Costa Rica
Global green leader nears net zero goal
At the end of the 20th century, Costa Rica was one of the most rapidly deforested countries in the world. But today, this small Central American nation is a global leader in environmental restoration and climate action – and the only tropical country in the world that has reversed deforestation – thanks to ambitious and well-designed policies.
Prosperous and politically stable, Costa Rica is known for its pacifist constitution outlawing any military spending. And thanks to decades of strong investment in education, healthcare, and social services, it also boasts one of the lowest poverty rates in Latin America. Although rural poverty is still an issue, the country has successfully diversified its economy away from a heavy reliance on agriculture into finance, pharmaceuticals, and a booming eco-tourism industry.
Home to about 5% of the world’s total biodiversity, tiny Costa Rica is proud of its status as one of the richest countries in the world for wildlife, with fully a quarter of its landmass protected in national parks and conservation areas.1
It also punches well above its weight when it comes to global green leadership. Costa Rica has twice topped the New Economic Foundation’s rankings for sustainability, generates almost all its electricity from renewable sources, and has set clear ambitions to become carbon-neutral by 2050, but likely much sooner.2
The landmark 2018 Decarbonisation Plan and 2019-2022 National Development and Public Investment Plan set world leading ambition for Costa Rica’s transition towards an inclusive, green economy – with clean transport the next step on from its portfolio of renewable electricity.3
Climate policies are well-aligned with the Paris Agreement, making it one of only a handful of countries to have made good on their commitments to keeping global heating below 1.5°C. And with natural resource accounts dating back to as early as 1991, and the world’s first national payments for environmental services (PES) program, Costa Rica is also a leader in the field of natural capital.
However, ongoing fragility in the government’s financial situation – driven by budget deficits, foreign debts and an eroding currency – have introduced a note of uncertainty into Costa Rica’s economic future. And a growing middle class has created a surge in car ownership, fuelling demand for imported oil. It remains to be seen whether the new administration of Carlos Alvarado, elected by a landslide on a socially and environmentally progressive ticket in 2018, can keep Costa Rica at the front of the pack on the path towards sustainable development.
Policy Scores
Last updated 10 Dec 2019
Governance
National green economy plan
The Estrategia Nacional de Cambio Climático (2009) is Costa Rica’s keystone climate policy, but the 2018 Decarbonisation Plan outlines high level commitment to net zero by 2050 and update Paris NDCs. The 2019-2022 National Development and Public Investment Plan (PNDIP) provides much more comprehensive detail, including alignment of the planning with national development priorities, the SDGs and green finance. The Costa Rican government has signalled even higher ambition on decarbonisation, with 2021 a target potentially in scope.
The Estrategia Nacional de Cambio Climático (2009) is Costa Rica’s keystone climate policy, but the 2018 Decarbonisation Plan outlines high level commitment to net zero by 2050 and update Paris NDCs. The 2019-2022 National Development and Public Investment Plan (PNDIP) provides much more comprehensive detail, including alignment of the planning with national development priorities, the SDGs and green finance. The Costa Rican government has signalled even higher ambition on decarbonisation, with 2021 a target potentially in scope.
Inclusive governance
Some coordination between the Ministry for Economic Planning and the Ministry of Environment & Energy , and various private sector associations are engaged with the UN Global Compact on corporate sustainability, but no concrete legislation requiring employee involvement in corporate governance or gender inclusion.
Some coordination between the Ministry for Economic Planning and the Ministry of Environment & Energy , and various private sector associations are engaged with the UN Global Compact on corporate sustainability, but no concrete legislation requiring employee involvement in corporate governance or gender inclusion.
SDG business strategy
Costa Rica has committed on paper to engaging the business sector on sustainability in general and the SDGs in particular, but existing initiatives are small-scale and lack cross-sector impact. The private sector is increasingly engaged on green issues, and the government has targeted their engagement with SDG implementation through the Banco Central de Costa Rica (BNCR), and the prospective formulation of a national SDG business strategy – though it’s exact status is unclear.
Costa Rica has committed on paper to engaging the business sector on sustainability in general and the SDGs in particular, but existing initiatives are small-scale and lack cross-sector impact. The private sector is increasingly engaged on green issues, and the government has targeted their engagement with SDG implementation through the Banco Central de Costa Rica (BNCR), and the prospective formulation of a national SDG business strategy – though it’s exact status is unclear.
Wealth accounting
Costa Rica is recognised by the World Bank’s WAVES programme as a regional leader on natural capital and national wealth accounting. Developed and managed within the Banco Central de Costa Rica, accounts on forests, energy and water were established in 2012 and are now increasingly integrated into government policy.
Costa Rica is recognised by the World Bank’s WAVES programme as a regional leader on natural capital and national wealth accounting. Developed and managed within the Banco Central de Costa Rica, accounts on forests, energy and water were established in 2012 and are now increasingly integrated into government policy.
