investment needed to reach the target of universal coverage. The 2016 National Wastewater Sanitation Policy (PNSAR) set an

objective to achieve, by 2045, the safe management of all wastewater generated in the country. However, under business as usual, only about 15% of the population will be connected to public wastewater treatment systems by 2045, far from the 100% target in the PNSAR. If existing plans are executed, coverage is estimated to reach 38% (CONARE, 2021_[9]).

Figure 6. Access to drinking water has marginally improved while access to sanitation services has deteriorated

Costa Rica uses economic instruments to manage the quantity and quality of water, which contribute to cost recovery of water services and funding for water management. The Water Utilisation Levy applies to water use, with different rates according to type of use and source. The Water Discharge Levy applies to wastewater discharge based on discharged loads of chemical oxygen demand and total suspended solids. The amount for each pollution parameter is adjusted annually to reflect inflation. Both levies could be adjusted to better apply the user-pays and polluter-pays principles. Water supply and sanitation tariffs should also reflect the full cost of service provision, with targeted social measures to address affordability issues.

The ongoing revision of the water policy framework is a welcome development to ensure it is fit for purpose to address current and future challenges, including improved water quality and enhanced resilience to climate change. Costa Rica has made progress on water governance with the establishment of regional stakeholder forums and the ongoing work on river basin planning. The new water policy framework and implementation of river basin planning should reflect the results of extensive consultations with stakeholders and indigenous communities.

Recommendations on environmental performance

Strengthening climate mitigation and adaptation policy

Fully implement the measures outlined in the National Decarbonisation Plan 2018-50 in all sectors in a timely fashion; use the periodic monitoring of the plan to identify barriers to implementation and good practices, and for adjusting policy actions accordingly.
Update the GHG emission inventory more frequently; further improve the knowledge base on climate-related hazards and vulnerabilities.
Secure and efficiently use funds for investment in improving the climate resilience of physical assets, including through effective maintenance, management and operation of infrastructure; systematically integrate vulnerability and resilience to climate change impacts into the appraisal procedures for land-use plans and infrastructure and settlement projects, public procurement process and public-private partnerships.

Decarbonising energy generation and use

Upgrade the power grids and their operating efficiency to support expansion of the charging network for electric vehicles, as well as the integration of power generation from geothermal, onshore and offshore wind, photovoltaics, biomass and wave technology.
Introduce stringent mandatory energy standards for new buildings and renovations (near-zero energy building standard); strengthen the minimum energy performance standards for appliances and extend their coverage to other electrical devices and equipment.
Accelerate development of smart grids and high-resolution pricing; require electricity retailers to provide clear information to customers about their power consumption, as well as advice on energy savings; conduct regular campaigns to raise awareness about energy savings.

Improving the environmental performance of transport

Increase public investment on public transport, cycling and pedestrian infrastructure projects; accelerate implementation of an integrated public transport system in the Greater Metropolitan Area (GAM); rationalise and improve transport governance in the GAM; to this end, consider establishing a metropolitan transport authority to co‑ordinate mobility systems in the GAM.
Ensure that local land-use plans integrate sustainable mobility concerns by promoting settlements with easy access to transport links and including a network of safe walking and cycling routes; rearrange the road layouts in cities to give more space to cyclists, pedestrians and public transport.
Pursue the electrification of motorcycles and urban buses in addition to that of private cars; extend the pilot implementation of electric bus routes, including in municipalities outside the GAM; consider providing financial assistance to buy electric buses; continue to extend the charging points for electric vehicles across the road network.
Strengthen pollutant emission standards for all passenger and freight road vehicles without delay; adopt fuel efficiency or CO₂ emission standards for vehicles; reinforce mandatory vehicles’ technical inspections and include more air pollutants in the emissions tests; prohibit the circulation of non-compliant vehicles.

Monitoring air pollution

Produce data on national air emissions more frequently and improve reporting; expand the ambient air monitoring network, including in regions outside the GAM.

Modernising waste services for the circular economy

Complete development of integrated waste management plans in all municipalities; include public-private initiatives in the plans; reinforce the capacity to invest in waste treatment and provide sound waste management services, including through inter-municipality agreements supported by government policy.
Expand extended producer responsibility schemes to major waste streams, including organic waste, packaging and construction and demolition waste; set compulsory recovery targets for all schemes and ensure their enforcement; include the use of recovered materials and recycled waste among the criteria for public procurement; introduce a ban on disposal of biodegradable waste in landfills.
Reform waste collection fees to ensure cost recovery and encourage waste sorting at source, while addressing the impacts on poor households adversely affected by the related price rises.
Improve the collection and dissemination of information about waste generation and treatment; strengthen reporting obligations of waste operators; establish an integrated digital platform to disseminate data on waste by type of material.

Ensuring effective water resources management

Expand water quality monitoring, in terms of parameters covered, frequency of monitoring and coverage of water bodies; periodically and publicly report on the quality of water bodies.
Accelerate and scale up investment in water infrastructure to expand access to drinking water and sanitation services, extend wastewater treatment, reduce water losses and ensure resilience to the impacts of climate change.
Ensure adequate supervision of the construction, operation and maintenance of septic tanks to minimise risks of contamination.
Progressively raise water supply and sanitation tariffs to better reflect the costs of service provision based on long-term strategic investment plans with independent oversight of the regulator; expand targeted social measures to address affordability issues.
Review the rates of the Water Utilisation Levy to better reflect the full cost of water use by users from a given source, including the scarcity value in cases where demand exceeds supply; expand the Water Discharge Levy to cover a broader range of pollution parameters to more fully apply the polluter-pays principle.

2. Towards green and inclusive growth

Sustainable development and green growth are high on Costa Rica’s political agenda, but challenges lie ahead

Costa Rica is strongly committed to meeting the SDGs. To that end, it has established a solid policy framework to support and evaluate SDG implementation and engage civil society. Its 2016 “Social Pact for the Implementation of the SDGs” is the first such pact in the world.8 The President of the Republic chairs the High-Level Council for the SDGs to ensure policy coherence. A comprehensive system of statistical indicators is in place to monitor progress. Costa Rica’s strategy prioritises SDGs related to poverty and inequality, sustainable production and consumption, and resilient infrastructure and sustainable communities; these are considered instrumental to meet all other goals. The SDGs have been guiding strategic policy making. The National Development and Public Investment Plan (PNDIP) 2023-26 is the second multiannual investment plan to link investment projects to the SDGs they contribute to achieve.

The scale of the investment needed to achieve the SDGs is extensive. Meanwhile, the government is facing severe fiscal constraints in an uncertain global context. With high public debt, maintaining fiscal prudence is critical for macroeconomic sustainability (OECD, 2023_[1]). It is essential to improve the quality and efficiency of public management and spending. There is a need to further engage households and businesses in environmental protection, as well as to mobilise private finance towards a green and inclusive economy. To that end, Costa Rica should promote compliance with environmental regulations, provide stronger price signals and remove harmful subsidies, while considering the rising cost of living and supporting vulnerable groups in getting out of poverty and job informality.

The environmental governance system is well established, but implementation is lagging behind

Institutional and policy fragmentation hampers policy coherence and implementation effectiveness

Costa Rica has a long-standing environmental policy and a comprehensive legal framework. Diverse environmental programmes, laws and regulations are in place, and many more are under development. The country has shown continued commitment to aligning its legislation, policies and practices with OECD standards. However, policy objectives have not always translated into actionable measures and adequate financing (CONARE, 2022_[17]).

