PSA Program consists of financial compensation provided by the State through
FONAFIFO to forest and forest plantation owners for the environmental services
they provide, and which have a direct impact on environmental protection and
accordance with Forest Law No. 7575, Costa Rica recognizes the following
Mitigation of greenhouse
effect gas emissions (fixation, reduction, sequestration, storage, and
Protection of Water for
urban and rural use, and for hydroelectric plants.
Protection of biodiversity
for conservation and sustainable use for scientific purposes, for the
pharmaceutical industry, for research, and for genetic improvement, as well
as for the protection of various ecosystems and forms of life.
Protection of the beauty of
natural landscapes, to the benefit of both the tourist industry and
most important characteristic of this program is that it changed the
traditional concept of "subsidy" or "incentive" to that ofproviding a "financial reward" to
services a forest provides, which in turn contribute to increase its
ecological, social, and economic value.
Basic Pillars of the
Environmental Services Payment Program
Environmental Services Payment (PSA) Program, as a mechanism to finance the
management, preservation, and sustainable development of forest resources and
biodiversity; it is sustained by four basic pillars: Institutions, Legal
Framework, Financing, and Monitoring and Evaluation.
The following is an outline of these pillars:
Since its creation, the Environmental Services Payment
(PSA) Program has facilitated and promoted incorporation of several
stakeholdersin Costa Rica’s forest
development sector. This permitted the adoption of a novel financial
scheme incorporating various institutions such as: SINAC, FONAFIFO, the
National Forest Office (ONF), forest regents, the country’s Association
of Agricultural Engineers, cooperatives, cantonal agricultural centers,
non-governmental organizations from the farming sector, and beneficiares
in general. FONAFIFO is the financial backbone of the PSA program.
Within MINAE, FONAFIFO works in coordination with
SINAC; this is how the State’s Forest Administration (AFE) is structured.
The State’s Forest Administration is where national policies for resource
investment in priority areas of the PSA Program are defined. Moreover,
elements deriving from the Mesoamerican Biological Corridor- Costa Rican
Chapter’s framework are taken into account, as well as other commitments
to ecosystem conservation and biodiversity. At present, FONAFIFO has
eight Regional Offices to develop its activities in strategic zones.
Recently, as a result of the extention of the Program’s
coverage, managerial and operational capacities have been developed to
guarantee efficient management of the investment resources assigned to
the institution, so that it can better conform to the requirements of the
regulations in effect concerning financial administration and public
budgets, and maintain a productive dialogue with the authorities in the
country’s Ministry of the Treasury.
During the 1990s, Costa Rica experienced a change in
the environmental area, with legislation favoring conservation and
protection of natural resources, the creation of institutions that
strengthen the sector, and a significant change in the way in which
society perceives management, conservation and sustainable development of
Global initiatives from the beginning and middle of
that decade, such as the Río Summit and Declaration on Environment and
Development, Agenda 21, international conventions on climate change, the Convention on Biological
Diversity and the Convention on Action Against Desertification, the Kyoto
Protocol, the Forestry Principles, and more recently, the Millennium
Development Goals, and the Johannesburg Summit, have had an effect on the
definition of the route the country has decided to follow.
Likewise, Costa Rica included the necessary legal
provisions to safeguard the right of all its inhabitants to enjoy a healthy
and balanced environment, several sub-regional agreements were ratified,
such as the Regional Convention for the Management and Conservation of
Forest Natural Ecosystems and the Development of Forest Plantations, and
new laws were enacted, such as Forestry Law No. 7575, the Regulating
Authority of Public Services Law, the Costa Rican Organic Environmental
Law, the Law for Soil Conservation, and the Biodiversity Law, which
together are the framework within which the PSA Program is implemented.
The legal framework in effect also establishes the area
of application of and compensation for environmental services, its
sources of financing, and the governing mechanisms of FONAFIFO, thus
guaranteeing institutional sustainability of this Program.
The PSA Area of FONAFIFO is responsible for assuring
the effective operation of the PSA Program. All activities related to
guidelines (decrees, PSA procedure manuals), technical procedures,
statistics, payment mechanisms to beneficiaries of PSA contracts,
evaluation, and monitoring of the PSA Program are carried out in this
Initially, the main source of financing for the
Environmental Services Payment (PSA) Program consisted of assigning to it
one-third of the resources generated from gasoline taxes, pursuant to
Article 69 of Law 7575. Later, this tax was modified by the Tax
Simplification Law, creating a single tax for gasoline, of which 3.5% is
assigned to the PSA Program. This action reflects the vision of
legislators, who clearly perceived the need to establish a source of
financing which guarantees the Program’s sustainability.
The same legal framework (Forestry Law) sets forth in
its Article 47, other potential sources of financing to strengthen the
programs developed by the institution, such as:
Finaicial contributions received from the State through
ordinary and extraordinary budgets of the Republic, or other mechanisms;
donations or credits received from national or international organizations;
credits obtained by the Fondo Nacional de Financiamiento Forestal
(FONAFIFO) as well as other resources obtained through emission and
placement of credit instruments.
In addition, FONAFIFO has encouraged participation of
international entities such as the World Bank and the Global Environment
Fund, through the Ecomarkets Project, and the German Government, through
the KfW Development Bank, which contributes resources for the Huetar
Norte Forest Program.
However, the currently available resources for
investment have not been enough to satisfy the growing demand. In this
situation, FONAFIFO has developed mechanisms and agreements with local
private businesses to generate alternate financial resources for the PSA
Program, which have proved to be highly successful, and have made it
possible to benefit more producers with the resources obtained through
the use of this instrument. The investment made by private businesses has
been approximately $7 million in the last few years.
Monitoring and Evaluation
FONAFIFO designed a monitoring and evaluation scheme
supported by modern technology and qualified personnel. The tasks
necessary to guarantee that the resources invested are used efficiently
and reach those who are actually providing environmental services are
carried out with the assistance of this tool.
Monitoring is carried out through several activities:
visits of personnel of the PSA Area and Regional Offices to properties in
the PSA Program, revision of reports from regencies provided by Forest
Regents, audits of FONAFIFO and the PSA Program, accompanied by the SIG
and SIAP as follow-up and monitoring tools, which together with the
computing platform, make it possible to manage all of the PSA contract
information, combining technical criteria, legal, geographic and financial
information to provide transparency and support for the PSA Program.
The PSA Program, in combination with other actions by
the Government of the Republic, has permitted reaching objectives which
have had a positive impact on:
forest cover and degraded lands.
fighting illegal forest felling.
production and non-traditional exports, and taking advantage of potential
the forestry industry.
to rural development.
Contributing to national strategies against poverty.
• Contributing to compliance with global environmental
National Forest Financing Fund - FONAFIFO - Costa Rica All rights reserved. 2014