Finance
Green finance plan
A plan for sustainable finance reform has been agreed by the central bank and the Ministry of Finance, but unresolved differences over details have slowed implementation. Costa Rica has pioneered the use of payments for ecosystem services (PES) since 1996, and is a pilot country for UNDP’s Biodiversity Finance Initiative (BIOFIN). BIOFIN Phase II is currently under technical development.
A plan for sustainable finance reform has been agreed by the central bank and the Ministry of Finance, but unresolved differences over details have slowed implementation. Costa Rica has pioneered the use of payments for ecosystem services (PES) since 1996, and is a pilot country for UNDP’s Biodiversity Finance Initiative (BIOFIN). BIOFIN Phase II is currently under technical development.
Green fiscal & monetary policy
No government-wide reviews of sustainability of fiscal and monetary policy have yet been completed, though further fiscal commitments have been clarified in the PNDIP. The BIOFIN initiative, of which CR is a pilot country, has prompted a review of biodiversity relevant green fiscal and monetary policy at the Treasury, central bank and MINAE, with conclusions expected during 2019 but currently unclear .
No government-wide reviews of sustainability of fiscal and monetary policy have yet been completed, though further fiscal commitments have been clarified in the PNDIP. The BIOFIN initiative, of which CR is a pilot country, has prompted a review of biodiversity relevant green fiscal and monetary policy at the Treasury, central bank and MINAE, with conclusions expected during 2019 but currently unclear .
Safe & accountable banks
Banco Central de Costa Rica undertakes some banking sector stress tests under its risk evaluation protocols, but these focus on financial stability alone. Work on expanding risk analysis to include social and environmental criteria is underway at CR’s financial sector watchdog SUGEF and the Ministry of Environment & Energy, but in its very early stages.
Banco Central de Costa Rica undertakes some banking sector stress tests under its risk evaluation protocols, but these focus on financial stability alone. Work on expanding risk analysis to include social and environmental criteria is underway at CR’s financial sector watchdog SUGEF and the Ministry of Environment & Energy, but in its very early stages.
Pricing carbon
Progress has stalled since the ambitious introduction of a 3.5% tax on carbon pollution in 1996. Almost no headway has been made in implementing the planned Voluntary Domestic Carbon Market (VDCM), and existing carbon taxation is managed exclusively by National Forestry Financing Fund (FONAFIFO) public-private institution, with a narrow focus on finance for forestry.
Progress has stalled since the ambitious introduction of a 3.5% tax on carbon pollution in 1996. Almost no headway has been made in implementing the planned Voluntary Domestic Carbon Market (VDCM), and existing carbon taxation is managed exclusively by National Forestry Financing Fund (FONAFIFO) public-private institution, with a narrow focus on finance for forestry.
Sectors
Green sectoral policy plan
No national government body coordinating green economy policy, but sectoral policy is strong and engagement with several regional / international initiatives, including a regional climate change plan from the Central American Commission for Environment and Development (CCAD, and the Mesoamerican Environmental Sustainability Strategy (EMSA) of 2008. Recent Decarbonisation Plan also created using a 10 priority-sector focus and the PNDIP recognises the importance of intersectoral implementation.
No national government body coordinating green economy policy, but sectoral policy is strong and engagement with several regional / international initiatives, including a regional climate change plan from the Central American Commission for Environment and Development (CCAD, and the Mesoamerican Environmental Sustainability Strategy (EMSA) of 2008. Recent Decarbonisation Plan also created using a 10 priority-sector focus and the PNDIP recognises the importance of intersectoral implementation.
Small business support
Little concrete government support given to SMEs, although some private sector bodies (UCAEEP, CICR, AED) have relevant SME and social enterprise initiatives. The Ministry of Economics & Commerce (MEIC) have outlined some green and sustainability concerns in their SME policies, but these lack strategic focus.
Little concrete government support given to SMEs, although some private sector bodies (UCAEEP, CICR, AED) have relevant SME and social enterprise initiatives. The Ministry of Economics & Commerce (MEIC) have outlined some green and sustainability concerns in their SME policies, but these lack strategic focus.
Carbon budgeting
Despite not including binding carbon budget legislation, Costa Rica has been identified as one of just 16 nations whose domestic decarbonisation legislation is ambitious enough to meet their Paris Agreement commitments. Since 2018, the Costa Rica’s government has made decarbonisation a central priority with plans to phase out fossil fuels, shift to 100% renewable energy, and achieve net zero carbon emissions. Lack of enforcement of ambitious targets, and some frustration over slow progress in implementation and the lack of public transparency remain risks for Costa Rica’s decarbonisation trajectory.
Despite not including binding carbon budget legislation, Costa Rica has been identified as one of just 16 nations whose domestic decarbonisation legislation is ambitious enough to meet their Paris Agreement commitments. Since 2018, the Costa Rica’s government has made decarbonisation a central priority with plans to phase out fossil fuels, shift to 100% renewable energy, and achieve net zero carbon emissions. Lack of enforcement of ambitious targets, and some frustration over slow progress in implementation and the lack of public transparency remain risks for Costa Rica’s decarbonisation trajectory.