Costa Rica has adopted a whole-of-government approach to environmental management and sustainable development. However, the institutional framework could be streamlined with a view to enhancing coherence and effectiveness of policy making and implementation. As in many countries, several ministries share responsibilities for sustainable development and environmental policies with the MINAE. In addition, the environmental governance structure comprises a multitude of subsidiary and autonomous or decentralised bodies. These have varying degrees of autonomy from government ministries and limited steering and accountability mechanisms – a common feature of Costa Rica’s public administration (OECD, 2021_[20]). Recognising this problem, a 2022 legislative proposal aims to consolidate MINAE and reduce the number of its subsidiary bodies. The environmental legislation establishes several inter‑ministerial bodies to ensure co‑ordination at the political, technical and operational levels. The country is divided by geographical demarcations for different purposes (e.g. for regional development, watershed management, integrated natural resource management), each with associated institutions for multi-level governance. All this creates an overly complex, expensive and fragmented system (CGR, 2022_[21]; OECD, 2021_[20]).

Stronger implementation capacity at local level is needed

The autonomy and financial resources provided to the 90 local governments (82 cantons or municipalities and 8 district municipal councils) should be strengthened so they can deliver quality environmental and mobility services to their inhabitants. As in many countries, local governments are responsible for a wide range of environment-related matters – from land-use management to waste collection. The 2001 constitutional reform has formally allocated more powers and budget to subnational governments. However, the delay in implementing the reform implies that local authorities still have limited financial and human resources, and implementation capacity (OECD, 2021_[20]). Most local governments face difficulties in collecting taxes and service fees, whose revenue barely covers staff costs. Service quality and delivery vary greatly across municipalities and regions. The experience of other OECD countries shows that inter‑municipal arrangements to pool or share resources help provide better services at lower costs through economies of scale (OECD, 2019_[22]). However, Costa Rica’s legislation does not allow municipalities to do so. The Greater Metropolitan Area (GAM) lacks a metropolitan structure to co-ordinate the management of public urban services such as public transport and waste management (Section 1).

Environmental regulation is becoming more efficient but should be further improved and better enforced

The ongoing permitting reform aims to reduce the regulatory burden on businesses

In 2022, Costa Rica launched a comprehensive reform to streamline the now cumbersome system of government approvals. Integrated environmental permits will be part of the “Single Window of Investment” (VUI), a paperless one-stop shop for permits. This aims to simplify application procedures for activities with a low level of environmental risk. Environmental inspections will also be integrated. This would align Costa Rica with the OECD standard on integrated pollution prevention and control.

In line with OECD standards, an environmental impact assessment (EIA) is required for any activity, work or project that entails risks of adverse impacts on the environment. The process, conducted by the National Environmental Technical Secretariat (SETENA), leads to the issuance of an Environmental Licence or Viability (VLA), which lays out specific environmental requirements for activities or projects. Costa Rica could further improve environmental permitting by introducing cross-media, process-oriented licences based on Best Available Techniques (BAT).9 SETENA also issues VLAs of local land-use plans, which are the only plans to undergo a strategic environmental assessment (SEA). As in other countries, the overall effectiveness of the assessment process can be strengthened. A 2023 regulation aims to streamline the EIA and VLA issuance processes and make them more efficient.

Compliance promotion, proactive inspections and stronger enforcement are needed

Authorities’ inspection plans give priority to facilities with high environmental and health risks.10 However, in practice, most on-site inspections are reactions to complaints or incidents. Costa Rica has encouraged the participation of citizens in compliance monitoring activities, with the establishment of 40 committees of volunteer environmental inspectors. There is room to better support the regulated community in fulfilling its environmental requirements by providing technical assistance and information on best practices. This would also help reduce the compliance monitoring workload on authorities. The staff of monitoring and enforcement authorities is largely insufficient to cope with the increasing number and complexity of suspected violations. In case of non-compliance is detected, the Environmental Administrative Tribunal (TAA) can impose administrative sanctions such as fines. Fines are calculated in relation to the estimated value of environmental damage but not to the benefits of the operator from non-compliance, which would provide a stronger deterrent. Revenues from fines are channelled to a fund administered by the health ministry or to the municipality where the offence occurred rather than to the general state budget, which can entail conflicts of interest.

There is scope to improve price signals through a system of green taxes and charges and by removing harmful subsidies

Costa Rica should follow through on its plan to implement a green tax reform and carbon pricing

Environment-related taxes are an important source of fiscal revenue in Costa Rica, especially because of generally low revenues from income taxes and large informal employment. On average, they accounted for about 10% of total tax revenue and 2.3% of GDP in 2010-21, above the respective OECD averages (6.8% and 2.2%). Revenue increased steadily and strongly over the same period, in line with a rising number of vehicles on the roads and higher fuel consumption (except in 2020, at the peak of the COVID‑19 pandemic). As in most other countries, most receipts come from the excise duty on fuels and, to a lesser extent, from vehicle taxes. Taxes on pollution and resource management mainly apply to wastewater discharges and water use (Section 1) and generate limited revenue. Proceeds from environment-related taxes are partly earmarked for environmental purposes (Section 3).

The fuel and vehicle taxes should be redesigned to encourage a shift towards cleaner vehicles, public transport and active mobility. The annual vehicle tax applies the same rate, regardless of fuel efficiency or emission levels. In addition, the tax amount decreases with vehicle age, which favours old and potentially more polluting and less safe vehicles. Electric vehicles (EVs) benefit from several tax exemptions. EV subsidies should be accompanied and progressively replaced by rising taxation of internal combustion engine vehicles (ICEVs), with a view to reducing the difference in purchase price or lifetime cost between EVs and ICEVs. Vehicle taxes should be combined with more stringent emission standards (Section 1).

As in most countries, road fuel prices and taxes do not fully reflect the social costs of fuel use, including costs associated with emissions of greenhouse gases (GHGs) and local air pollutants, accidents and congestion (Parry, Black and Vernon, 2021_[23]). The excise duty on diesel is less than 60% that on petrol, despite the higher carbon content per litre of diesel and higher emissions of local pollutants from diesel vehicles. Fuel taxes are generally higher than in other LAC countries, while subsidies are lower. As a result, Costa Rica’s net effective carbon rates (ECRs) are the highest among the major LAC economies. However, in 2021, the average net ECR on road transport fuels was just two-thirds the OECD average. According to OECD estimates, less than half of the country’s GHG emissions are priced via the fuel tax (Figure 7). All emissions of GHGs other than CO₂ (mostly methane and nitrous oxide) are not priced at all (OECD, 2022_[24]).

Figure 7. Energy taxes cover a higher, albeit insufficient, share of GHG emissions than in many LAC countries

The National Decarbonisation Plan (PND) 2018-50 mandates the Ministry of Finance, in collaboration with MINAE, to design a green tax reform, including the introduction of carbon pricing and the removal of fossil fuel subsidies. The intention is welcome. It should be followed through to align price signals with the country’s ambitious climate goals (Section 1). The reform also aims to find alternative sources of tax proceeds to offset the revenue loss from vehicle and fuel taxes, which will likely result from the progressive electrification of the vehicle fleet and the shift to public transport and active mobility. To this end, the tax package should include well-designed vehicle taxes and, in the medium term, distance-based road charges. As a first step, the government should raise road tolls, which have not been updated since 2002. Implementing congestion charges would help curb peak-time congestion in critical areas of the GAM in a cost-effective and socially fair manner. There is also room to introduce taxes on resource use and pollution. These taxes could target chemical fertilisers and pesticides, which are intensively used (Section 3), as well as landfilled waste and selected plastic products (e.g. bags), with a view to improving waste management and reduce plastic pollution (Section 1).

