The Payments for Environmental Services Program in Costa Rica: an Assessment of the Program’s Early Years

Abstract

Costa Rica’s Payment for Environmental Services Program–PESP was launched in 1997. It is a market-oriented policy instrument designed to stimulate forest conservation by making monetary payments to landowners who choose not to engage in deforestation or to engage in forest recovery or plantations on their properties. This article focuses on the basic concepts and on the early years of the program’s performance, using data published by the program’s management agency as well as data and analysis published in a limited number of the numerous texts that examine this pioneering experience in payments for environmental services. Findings show that in its early years (between 1997 and approximately 2003) the program managed to reverse a severe process of deforestation and even expand the total area of forested lands in Costa Rica. It corrected market failures and created trade opportunities linked to the market of environmental services. It benefitted larger landowners in a more than proportional manner, a fact that precluded it from being simultaneously a poverty alleviation program. The conclusion is that the program, if targeted more precisely at small landowners, can serve as a model for comparable forest protection policies in developing countries, reducing deforestation rates, changing land uses and expanding forest cover, besides mitigating rural poverty.