Legal Niches

Costa Rica ? A Small Country With A Big Vision

By Jim Holtkamp

I am sitting on a veranda on the slopes of Rincon de La Vieja Volcano in Costa Rica, about 45 miles south of the border with Nicaragua. We are in the midst of a protected conservation area administered by the government of Costa Rica.  One-fourth of the land mass of the country is within protected areas, forest reserves and national parks.  With 0.3 percent of the earth?s landmass but 10 percent of the known species of animals and plants, Costa Rica has made protecting biodiversity a priority.  ?Ecotourism? is a major driver of the Costa Rican economy, and the forests provide the principal mechanism for assuring water supplies for a growing population.  The forest cover of Costa Rica decreased from 75 percent in 1940 to 21 percent in 1987.  The government?s decision to enhance forest cover to protect biodiversity, watershed and scenic values has resulted in an increase of forest cover to more than 50 percent today.  This is a remarkable achievement.

Costa Rica is a pioneer in the Payment for Environmental Services Program, or PES, in which small- and medium-sized landowners are paid an annual subsidy in exchange for their commitment not to remove forest cover from their properties.  This avoided deforestation protects biodiversity, watershed, scenic resources, and represents a significant bank of sequestered carbon.  By calculating how much forest cover is not cut down through the PES program, the amount of carbon not released into the atmosphere can be calculated. 

I have spent the last several days in a series of meetings on behalf of our client Pax Natura with the Rain Forest Alliance, a certifier of carbon credits, and with various Costa Rican entities including the government, a funding institution and an NGO.  Pax Natura has a contract with the government under which it can sell carbon credits derived from the PES program in a 60,000-acre project area.  The proceeds of the sales are returned to the government for payments to the participating landowners.  The purpose of the Rain Forest Alliance audit is to certify that carbon credits from the PES program conform to the expectations of the Climate, Community & Biodiversity Alliance ("CCBA").  Certification will assure that the Costa Rican credits are marketable and that, in turn, the money from the sale of the credits is returned to the government for payment to the participants in the PES program.

Each year, about 20 percent of the CO2 released into the atmosphere from anthropogenic causes is from deforestation, principally in the tropics.  However, because of uncertainties in the models and mechanisms for accurately quantifying carbon sequestered in particular forest regions, avoided deforestation is not eligible for credits under the Kyoto Protocol.  However, the models have now been refined to the point that calculations of sequestered carbon preserved through PES can be made with a high degree of confidence based on the species distribution of the vegetative biomass, the succession status of the forest, the economics in a particular region of certain types of land uses, and the duration of legally binding PES commitments.  The audit of the Pax Natura project by the Rain Forest Alliance is one of the first of its kind and will set a precedent for future PES-based carbon credit certification.

As we wrestle with the enormity of achieving commercial-scale carbon capture and sequestration, transitioning our electric generation to low-carbon or carbon-free technologies, diversifying vehicle fuels away from complete dependence on oil, and setting stringent greenhouse gas emissions caps on the engines driving the economy, we should not forget that the most economical means to achieve significant CO2 emissions reductions in a short time is to reduce and ultimately reverse the rate of deforestation in the tropics.  Of course, if it were easy, it would already have been done.  There are serious political and institutional barriers in Brazil, sub-Saharan Africa, Indonesia and Malaysia, for example.  But it does not mean that we should not try.  The entry of CCBA-certified carbon credits from Costa Rica into the North American private market will illuminate a path forward for many of the countries struggling to take control of their forest resources.  Where the stakes are highest, the effort must be the greatest.

This post was contributed courtesy of Jim Holtkamp, Manager of Holland & Hart's Global Climate Change Practice Group.

Full post as published by Climage Change Law on September 08, 2008 (boomark / email).