New REDD Desk Country Profile: Costa Rica

17 January 2014

Financing

Costa Rica wrote its REDD+ Preparation Proposal (R-PP) with the support of a US$200,000 grant from the Forest Carbon Partnership Facility (FCPF). In the R-PP Costa Rica set out how it would produce emissions reductions from avoided deforestation; principally through expanding coverage of its existing national Payments for Ecosystem Services Programme (PPSA) to new areas. The FCPF approved Costa Rica’s R-PP in 2010, authorising a grant of US$3.6m for REDD+ readiness activities including US$200,000 for the preparation of a national grievance redress system. As of October 2013, the FCPF had disbursed US0.59m of this, particularly to help fund institutional arrangements needed for REDD+.

Costa Rica developed the emissions reduction and carbon enhancement part of its REDD+ strategy in an Emissions Reduction Project Idea Note (ER-PIN), which it submitted to the FCPF’s Carbon Fund in February 2013. According to the ER-PIN, Costa Rica will avoid emissions and enhance carbon stocks by a total of 108m tCO2e between January 2010 and December 2020 at a total cost of US$238m (GOCR 2013a). In June 2013, the World Bank (on behalf of the Carbon Fund) signed a Letter of Intent with Costa Rica to purchase 12m tCO2e of these emissions reductions up to the value of US$63m (FCPF 2013).

Costa Rica updated the draft financing plan included in the ER-PIN in its Mid-Term Report to the FCPF in October 2013. This states the total budget required to be US$250m (US$217 to implement programme activities including PPSA, US$24m for administrative costs and US$6m in other costs). The financing plan is based on a set of assumptions around the level of incentives to be offered under PPSA and assumes an international carbon price of US$5/tCO2e (GOCR 2013c).

In addition to the US$63m from the Carbon Fund, Costa Rica estimates that it will invest US$84m of public funds and US$27m of international loans under the Ecomarkets II programme. It also envisages raising US$27m from selling carbon credits on the voluntary market and US$42m from private forestry investors (GOCR 2013c). The Costa Rican Domestic Voluntary Carbon Market (MDVCR) also represents an important possibility for revenue in the framework of Costa Rica’s target to become carbon neutral by 2021.

Other sources of funding are estimated at US$7m.

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