The green tax reform should also aim to reduce tax avoidance and make the tax mix more progressive and conducive to creating jobs and moving towards a more formal economy. Gradually introducing a comprehensive package of tax measures will help smooth the costs of the reform across sectors and over time. Well-targeted and transparent policies for using additional revenues from environment-related taxes and subsidy removal are key to improve social acceptability of reforms, especially at times of high cost of living.

Many fiscal incentives have a negative impact on the environment

In 2021, the Ministry of Finance categorised tax exemptions and discounts according to their environmental impact. It estimated that revenue losses due to environmentally harmful tax incentives amounted to 0.24% of GDP in 2020, including tax discounts and exemptions on fossil fuel use and agricultural inputs (Section 3). Tax expenditures with positive environmental impact were negligible (Ministerio de Hacienda, 2021_[25]). Costa Rica should build on this exercise to develop a plan to phase out environmentally harmful subsidies, including support to energy use and agriculture (Section 3). Fossil fuel support amounted to about 0.13% of GDP in 2021 (OECD, 2023_[26]). Support is nearly exclusively linked to the use of petroleum products. It increased in the last decade, mainly due to the introduction of a price discount on liquefied petroleum gas (LPG) in 2016. Exemptions from the fuel excise duty for fuels used in commercial aviation and fishery is the main form of support, followed by the LPG price discount.

The government response to the 2022 hike in global energy prices will likely lead to increasing amounts of fossil fuel support. That year, the government more than halved the tax rate on LPG for six years. This measure targeted low-income households, who are the main users of LPG for cooking and heating, as well as the pandemic-stricken service sectors. Temporary measures moderately reduced the price of petrol and diesel, which is mostly used in freight, agriculture and shipping. Overall, these measures were less costly and less regressive than in regional peers (Garcimartín and Roca, 2022_[27]). Nonetheless, increasing the temporary allowance for poorer households (Bono inflación) is a preferable way to shield the population most affected by rising prices as it does not discourage energy savings (OECD, 2023_[1]).

The transition to a green and decarbonised economy requires large-scale investment

Public environment-related investment should be increased and made more efficient

Public spending on environmental protection averaged 1.2% of general government expenditure in 2012‑19.11 Waste management accounted for more than half of public environmental expenditure, followed by biodiversity with about one quarter. All waste related spending occurs at local level. Current expenditure (i.e. for covering operating costs) makes up the bulk of spending in environmental protection, neglecting much-needed investment in waste and wastewater infrastructure. Similarly, investment in transport infrastructure has been insufficient and mostly focused on roads.

There is a need to reallocate resources to address infrastructure gaps, improve service delivery and implement the PND 2018-50 (Section 1). Financial needs for implementing the PND are estimated at USD 5 billion for 2021‑25 (7% of GDP), mostly for investment in electric and public transport and waste management. However, the PNDIP 2023-26 continues to focus infrastructure investment on roads. Accelerating the PND investments would boost economic recovery and employment (Groves et al., 2022_[28]). At longer term, achieving a decarbonised and digital economy could create 135 000 net jobs by 2050 (equivalent to 5% of the 2021 labour force), mainly related to clean energy, sustainable transport and efficient use of natural resources (Quirós-Tortós et al., 2022_[29]).

Further improving capacity to execute capital investment projects will require stronger accountability mechanisms, transparency and impact evaluation. Costa Rica’s well-developed National Public Investment System (SNIP) aims to improve and harmonise project selection across the public sector. However, only part of the public investment by autonomous institutions is reported to the SNIP (OECD, 2021_[20]). On average, only 30% of the budgeted capital spending is used (OECD, 2023_[1]). The government issued regulations and guidelines to integrate climate mitigation and adaptation considerations into the SNIP and started implementing a taxonomy of sustainable infrastructure. Costa Rica has defined standards for using cost-benefit analysis but in practice has made little progress in using them to select projects (OECD, 2020_[30]). Implementing green budgeting practices would help the government align public expenditure, as well as revenue, with climate and other environmental goals.

There is a clear need to explore new financing avenues

Given the limited fiscal space, more private participation in infrastructure projects is needed. Concessions and public-private partnerships (PPP) can help in this respect. Costa Rica’s PPP legal framework is aligned with OECD standards, but inefficiencies and long execution delays remain (OECD, 2021_[20]). Thorough assessment of projects, adequate specifications of the contracts and proper fiscal accounting are crucial to maximise value for money of PPPs and limit risks for public finances.

Costa Rica’s long-standing environmental commitments place the country in a favourable position to access international green finance, including through green, social, sustainability and sustainability‑linked (GSSS) bonds. Costa Rica is among the ten largest LAC issuers of GSSS bonds on international markets. The experience of Colombia shows that sovereign green bonds in local currency could help mobilise finance from private and institutional investors in the domestic market (OECD et al., 2022_[31]). Work is ongoing to develop official government guidance to access finance from the Green Climate Fund. The General Superintendence of Financial Institutions developed a methodology to assess climate-related financial risks of the country’s banks and financial institutions. A systematic application of this assessment methodology would enhance transparency, provide incentives for redirecting finance towards cleaner activities and prepare for the introduction of climate-related financial disclosure requirements. Costa Rica would benefit from joining the efforts of other LAC countries in further developing and harmonising a GSSS bond standards, corporate sustainability standards and taxonomies to identify activities and investment that contribute effectively to the green transition.

More effective incentives are needed to encourage businesses’ environmental investment

Costa Rica has several measures to encourage businesses to engage in environment-friendly activities and investment, in line with its 2018 National Policy for Sustainable Production and Consumption. These include fiscal incentives for investment in environment-friendly equipment and processes and a programme of voluntary agreements led by MINAE. A variety of business certification programmes and labels is available. According to a survey by the Central Bank of Costa Rica, 65% of companies had some form of environmental certification in 2018‑20, mostly under the Country Programme for Carbon Neutrality and the Ecological Blue Flag Programme. The Certification for Sustainable Tourism has helped position Costa Rica as a pioneer of ecological tourism (OECD, 2023_[32]). However, this multitude of certifications and labels risks creating confusion for customers and generating “greenwashing”. Businesses spend little in environmental activities. In 2018‑20, the share of environmental protection expenditure in total business expenditure was less than 1% (BCCR, 2022_[33]). Most spending went to managing waste and reducing air emissions.

With large spending on public procurement (12.5% of GDP in 2018), expanding green public procurement (GPP) can greatly help raise demand for cleaner products and services, thereby stimulating entrepreneurship, innovation and job creation in green industries. For instance, GPP can foster the creation of markets for recovered and recycled materials (Section 1). In 2015, Costa Rica was the first LAC country to adopt a National Policy for Sustainable Public Procurement, followed by technical regulations setting environmental criteria for public purchases of several items and services. However, results have been modest, largely because the overall public procurement system is still fragmented and inefficient (OECD, 2020_[34]). The new law establishing that all public institutions must carry their purchases through the central procurement system is a welcome step.

