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COVID hit to Costa Rica's gasoline tax stalls funding for forests

by Sebastian Rodriguez | @sebas211297 | Thomson Reuters Foundation
Thursday, 3 September 2020 13:00 GMT

FILE PHOTO: General view of the National Park Tapamti in Orosi, 80 miles (128km) of San Jose May 25, 2007. REUTERS/Juan Carlos Ulate

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Petrol pump levy shrinks due to pandemic restrictions, threatening funding for a key program that pays farmers to protect forests

By Sebastian Rodriguez

SAN JOSE, Sept 3 (Thomson Reuters Foundation) - For 12 years, the Costa Rican government has paid Rosa Picado about $2,000 a year so that she can protect an area of forest on her farm in Sarapiquí on the Atlantic coast.

The payment may be small, but it makes a big difference.

"I don't know what I would do without it. It has been really hard for us," she said, adding that she had fought for a long time to safeguard the 40-hectare (99-acre) forest.

Picado benefits from a government initiative, called the Program for Payment of Environmental Services (PPSA), which has helped expand Costa Rica's forests by remunerating farmers for looking after trees on their property.

But the program's funding depends on a gasoline tax that has been hit hard by the coronavirus pandemic, threatening its future.

Most of the PPSA's money comes from a levy on sales at the petrol pump, which have fallen sharply in the past five months due to movement restrictions to limit the spread of COVID-19, said Jorge Mario Rodríguez, director of the National Forestry Financing Fund (FONAFIFO).

"Not having the regular economic activity reduces fossil fuel consumption (and) that has negatively impacted gasoline tax collection. FONAFIFO now has fewer resources to finance (forest) protection and reforestation," he said.

Government projections show that, by the end of 2020, income from the tax will be almost a quarter below what was budgeted.

In response, the Costa Rican Congress in July approved a $1.7-million cut in funding for FONAFIFO, as part of its revised national budget for this year.

The fund will now have to finance the 4,700 hectares of forests affected by the cut from its reserves, Rodríguez said.

That will get the program through 2020, but the financial situation looks more uncertain for next year, he added.


Costa Rica is the only country in Latin America that has managed to reverse deforestation since the start of this century, according to a 2016 report by the United Nations' Food and Agriculture Organization (FAO).

The Central American nation suffered huge losses of forest in the 1980s, with tree cover falling to 25% of its territory from about 75% four decades earlier. Today, just over half is covered in forest.

Costa Rica's successful reforestation efforts are partly due to the creation of the PPSA back in 1997, the FAO report said.

Currently, about 337,000 hectares of forests are covered by the program, according to FONAFIFO data.

One of the main goals in Costa Rica's National Decarbonization Plan - along with achieving net-zero climate-heating emissions by 2050 - is to increase the country's forest area to 60% of its territory by 2030. Forests play a vital role in the fight against global warming by absorbing heat-trapping carbon dioxide, the main greenhouse gas, scientists say.

In 2018, there were more than 550 programs making payments in exchange for services to conserve forests, land and water around the world, either at the regional or national level, according to a study published in the journal Nature.

Some mechanisms are user-based - such as a hydroelectric dam rewarding forest protectors upstream by paying for their water use - while others, like Costa Rica's, are government-financed.

The rest involve economic sectors offsetting their carbon emissions by paying for forest conservation, the study noted.

Elicinio Flores (left), a forest protector, is pictured on his farm in Sarapiquí, Costa Rica. HANDOUT/Fundecor


Picado uses her annual $2,000 from the PPSA mainly to pay for expenses on her family's farm, such as fuel and salaries for maintenance workers who protect the trees by cutting diseased branches, getting rid of pests and applying fertilizers.

Selling sustainable wood is another way some small-scale farmers make money from the forests they look after on their land, but that is a challenge, she explained.

First, farmers need to create a management plan to responsibly grow and sell the wood, which requires expensive technical advice, Picado said.

Even if they do that, they make very little because buyers usually refuse to pay extra for sustainable wood despite it being more expensive to produce, she added.

"We enjoy our forest because it frees us from the stress of the city. But maintaining it has been really hard," she said.

"We have ventured into several different businesses to keep the farm," she said, noting that even after adding dairy cattle and opening a clothing store, her family is still in debt.

Elicinio Flores, another forest protector in Sarapiquí, said the PPSA money is crucial for him as he uses it to pay for his children's studies.

The program places no conditions on how farmers spend the money, but inspectors check periodically to make sure they are keeping their area of forest in good condition, he explained.

Picado and Flores both said that even if they did not receive any money, they would still maintain their forests.

"We would have to resort to some other help from our relatives," Flores said. "We have respected the forest even before the program existed and we will continue to respect it."

Forest pictured on a Costa Rican farm, May 31, 2017. HANDOUT/Cristina Weidlich/Fundecor


In a bid to keep the program running through next year, FONAFIFO is negotiating with the World Bank, which may grant funding in exchange for FONAFIFO stepping up its carbon sequestration projects in forests, Rodríguez said.

But even if the new funding does not come through, massive deforestation is unlikely because of Costa Rica's strict environmental laws, said Roger Madrigal, forestry researcher at the Tropical Agricultural Research and Higher Education Center (CATIE), based in Cartago.

The PPSA payment has more to do with social justice, he said.

"Forest owners give (environmental) services to society and they don't get anything in return. The PPSA gives them a little in return," he said.

The program was already at risk from Costa Rica's decarbonization plan even before the pandemic, Madrigal said.

If the country meets its pledge to become carbon-neutral by 2050, then money to protect forests will have to come from somewhere other than fossil fuel taxes, he explained.

The national decarbonization plan includes the passing of a "green tax reform", which would aim to create additional sources of public income.

In the long run, Madrigal said, the country also needs new policies to encourage a larger market for sustainable wood, which would make forest conservation more profitable.

"Right now, there's an excess of people in need of money," he said.

Read more:

With drones and lasers, Costa Rica seeks to track its forests

'Narco-deforestation' may boost disaster risks in Central America

Indigenous groups rally to protect Latin America's threatened forests

(Reporting by Sebastian Rodriguez; editing by Jumana Farouky and Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org/climate)

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