Bridging the Policy and Investment Gap for Payment for Ecosystem Services: Learning from Costa Rican Experience and Roads Ahead

Abstract

Payment for ecosystem services (PES) is a powerful tool for enhancing economic, environmental, and social returns from investments in integrated ecosystem management, including forest regeneration, agricultural landscapes, agroforestry, silvo-pastoral systems, etc. It provides financial incentives for ecosystem services that are not usually monetized and paid for in the traditional market. PES schemes internalize externalities by creating new marketplaces for ecosystem services. These schemes provide a new source of income for land management, restoration, conservation, and sustainable agricultural activities. However, implementing and sustaining PES schemes over time is not a simple task.

Costa Rica's PES program is globally recognized as an innovative blend of economic and regulatory instruments. Its stories provide a valuable source of inspiration for other countries looking for effective ways to conserve and regenerate ecosystems, especially generating South-South learning potentials. Starting with a strong rationale for why valuing ecosystem services has significant implication in the economic, environmental, and social context, this analytical report unpacks the lessons learned from the Costa Rican PES experience. Based on an in-depth analysis drawn out of Costa Rican national PES program, this report addresses the key enabling conditions for sustainable PES development and provides a step-by-step guide for policymakers wishing to install similar programs (on either a national or sub-national level). This report also addresses the conservation finance gap, describes the changing landscape of finance, and examines potential solutions, including strategies for attracting private sector investment.

Keywords: Payment for Ecosystem Services, PES, Costa Rica