Costa Rica has consolidated its framework for environmental democracy

Provision of environmental information has greatly improved, but gaps remain

Costa Rica has made remarkable progress in implementing the open government principles of transparency, accountability and participation. Its legal and institutional frameworks for open government are on par with OECD standards. The National Environmental Information System (SINIA) was established in 2013 to co-ordinate the collection of environmental statistics and disseminate them through a single web repository. The National System of Climate Change Metrics (SINAMECC), established in 2018, is a parallel platform for information related to climate change. Work is progressing to implement statistical environmental accounts and a pollution release and transfer registry, as well as to update the state of the environment report (the first and last was released in 2017). However, more work is needed to extend the coverage of SINIA, as much information is still scattered across ministries, their subsidiary entities and other autonomous bodies. Information gaps persist, including on GHG emissions, air and water quality, and waste (Section 1), as well as the oceans (Section 3). These gaps impede evidence-based decision making and informed citizen engagement.

Public participation features in many environmental decision-making processes

Public participation and consultation of indigenous communities are required by law for the formulation of several public policies and environmental decision-making processes. These include EIA procedures and, to a lesser extent, SEA. Several mechanisms for public participation are in place. In 2018, the government introduced the General Mechanism for Consultation of Indigenous Peoples. The population shows a high degree of satisfaction (67%) with the country’s efforts in protecting the environment. Citizens’ support for environmental policies has remained above 50% since 2010 (Gallup, 2022_[35]). However, active engagement of citizens and civil society organisations remains limited, and trust in government is relatively low (OECD, 2023_[1]; OECD, 2021_[20]). Education and awareness-raising policies can help accelerate cultural change.

Citizens are granted access to justice in environmental matters

Every person has legal standing to denounce any acts that may violate the constitutional right to a healthy and ecologically balanced environment and to safe drinking water. Every citizen can file a complaint for suspected non-compliance with environmental provisions and claim compensation for the resulting damage. A centralised system for collecting and following up on environmental complaints, operated by the Environmental Comptroller, is accessible to all citizens. Complaints have increased steadily since 2017. In 2021, almost half of them concerned forests (mostly about illegal logging), followed by complaints related to biodiversity loss and water pollution.

In line with its environmental democracy tradition, Costa Rica was among the promoters of the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean (Escazú Agreement), which entered into force in April 2021. Costa Rica has taken several measures to protect environmental human right defenders and Indigenous Peoples but has not ratified the agreement. Ratifying the Escazú Agreement would further improve the country’s advanced legal framework to manage the environment and guarantee environmental democracy (OECD, 2023_[32]).

Recommendations on green and inclusive growth

Improving environmental and sustainable development governance

Build on the legislative proposal on strengthening the environment ministry’s competencies to develop a plan for rationalising the environmental governance system, based on transparent criteria for maintaining or establishing institutional entities; simplify and streamline the councils and committees for horizontal co‑ordination and multi-level governance for sustainable development.
Provide guidance, support and training to central and local government bodies to improve their capacity to develop science- and evidence-based policies and carry out their environment-related responsibilities.
Allow and encourage inter-municipal arrangements to build the necessary economies of scale to deliver environment-related services in a more cost-effective manner.

Ensuring compliance with environmental requirements

Swiftly implement integrated environmental permitting and inspections; make Best Available Techniques the basis for setting conditions in environmental permits for high-risk installations.
Extend the strategic environmental assessment (SEA) requirement to sectoral plans and programmes, giving priority to public investment plans, and build related institutional capacity; broaden public participation mechanisms for SEA procedures.
Implement risk-based planning for environmental inspections to improve efficiency of compliance monitoring and reduce its reliance on environmental complaints; conduct systematic inspections to ensure compliance of activities with requirements set in the Environmental Licence or Viability.
Impose fines that reflect the gravity of the offence and recover the economic benefits to the operator from non-compliance, with a view to increasing the deterrent effect of monetary penalties; allocate revenues from fines to the state budget.

Greening taxes and subsidies

Accelerate the development and implementation of a comprehensive green tax reform, as foreseen by the National Decarbonisation Plan 2018-50. As part of the reform:
- introduce a carbon tax component in the fuel excise levy; set the rate at an initially low level and gradually raise it over time according to a pre-defined schedule
- progressively raise the fuel tax rate on diesel to at least match that on petrol
- increase taxes on conventional vehicles and modulate them according to the vehicles’ weight, fuel efficiency and levels of local pollutant emissions; reduce the annual depreciation rate of the vehicle’s fiscal value to eliminate the distortion in favour of old vehicles
- update road tolls and differentiate them according to vehicles’ emission parameters; lay the groundwork for a fully-fledged system of distance- and time-based road charges
- consider introducing congestion charges, potentially in combination with low-emission zones, to address congestion and air pollution in critical areas of the Greater Metropolitan Area, as well as to raise revenue to finance investment in sustainable transport infrastructure and services
- introduce taxes on pollution and resource use, such as on chemical fertilisers and pesticides, landfilled waste and selected plastic products
- use part of the revenue from increased environment-related taxes to mitigate their impact on low-income households and most affected economic sectors, as well as to finance policies and investment for the green transition; periodically review revenue earmarking arrangements in a transparent way
Develop the regular stocktaking of tax expenditure into a systematic screening of actual and proposed subsidies with a view to identifying those not justified on economic, social and environmental grounds; prepare a plan to phase out fossil fuel and other environmentally harmful subsidies.

Investing in the green transition

Scale up and accelerate environment- and climate-related investment; increase private participation in infrastructure projects through transparent and fiscally sound concessions and PPPs; ensure timely execution and quality of infrastructure projects.
Systematically apply cost-benefit and climate risk analysis to capital investment projects, as required by regulations; include shadow costs of GHG emissions and other environmental impact in public investment appraisal; regularly evaluate that executed spending contributes effectively to improving environmental outcomes and resilience.
Extend the use of green bonds to finance investment in decarbonisation and biodiversity; consider issuing sovereign green bonds for the domestic market; promptly finalise the official guidance to access finance from the Green Climate Fund.
Strictly enforce environmental criteria in public procurement and monitor implementation; expand the categories of products and services covered by sustainable public procurement.

Promoting environmental democracy and citizen engagement

Improve production, collection and dissemination of environmental statistics as part of the SINIA, including through increased funding, deployment of Earth observation technologies and enhanced collaboration with the scientific community; strengthen the capacity of decentralised institutions and local governments of collecting and processing environment-related information.
Consider the possibility of taking steps towards ratifying the Escazú Agreement.

3. Biodiversity conservation and sustainable use

Costa Rica has reversed deforestation, but pressures on its rich biodiversity remain strong

A megadiverse country, Costa Rica is home to about 6% of the world’s known species and hosts a large variety of ecosystems. Its biodiversity supports the country’s florid nature-based tourism, productive agriculture and artisanal fisheries. Costa Rica’s natural capital is estimated at no less than USD 15 billion per year, or 23% of the 2019 gross domestic product (GDP). Much of this value arises from ecosystem services such as climate regulation, erosion prevention, food and water provision, and nature-based tourism (Hernández-Blanco and Costanza, 2021_[36]). Infrastructure development, urbanisation, tourism, farming, fishing, untreated wastewater, pollution and climate change exert pressure on Costa Rica’s biodiversity. The conservation status varies across regions and ecosystems.

