In a debate between the environment and the economy, the environment seems always doomed to lose. Why?
Because it is assumed that the environment cannot solve pressing social challenges such as employment and poverty alleviation.
But what if it can? In one small country in Central America, the environment has triumphed – not at the expense of the economy – but to its infinite benefit, and that of the 4 million people living there.
Twenty years ago Costa Rica earned its keep primarily from agriculture, ranching and forestry, exporting timber to the developed world. It was losing its indigenous forests at a rate of 55 000 hectares a year. Today it has reversed the trend.
Through ingenious restoration and conservation efforts, it has achieved a remarkable doubling of forest cover and has turned itself into one of the ecological tourism hot spots of the world. GDP is up and the country is ranked No 1 in the Happy Planet Index and number five in the Environmental Performance Index.
In a very real way, in Costa Rica money grows on trees!
In South Africa recently to tell the story behind the story was Carlos Manuel Rodriguez, regional vice-president of Conservation International and the man who led the Costa Rica turnaround as the then energy and environment minister.
A guest of the Cambridge Programme for Sustainability Leadership’s (CPSL) South African office, Rodriguez told an audience at a CPSL Resilience Forum earlier this month that the Costa Rican government knew it had to do something radical because, despite decades of conservation planning, the creation of protected areas and support at the highest political levels, they had not been able to stop the decline in biodiversity and loss of tropical forests.
Its solution was as visionary as it is deceptively simple.
Its first radical act was to overcome what Rodriguez calls “major institutional failures” and marry the portfolios of the environment and energy (including mining and water), so instead of being at loggerheads, they had to work together.
“This opened the possibility for more coherent planning,” said Rodriguez. It also gave the environment a louder voice in government.
“If politics was a football game, the ministry for the environment was almost always relegated to the bench,” he said. “We moved it to midfield.”
Its second act was to recognise the economic benefit of natural capital. “We came with the realisation that the forest wouldn’t be protected until we were fully able to recognise the economic services it was providing to society,” said Rodriguez.
Usually, natural capital is used up in the pursuit of economic growth, and this is never costed into the process. Yet ecosystems play a crucial role in sustaining life on Earth.
Forests provide essential services such as the absorption of climate-changing carbon dioxide, refuges for pollinating insects, purification of water resources, roots that prevent erosion, and recreation – all of which are critical to human life, and hence have a value.
Costa Rica’s third radical act was to find ways to reward the people who cared for these ecosystems. Simply put, they looked for ways to make it more valuable for them to protect the forests than to destroy them by, for example, selling mineral and timber rights for short-term gain.
The result was the introduction of a tax on fossil fuels, the proceeds of which were used to pay local communities for forest protection based on the carbon sequestration services they provided.
Known as the Payment for Ecosystem Services (PES) scheme, or Pagos por Servicios Ambientales, what Rodriguez and his colleagues had developed was a pioneering financial instrument that attempted to measure natural capital and then compensate accordingly.
Being able to measure (however inexactly) and quantify the value of ecosystem services was crucial in being able to win over all parts of government to the cause. Rodriguez learnt early on that he needed to speak the finance minister’s language before funds for environmental protection would be unlocked.
Having done this, he went on to successfully lobby other ministries to support a $50 million Ecomarkets project, backed by the World Bank and the Global Environmental Facility, that would put a market price on the various services that ecosystems provide when left intact.
Over time the system has grown more complex. It is backed up by other policies that enforce the rule of law (Costa Rica passed a law banning deforestation in 1996) and eliminate subsidies that encourage the destruction of biodiversity.
Financial incentives have been expanded to include conservation of the water supply. Finding similar incentives for biodiversity protection is next on the agenda.
“There’s a big industry in Costa Rica that makes profits out of biodiversity – that’s ecotourism, and ecotourism generates revenue of around $2 billion a year, so that’s an industry that uses biodiversity, but doesn’t pay for the access and for the use,” explains Rodriguez.
Along the way, the focus has also broadened from pure conservation to restoration, which, Rodriguez said, is more complex “because there are already people in the landscape”.
By using PES to incentivise farmers to convert degraded lands into silvo-pastoral systems that combine forestry and grazing of domesticated animals or agriculture and create vital biodiversity corridors, they have succeeded in reconciling two other age-old enemies, the environment and agriculture, in a way that works for both.