Clean energy policy
Over 90 % of Costa Rica’s electricity is provided by renewables, but transport continues to be heavily reliant on fossil fuels – hence the focus on transportation in the new Decarbonisation Plan. Some initial coordination from the Ministries of Transport and Economic Planning, but this remains in the preliminary stage.
Over 90 % of Costa Rica’s electricity is provided by renewables, but transport continues to be heavily reliant on fossil fuels – hence the focus on transportation in the new Decarbonisation Plan. Some initial coordination from the Ministries of Transport and Economic Planning, but this remains in the preliminary stage.
People
Green jobs
Although inequality and poverty reduction are core issues for the current government, existing policies in Costa Rica are not explicit on connections between green issues and the poverty agenda. Various ministries have SMEs and labour programmes, but little mention of green jobs, and inter-ministry coordination is weak. Brief mention is given to decent job creation in the Biodiversity National Policy 2015-2030.
Although inequality and poverty reduction are core issues for the current government, existing policies in Costa Rica are not explicit on connections between green issues and the poverty agenda. Various ministries have SMEs and labour programmes, but little mention of green jobs, and inter-ministry coordination is weak. Brief mention is given to decent job creation in the Biodiversity National Policy 2015-2030.
Pro-poor policy
No specific pro-poor environmental policies can clearly be identified, and there is no identification of environmental risks in Costa Rica’s national strategy for poverty reduction. The PNDIP provides some linkages of with the 2030 agenda and provides initial mapping of national targets against relevant SDG indicators for poverty, jobs, inequality.
No specific pro-poor environmental policies can clearly be identified, and there is no identification of environmental risks in Costa Rica’s national strategy for poverty reduction. The PNDIP provides some linkages of with the 2030 agenda and provides initial mapping of national targets against relevant SDG indicators for poverty, jobs, inequality.
Participatory policymaking
Public consultation has been part of Costa Rica’s development of decarbonisation planning, but rigour and consistency of process is unclear. Some gender equality policies in place, but there are significant gaps and little evidence of social impact assessment. Some ministries and state governments are beginning to intervene, but there is a lack of cross-cutting macro government policy.
Public consultation has been part of Costa Rica’s development of decarbonisation planning, but rigour and consistency of process is unclear. Some gender equality policies in place, but there are significant gaps and little evidence of social impact assessment. Some ministries and state governments are beginning to intervene, but there is a lack of cross-cutting macro government policy.
Innovative social protection
Some initiatives under the PNDIP focused towards social investment and expanding social support services, but programmes in this area from the National Women’s Institute (INAMU) and the Ministry of Labour (MTSS) remain largely invisible.
Some initiatives under the PNDIP focused towards social investment and expanding social support services, but programmes in this area from the National Women’s Institute (INAMU) and the Ministry of Labour (MTSS) remain largely invisible.
Nature
Ocean & land conservation
The PNDIP national development plan is the main strategy prepared by the Ministry of Economic Planning to coordinate work towards the SDGs, although SDG 14 & 15 largely fall within the remit of the Ministry of Environment & Energy. The strategy provides some alignment of development targets with SDG 14 and 15.
The PNDIP national development plan is the main strategy prepared by the Ministry of Economic Planning to coordinate work towards the SDGs, although SDG 14 & 15 largely fall within the remit of the Ministry of Environment & Energy. The strategy provides some alignment of development targets with SDG 14 and 15.
Natural capital accounts
A national capital assessment programme has been active since 2012, with accounts for water, energy and forest resources, and more in the pipeline. Existing accounts were designed according to UN System of Environmental-Economic Accounting (SEEA) standards, and CR has been part of the World Bank’s WAVES initiative since 2013.
A national capital assessment programme has been active since 2012, with accounts for water, energy and forest resources, and more in the pipeline. Existing accounts were designed according to UN System of Environmental-Economic Accounting (SEEA) standards, and CR has been part of the World Bank’s WAVES initiative since 2013.
Natural capital committee
Costa Rica’s natural capital commission meets regularly and brings together representatives from the ministries of finance, economic planning, environment & energy, the national statistics agency and the central bank, supported by the WAVES programme.
Costa Rica’s natural capital commission meets regularly and brings together representatives from the ministries of finance, economic planning, environment & energy, the national statistics agency and the central bank, supported by the WAVES programme.
Nature-based fiscal reform
A “polluter pays” national tax on fossil fuel consumption has financed reforestation programmes, and various exploratory studies are underway on various green fiscal policies including taxes and subsides, although economic headwinds appear to have delayed their implementation.
A “polluter pays” national tax on fossil fuel consumption has financed reforestation programmes, and various exploratory studies are underway on various green fiscal policies including taxes and subsides, although economic headwinds appear to have delayed their implementation.
References
- World Headquarters, "Costa Rica country profile"
- Vox.com, "Costa Rica has an ambitious new climate policy", June 2018
- Think GeoEnergy, "Costa Rica reports near 100% renewable energy electricity supply and electricity export"