Costa Rica has managed to increase secondary forest cover (Figure 8), thanks to a mix of targeted policies (see below), as well as external factors such as the collapse of the beef market in the 1980s (Ardila et al., 2020_[37]). Today, forests cover 59% of the country’s land areas, up from an all-time-low of 21% in 1987, but still far from 75% in 1940. About half of the forested area is under some form of protection, either within official protected areas or in biological corridors. However, reforestation and regeneration rates vary across types of forests and regions, with substantial forest fragmentation. Dry forests have recovered well, while humid and cloud forests show low to moderate deterioration levels (MINAE et al., 2018_[38]). Secondary forests on abandoned agricultural lands are ecologically different from the original forest of a site. Land conversion from forests to pastures, crops and urban areas has grown since the mid-2010s (CONARE, 2021_[9]). Wildfires and climate change are affecting forests, some of which have stored carbon that might be released (Section 1).

Figure 8. Costa Rica is among the few Latin American countries to have increased forest cover

While coastal areas are sparsely populated, they are under rising pressure from intensive fishing practices, massive tourist flows and uncontrolled development of tourism-related infrastructures and buildings (Moreno Díaz et al., 2019_[39]), as well as runoffs, sediments, waste and untreated sewage produced in the Central Valley (where most people live). These are also the main drivers of deterioration of mangroves and other wetlands (MINAE et al., 2018_[38]). About 7% of Costa Rica’s known species are threatened, which is relatively low compared to other megadiverse countries. However, the number of threatened species has been increasing since the late 1990s. Knowledge about the health of marine ecosystems and species is limited, but there is evidence of unsustainable exploitation of marine resources.

The revision of the National Biodiversity Strategy is an opportunity to enhance policy coherence

Costa Rica’s environmental policy took a decisive turn in the 1990s, in a bid to halt deforestation, recover lost forests and promote economic activities based on the sustainable use of biodiversity. The Biodiversity Law, the Forest Law and the Wildlife Conservation Law established the institutional and policy settings for biodiversity management that are still largely in place today. They introduced a ban on mature forest clearing and the nationwide Programme of Payments for Environmental Services (PPSA), as well as a multi-level governance system for managing the network of protected wilderness areas (ASPs) and natural resources (forest, wildlife and water) in an integrated fashion. As in other sectors of Costa Rica’s public administration, several institutions at central and subnational levels share biodiversity management, which often creates conflicting objectives and overlapping responsibilities (Section 2).

Costa Rica has an array of strategies and programmes in place, broadly in line with the country’s international commitments. The National Biodiversity Management Commission (CONAGEBIO) oversees the implementation and monitoring of the National Biodiversity Policy 2015-30 and the National Biodiversity Strategy 2016-25 and Action Plan (ENB2) – the main documents guiding the country’s biodiversity policy. They also aim to foster social inclusion and citizen participation. The ENB2 is itself the result of a broad participatory process that included Indigenous Peoples in an effective manner for the first time.

The ENB2 adopts a result-based approach by setting 100 targets, identifying the administrations responsible for achievement of each target and establishing an interinstitutional committee to monitor progress. Most ENB2 targets have been achieved or are on track to be achieved, including those for protected areas management, connectivity, forest cover and area under the PPSA. However, progress on some key targets has been slower, namely those related to enforcement of environmental legislation and spatial planning, recovery of mangrove ecosystems and coral reefs, illegal extraction and trade of species, pesticide use, knowledge of marine biodiversity and environmental education (MINAE, CONAGEBIO and SINAC, 2023_[40]).

The planned revision of the ENB2 aims to align the strategy with the targets of the Kunming-Montreal Global Biodiversity Framework (GBF) for 2030. It provides the opportunity to address the barriers to achieving biodiversity-related targets in a cost-effective way. The updated strategy should bring the multitude of biodiversity-related programmes and policy measures into a coherent framework and identify concrete actions to mainstream biodiversity considerations in agriculture, fisheries, tourism and urban development policies. It should also consider how to reduce institutional fragmentation, which hinders implementation and risks increasing the costs of achieving targets. Increasing cost effectiveness is even more crucial given the fiscal constraints Costa Rica is likely to face for the years to come. Further improving knowledge and data, particularly on marine and freshwater ecosystems, is essential to build consensus around biodiversity policy, identify priorities for action and manage natural resources effectively.

Protected areas have helped reduce biodiversity loss, but their ecological representativeness and management could be improved

Costa Rica expanded its network of protected area and biological corridors

Costa Rica’s extensive ASP system has been effective in controlling human pressures such as hunting, logging, extraction of flora and fauna, and agriculture. It also plays an important climate mitigation role, as forests in large national parks are among the major carbon sinks (CONARE, 2022_[17]). As of 2022, there were 151 ASPs. A quarter of terrestrial area is included in the ASPs, above the 2020 Aichi Target (17% of land area). A wide marine ASP was established in 2021, bringing the share of marine protected areas up from less than 3% of the exclusive economic zone (EEZ) to 30%. This is the second highest share among countries in LAC, after Chile. Costa Rica is not far from achieving GBF Target 3 (30% of land and sea under protected areas and other area-based effective conservation measures or OECMs). However, it will need to accelerate the pace of progress for terrestrial areas compared to the last decade, as well as the identification of OECMs and the establishment of a national framework for the implementation of these measures.

To achieve Target 3, more efforts will also be needed to improve the ecological representativeness of protected areas. The ASPs cover 44.5% of the key biodiversity areas and 16% of the ecologically or biologically significant marine areas (EBSAs) present in Costa Rica (CBD and UNDP, 2021_[41]). Forest ecosystems and the EBSAs off the Caribbean coast are generally better represented than rivers and coastal and mangroves areas on the northern Pacific and central Caribbean coasts. The ASPs cover less than 2% of the biodiversity-reach Costa Rica Thermal Dome in the country’s northern Pacific EEZ.

Costa Rica has placed great emphasis on connectivity between ecosystems and participation of non-governmental stakeholders and local communities in natural resource management. It has also traditionally encouraged land donations and the creation of protected areas on private land through tax incentives. A network of 51 biological corridors, including six interurban biological corridors in the Greater Metropolitan Area (GAM), is in place to reduce fragmentation between ecosystems within and outside protected areas. They cover 38% of the land area. As of 2022, the Costa Rican Network of Natural Reserves, which includes fully private natural reserves outside the official ASP system, covered about 2% of national territory. In some cases, these reserves are located in biological corridors and act as buffer zones between larger state-owned protected areas. Non-governmental organisations (NGOs) own and manage some private reserves, as well as being actively engaged in the management of biological corridors.

Little progress has been made in identifying the areas for biodiversity conservation and sustainable use that will be managed by Indigenous Peoples (Áreas de Cuido) – one of the ENB2 targets. Forests cover 70% of the area within the 24 indigenous territories’ (CONAGEBIO, 2023_[42]), with overlaps between the indigenous territories and the official ASPs (FAO and FILAC, 2021_[43]). The restrictions to resource use and ancestral activities in the ASPs have been a source of conflict. There are positive examples of public‑private co‑operation to support indigenous-led businesses in their territories. However, the staff devoted to engaging and empowering Indigenous Peoples is limited.

There is scope to improve the management of protected areas and biological corridors

Management of protected areas has improved since the mid-2010s. As of 2020, 70% of protected areas had a management plan, but only half had management effectiveness evaluations. The quality and the details of management plans differ substantially across ASPs. In addition, several biological corridors do not have their local multi-stakeholder managing committee and management plan in place. These are essential for ensuring the participatory organisation that is at the core of the biological corridor concept.

Costa Rica should make sure the ASPs are properly funded and staffed. The National System of Conservation Areas (SINAC), a subsidiary body of the environment ministry (MINAE), oversees the ASP network. It is tasked with the integrated management of natural resources (forest, wildlife and water) within and outside protected areas. Between 2015 and 2020, the SINAC budget increased by about 5% per year (Molina-Escalante, 2021_[44]). However, the SINAC suffered a heavy cut in 2021 as part of the government’s fiscal consolidation efforts. Due to understaffing, many activities on the ground within and outside ASPs take place thanks to the co‑operation of civil society and NGOs.

Tourism generates revenue for protected areas and employment for local communities but also puts pressure on fragile natural areas

Costa Rica’s long coastlines and rich biodiversity are the main tourist attraction. The ASP system has been a driver of the country’s success as tourist destination, generating income and jobs. In 2017-19, 65% of travellers to Costa Rica visited the country to engage in nature-based activities. In 2011-19, the number of visitors to the ASPs increased by 50% to about 2 270 000. The ASPs are estimated to contribute USD 1.8 billion per year to the national economy, or 3% of GDP, more than three-quarters of which is related to tourism (Moreno Díaz and Villalobos Salas, 2019_[45]). This is more than three times the biodiversity-related public budget, which indicates the high economic returns from biodiversity-related spending.

Costa Rica tourism policy has long recognised the key role of healthy ecosystems and species for the competitiveness of tourism, as well as the potential negative impact of the sector on biodiversity. The country has branded itself as an ecotourism destination, including through voluntary certification and labelling schemes. The Global Sustainable Tourism Council recognised the Certification for Sustainable Tourism (CST) as compliant with its criteria. Costa Rica could consider assigning the audit for the CST and Ecological Blue Flag for beaches to accredited bodies, as required for the “Essential Costa Rica” country brand. This would help further consolidate the labels’ credibility.

Tourism generates finance for biodiversity through ASP entrance fees, which are a major source of revenue for SINAC. However, massive tourist flows concentrated in a few months and areas put pressure on ecosystems and species, within and outside the ASPs. Entrance fees are relatively low, have not been adjusted to inflation for years and do not cover operating costs. As in many emerging economies, entrance fees are much higher for foreign tourists. This price discrimination effectively subsidises wealthier Costa Ricans, who may be willing to pay as much as foreign tourists to enjoy their country’s nature. Costa Rica could also consider introducing other tourism-related fees such as diving or climbing fees, as well as fees on tourism companies to recognise the benefits they receive from a preserved nature. These would provide additional revenue.

The use of concessions for tourism-related services in the ASPs, such as restaurants, shops and parking, should be extended and made more efficient. These concessions allow the ASPs to earn revenue and improve the quality of services, while generating jobs for neighbouring communities. As of 2020, there were only two active concessions (CGR, 2020_[46]). In 2021, MINAE and SINAC, with the technical support of the Biodiversity Finance Initiative of the United Nations Development Programme (UNDP-BIOFIN), released technical guidelines for management of concessions in the ASPs.

There is an urgent need to complete spatial planning and mainstream biodiversity in it

The lack of land-use planning has been a major indirect driver of biodiversity loss in Costa Rica, and it weakens the country’s capacity to respond to natural hazards. As of July 2021, less than half of the country’s 82 municipalities had cantonal regulatory plans (PRCs). Most plans are more than 20 years old, cover only a part of the municipal territory and have not been granted an Environmental Viability (VLA) (Section 2). Uncontrolled land conversion continues outside the ASPs, including in biological corridors, where spatial management is regulated through the PRCs (CONARE, 2022_[17]). When in place, the PRCs do not impose specific land-use restrictions in biological corridors. The ENB2 acknowledges the need of better integrating biodiversity into spatial planning. Some initiatives have been taken in this direction, such as the San José “Biodiver_City” Project and the National Urban Environment Agenda, but it is too early to appreciate their results.

The absence of land-use and marine spatial plans exacerbates pressures on coastal areas, where much of the new infrastructure and building development linked to tourism occurs (CONARE, 2021_[9]). Many maritime terrestrial zones (ZMTs) have experienced illegal building development. This further strains the already insufficient waste and wastewater infrastructure, thereby threatening marine-coastal ecosystems. The Costa Rica Tourism Board (ITC), which is the competent authority for the ZMTs, has provided guidance to municipalities for developing integrated ZMT management plans. However, a fragmented regulatory framework, weak inter-instructional co‑operation, little participation of local communities and strong interest groups have impeded the effective development and use of these plans (Moreno Díaz et al., 2019_[39]). In response to these challenges, in 2022, the government established an interinstitutional technical group for the revisions and approval of cantonal and coastal regulatory plans.

Costa Rica pioneering programme of payment for ecosystem services should be extended and reinforced

The long-standing national PPSA has largely contributed to restoring degraded forestlands and, to a lesser extent, preventing forest clearing (CONARE, 2022_[17]). The National Forestry Financing Fund (FONAFIFO), under the aegis of MINAE, manages the PPSA and finances afforestation and reforestation activities. The programme pays landowners that commit to forest conservation, reforestation, regeneration of pastures, sustainable forest management or agroforestry on their lands, thereby contributing to providing ecosystem services.12 Of the 1.3 million hectares covered by the PPSA since its inception in 1997, more than 560 000 hectares were added between 2011 and 2021, mostly under forest conservation contracts. In 24 years, the programme paid more than USD 600 million to small and medium producers and led to the creation of 3 500‑4 000 direct jobs each year (ILO, UNEP and IUCN, 2022_[47]). The PPSA provides more favourable conditions to farms led by Indigenous Peoples or women. This is in line with the Gender Action Plan of the REDD+ strategy, which aims to strengthen the role of women in biodiversity conservation and close the employment and income gaps in the forestry sector.

FONAFIFO has been active in mobilising finance for the PPSA, through private donations, international co-operation, and carbon credits produced through forest plantations and REDD+. However, the PPSA funding remains highly dependent on fuel tax revenue, which is expected to decline with the progressive decarbonisation of transport (Section 2). A 3.5% share of annual fuel tax receipts is ring-fenced for the programme and accounts for nearly 90% of its funds. Between 2015 and 2021, the area under the PPSA declined, partly due to decreasing fiscal transfers to FONAFIFO. This corresponded to a decline in reforested area per year (CONARE, 2022_[17]). Since 2016, FONAFIFO has consistently received less than the amount due based on fuel tax revenue. In 2020, it suffered an additional cut due to the pandemic-related drop in fuel use and associated tax revenue. This shows vividly the impact that transport decarbonisation will have on the PPSA funding and area coverage, as well as on the capacity to monitor landowners’ compliance with the programme requirements.

Costa Rica should promptly approve the legislative proposal on reinforcing the PPSA that was submitted to Parliament in April 2022. The bill would help establish a coherent framework for extending the PPSA to other ecosystems, in recognition of the valuable services they provide. There is scope to broaden the set of financing instruments for the conservation and restoration of all ecosystem services, as well as to introduce a biodiversity offset system. This would contribute to ensuring a fair allocation of resources across ecosystem services and to promoting the long-term financial sustainability of the programme.

There is a need for scaling up finance for biodiversity and better spending it

Expenditures that protect biodiversity and landscape as their primary objective are a relatively large share of public environmental spending (25% in 2012-19), reflecting the country’s policy priorities.13 However, they represented just 0.1% of GDP and declined (in real terms) in the same period. Biodiversity-related expenditures, including spending with biodiversity conservation as a co-benefit or secondary purpose, are much higher. They are estimated at 0.6-0.8% of GDP per year in 2015-20. However, a large part of the biodiversity-related budget was not spent in the same period (Molina-Escalante, 2021_[44]). There is a need to reinforce the capacity of institutions to manage their budget effectively and carry out their functions.

Public budget allocations do not seem commensurate with the objectives Costa Rica set for itself. Investments represent a negligible part of total public expenditure in biodiversity. Human resources for biodiversity management are insufficient, resulting in inadequate planning, management and compliance monitoring. The objectives of the ENB2 have been mainstreamed in the National Plan for Development and Public Investment 2023-26. However, the funding gap is estimated at USD 90 million per year (0.18% of GDP) for 10-15 years.

There is a need to mobilise new sources of finance. Financing for biodiversity comes from a variety of fiscal sources. Part of the revenue from fuel taxes, water-related charges and stamp duties is earmarked for the institutions with environment-related responsibilities. Except for fuel taxes, revenue is negligible. A green tax reform could help raise revenue to finance biodiversity management, among other purposes (Section 2). Priority should be given to removing subsidies harmful to biodiversity, including for agriculture and fishing (see below), in line with the GBF (Target 18). The fiscal savings from subsidy removal could be partly redirected to finance biodiversity policy.

There is much scope to engage the business sector in private-public initiatives, including through more use of concession contracts for services in protected areas. Businesses spend very little in biodiversity conservation (BCCR, 2022_[33]). Costa Rica has some experience with conservation trust funds (such as the Sustainable Biodiversity Fund managed by the National Bank of Costa Rica) and debt-for-nature swap. Green bonds could also be used to attract finance for investment in biodiversity conservation, waste and wastewater infrastructure and NbS for adaptation to climate change (Section 1). At the time of writing, the government was working, with the support of UNDP-BIOFIN, to issue a green bond for securing funds for infrastructure investment in protected areas.

REDD+ actions have vast fund-raising potential. In 2022, Costa Rica became the first LAC country to receive payments from the Carbon Fund of the Forest Carbon Partnership Facility for reducing GHG emissions in 2018-19. Costa Rica is on track to unlock up to USD 60 million for cutting up to 12 megatonnes of carbon dioxide emissions by 2025 through actions in the forest sector (World Bank, 2022_[48]). The PPSA and protected areas are key tools for implementing the national REDD+ strategy and reaching net zero by 2050 (Section 1). In 2022, Costa Rica presented its National Strategy for Blue Carbon to seize the finance opportunities provided by carbon credits from conserving and restoring coastal ecosystems such as mangroves.

The equitable use of genetic and biochemical resources can be a driver of innovation and business opportunities

Costa Rica has put in place a coherent system for regulating access to its genetic resources and ensuring a fair sharing of benefits arising from their use (ABS). Since 2016, CONAGEBIO has granted the permit for using genetic and biochemical resources to seven companies, which have concluded contracts with local producers to share the benefits of the commercialisation of the products using such resources. In 2018, Costa Rica launched the “Distintivo ABS”, a label certifying that a product using the country’s genetic resources complies with the ABS regulations and good practices. This is a first for Latin America. Since 2021, six products have obtained the ABS certification.

The National Bioeconomy Strategy 2020-30 promotes equitable use of genetic and biochemical resources as a driver of innovation and business opportunities. However, an agreement on access to, and use of, genetic resources in indigenous territories and on the preservation of indigenous practices and knowledge, is still pending. This has impeded the ratification of the Nagoya Protocol on ABS, which entered into force in 2014.

Removing harmful subsidies is key to encourage good agricultural practices

Costa Rica has a large and productive agriculture sector. However, some monocultures and use of agrochemicals have exerted pressures on the environment, including clearing of forestland, soil degradation and water pollution (Roosendaal et al., 2021_[49]). Agricultural support for producers has declined since 2000 and is relatively limited. It includes support to advisory services and innovation, with significant emphasis on environmental protection. In a welcome move, the government reduced market‑price support to rice (OECD, 2023_[1]). Prior to this, in 2019-21, 89% of support was based on market-price support (through border tariffs and minimum reference prices).14 Being linked to production, this form of support can increase pressures on natural resources (OECD, 2022_[50]). In addition, sales of agricultural inputs, such as fertilisers and pesticides, have long benefited from tax exemptions (Section 2), which has encouraged their use. Costa Rica has among the highest intensity of pesticide use in the OECD and LAC. Many of these pesticides are highly hazardous and have not been assessed for environmental risk since their first registration in Costa Rica. In many cases, this dates back several years (Vargas Castro, 2021_[51]). A new regulation on the environmental risk assessment and approval of pesticides entered into force in early 2023.

The government has put a strong focus on promoting environmentally sustainable and low-carbon farming, most recently through the National Bioeconomy Strategy 2020-30 and the Sustainable Landscape Initiative 2022-30. The government and private sector have developed several initiatives such as guidance, training and capacity building for producers, as well as a voluntary certification programme, to promote adoption of environment-friendly agricultural practices. The NAMAs for coffee and livestock production, launched in the mid-2010s, identify technologies and practices that minimise the impacts on biodiversity and water, in addition to reducing GHG emissions. Additional NAMAs for large production sectors (sugarcane, rice and bananas) are in a pilot phase. Costa Rica has been an early mover in the field of organic production, but organic farming remains marginal. Less than 1% of total agricultural area was under organic farming in 2020, compared to the OECD average of 4.8% (FAO, 2023_[52]). Costa Rica should further encourage the uptake of organic farming practices by providing technical assistance to small-scale producers and helping them access international markets.

Sustainable fishery management calls for better knowledge and fewer harmful incentives

Fishing has high social value and is a major source of income for artisanal fishers in the rural and isolated communities in coastal areas. Overexploitation of coastal fisheries has affected the livelihood of artisanal fishers. Since 2008, the organisations of small-scall fishers can create Marine Areas of Responsible Fishing and participate in the zoning, management and vigilance of the areas, as well as monitoring and conservation of fish stocks. Costa Rica adopts regulatory tools to manage fish stocks but not total allowable catch limits. However, the biological sustainability of fish stocks, which is the basis for the sustainable management of fisheries, has not been recently assessed. High-capacity fishing gear with low selectivity, lost or abandoned gear at sea and harvesting during reproductive seasons are a threat to several marine species and habitats (MINAE et al., 2018_[38]). The government adopted a regulation for reducing mortality of dolphins in tuna fishing and launched the “Pura Vida” label for certifying sustainably caught and processed fish and seafood.

Costa Rica’s support to fisheries was 35% of the value of landings in 2018‑20, the fifth highest share in the OECD (OECD, 2022_[53]). Progress has been made in reducing support linked to input use, while increasing general support to improve efficiency and sustainability of fisheries and maintain coastal employment. However, in 2018-20, 46% of support was still given through tax exemptions on fuel use and other subsides that lower input costs. Such support tends to disproportionally benefit large fishing companies. It can encourage unsustainable fishing in the absence of effective fisheries management. Furthermore, it is more likely to increase illegal fishing, resulting in higher impacts on marine species and ecosystems, as well as higher GHG emissions (OECD, 2022_[53]).

Recommendations on biodiversity conservation and sustainable use

Strengthening the policy framework

Ensure the updated national biodiversity strategy for the post-2025 period provides a coherent policy framework consolidating strategies and programmes; thoroughly assess the results achieved by the current strategy and the costs of achieving them and identify the barriers to progress that should be addressed in the next period.
Invest in improving the knowledge base on the country’s biodiversity, particularly on marine and freshwater ecosystems, and the interlinkages between biodiversity, agriculture, fishery, tourism, and coastal and urban development.
Approve an agreement on the scope of access to, and use of, genetic resources in indigenous territories and on the preservation of indigenous practices and knowledge; ratify the Nagoya Protocol on access and benefit sharing.

Boosting the effectiveness of area-based conservation measures

Continue to strengthen the protected area system and improve its ecological representativeness and connectivity, by prioritising the ecologically significant terrestrial and marine areas that are less covered (such as coastal, mangroves and other wetlands, and the Costa Rica Thermal Dome); accelerate the identification of other effective area-based conservation measures and the establishment of a national framework for the implementation of these measures.
Enforce the legislation requiring all municipalities to adopt adequate and sufficiently up-to-date land-use plans that consider environmental concerns, including impact on biodiversity, vulnerability to climate-related hazards and specific restrictions that may be needed in biological corridors; develop spatial marine plans and integrated management plans for the maritime terrestrial zones.
Develop and systematically review the management plans for all protected areas, Ramsar wetlands and biological corridors; ensure they include mechanisms to evaluate management effectiveness, as well as ecosystem health or ecological integrity whenever possible; complete the establishment of local committees for the management of biological corridors.
Accelerate identification of areas for biodiversity conservation and sustainable use to be managed by the Indigenous Peoples (Áreas de Cuido); further engage indigenous communities in the PPSA; increase the number of civil servants devoted to engaging and empowering indigenous communities.
Enhancing the contribution of tourism to biodiversity management
Adopt a consistent methodology for setting entrance fees to protected areas, with a view to increase cost recovery; systematically adjust the fees for inflation, as required by law; consider differentiating fees between high and low seasons and reducing the gap between fees applied to local and foreign tourists, while applying discounts based on socio-economic status.
Extend use of concession contracts for tourism-related services in protected areas; systematically implemented the technical guidelines for the management of concessions.

Reinforcing payments for ecosystem services

Reinforce the PPSA and extend it to other ecosystems beyond forests; consider establishing a natural capital trust for financing the conservation and restoration of all ecosystem services, as well as a biodiversity offset system.
Broaden the sources of finance, including fiscal resources, for the PPSA, with a view to delinking the financial viability of the programme from fuel tax revenue.

Mobilising finance for biodiversity

Improve the timeliness and effectiveness of public spending for biodiversity conservation and sustainable use; further mainstream biodiversity in budget allocations; systematise statistics on budget and expenditure on biodiversity, as part of a broader rationalisation of the budget process.
Expand the use of innovative financing mechanisms such as green bonds, conservation trust funds and debt-for-nature swap to raise revenue for financing biodiversity management.

Mainstreaming biodiversity in agriculture policy

Remove tax exemptions for agrochemicals; consider introducing taxes based on the amount of active ingredients in pesticides and of nutrients in chemical fertilisers; ensure all pesticides are submitted to an appropriate environmental risk assessment and remove from the market those that exceed acceptable hazard levels for ecosystems and human health.
Continue to phase out market-price support (given through border tariffs and minimum reference prices) for agricultural products; replace it with time-bound payments targeted to producers in need, as well as to encourage green farming practices.

Mainstreaming biodiversity in fishing policy

Assess the biological sustainability of fish stocks; improve knowledge about the pressures on fish stocks and the impact of fishery policy on marine biodiversity.
Continue to remove fishery support linked to input use, primarily fuel use; repurpose the saved financial resources for targeted direct income support to fishers in need and for improving the environmental sustainability of fishing; accept the 2022 World Trade Organization’s Agreement on Fisheries Subsidies.

References

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[1] OECD (2023), OECD Economic Surveys: Costa Rica 2023, OECD Publishing, Paris, https://doi.org/10.1787/8e8171b0-en.

[30] OECD (2023), OECD Responsible Business Conduct Policy Reviews: Costa Rica, https://mneguidelines.oecd.org/oecd-responsible-business-conduct-policy-reviews-costa-rica.pdf.

[51] OECD (2022), Agricultural Policy Monitoring and Evaluation 2022: Reforming Agricultural Policies for Climate Change Mitigation, OECD Publishing, Paris, https://doi.org/10.1787/7f4542bf-en.

[49] OECD (2022), OECD Review of Fisheries 2022, OECD Publishing, Paris, https://doi.org/10.1787/9c3ad238-en.

[24] OECD (2022), Pricing Greenhouse Gas Emissions: Turning Climate Targets into Climate Action, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/e9778969-en.

[20] OECD (2021), Public Governance in Costa Rica, OECD, Paris, https://www.oecd.org/governance/costa-rica-public-governance-evaluation-accession-review.pdf.

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Notes

← 1. The GAM comprises the four largest cities (San José, Alajuela, Cartago and Heredia).

← 2. The latest national GHG emission inventory, released in 2021, presents emission data up from 1990 to 2017.

← 3. According to the definition of the OECD Climate Actions and Policies Measurement Framework, stringency is defined as the degree to which climate actions and policies encourage or enable GHG emissions mitigation at home or abroad.

← 4. Geothermal is the main renewable source in Costa Rica, followed by hydro, biomass and wind.

← 5. As of 2022, Costa Rica had installed about 740 000 smart meters.

← 6. “Ecoins” is a virtual currency earned against the deposit of properly sorted waste to recognised collection centres. The system is organised through an online platform.

← 7. As defined by the target 6.1.1. under SDG 6 on clean water and sanitation.

← 8. The “Social Pact for the Implementation of the SDGs” was signed by representatives of the parliament, government and judiciary, local governments and various social stakeholders.

← 9. BATs are “advanced and proven techniques for the prevention and control of industrial emissions and the wider environmental impact caused by industrial installations, which are developed at a scale that enables implementation under economically and technically viable conditions” (OECD, 2020_[54]).

← 10. Authorities include SETENA, Ministry of Health, National System of Conservation Areas, municipalities and others.

← 11. This analysis is based on the Classification of the Functions of Government (COFOG) of the OECD National Accounts Statistics.

← 12. The PPSA recognises four forest-related ecosystem services: carbon sequestration, water provision, biodiversity protection and natural scenic beauty.

← 13. “Protection of biodiversity and landscape” is an expenditure category under the Classification of the Functions of Government (COFOG) of the national accounts statistics.

← 14. Market-price support is defined as the “monetary value of gross transfers from consumers and taxpayers to agricultural producers arising from policy measures that create a gap between domestic market prices and border prices of a specific agricultural commodity, measured at the farm gate level” (OECD, 2022_[51]).

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