Costa Rica covers approximately 51,100 square kilometres, which is smaller than the American state of West Virginia and roughly the size of Denmark. It occupies approximately 0.25 per cent of the total land surface of the Earth, and contains, on the current best biodiversity estimates, approximately 6 per cent of the planet’s known species. In the 1940s, the country was approximately 75 per cent forested. Forty years later, forest cover had collapsed to approximately 21 per cent.
The reversal of that collapse, which occurred over a period of roughly thirty years, is one of the more consequential conservation outcomes of the past half-century. It was produced by a specific set of policy choices, made in a specific historical window, that have since been studied, adapted, and imitated by governments elsewhere in the world with varying degrees of success.
The Costa Rican programme is worth understanding on its own terms, both for what it accomplished and for what it did not.
The collapse
The specific set of forces that drove Costa Rican deforestation in the middle of the twentieth century has been well characterised in the environmental-history literature. Cheap agricultural credit, targeted specifically at cattle ranching, incentivised the conversion of forested land to pasture. Land-titling laws recognised cleared land as the property of the person who cleared it, which created a direct financial incentive to log and burn as much old-growth as possible before someone else claimed the same territory. A rapidly expanding road network, funded by international development banks, cut into previously inaccessible forest and made large-scale extraction economically viable for the first time.
The result, over four decades of accelerating loss, was approximately 55,000 hectares of forest destroyed per year at the peak, or roughly the surface area of the city of Los Angeles. By 1987, forest cover in Costa Rica had fallen from three-quarters of the country’s total land area to just over one-fifth. The country was, on the widely cited estimates of the period, one of the two or three most severe cases of tropical deforestation anywhere in the world.
Several factors began to shift the political calculus in the late 1980s and early 1990s. Ecotourism was starting to generate meaningful foreign-currency inflows. The country’s 1948 decision to abolish its army had freed up state revenue that most Latin American governments spent on defence. And the environmental cost of the previous decades of clearance had become visible in the form of soil erosion, disappearing river systems, and biodiversity collapse in areas that had been forest cover only a few years earlier.
For a more visual idea of how this fascinating story played out, watch this short video.
The 1996 law
The specific instrument that changed the trajectory was Costa Rican Law 7575, passed in April 1996. The law did two things that were unusual by the standards of contemporary forestry legislation. It banned outright the change-of-use of forested land. And it established a legal category, called environmental services, that reframed forest cover as a service the landowner was providing rather than an obstacle they were maintaining.
The four services the law recognised were carbon sequestration, hydrological regulation, biodiversity protection, and scenic beauty. Under the new legal framework, a landowner who kept forest standing was providing all four services to the broader Costa Rican public. And under the same framework, that landowner was legally entitled to compensation.
The compensation mechanism was launched in 1997 as the Payments for Environmental Services programme, abbreviated in Spanish as PSA and in English as PES. It has operated continuously since that date.
How the programme works
The PES programme is administered by a Costa Rican state agency called FONAFIFO, the National Forest Financing Fund. It compensates landowners for four separate activities: forest protection (leaving standing forest untouched), reforestation (actively replanting cleared land), sustainable forest management (selective harvesting under specific ecological limits), and agroforestry (integrating tree cover into agricultural land use).
Landowners sign contracts of five to fifteen years, depending on activity type, and receive fixed payments per hectare on a schedule tied to demonstrated compliance. If the landowner clears the protected forest during the contract period, the payments stop, and the funds already disbursed must be returned. The programme is funded primarily through a tax on fossil fuels, currently set at approximately 3.5 per cent of the wholesale price of petrol and diesel, along with revenue from water charges and international carbon-credit sales.
The specific numbers, over the programme’s twenty-five-year operational history, are substantial. More than 18,000 landowning families have received payments. More than 1.3 million hectares of Costa Rican territory, an area larger than the American state of Connecticut, have been placed under PES contracts. More than $500 million in total payments has been disbursed. And more than 7 million trees have been planted through the reforestation component of the programme specifically.
Why it worked
Similar programmes have subsequently been attempted in Brazil, Mexico, Ecuador, and Indonesia, with substantially mixed results. The specific reasons the Costa Rican version succeeded where others failed, on the available evidence from three decades of academic evaluation, include several distinct factors.
The payments went directly to landowners rather than to contractors or intermediaries. The funding source was structurally stable, because fuel-tax revenue was already being collected and did not depend on annually renegotiated appropriations. The programme was expanded incrementally over time to include Indigenous communities and untitled landholders, rather than being restricted to formal freehold owners at the outset. And the timeframe was long enough for the forest to actually recover, rather than being cancelled after a single election cycle.
There is also a broader ecological point worth making. Reforestation on the Costa Rican scale is not primarily a matter of planting trees. It is a matter of allowing forests to regrow on land that has stopped being actively cleared. Once the pressure to convert land is removed, tropical forest ecosystems will, on the accumulated evidence from decades of secondary-succession research, regenerate substantially on their own, provided the surrounding ecosystem retains enough biodiversity to seed the recovery. The PES programme worked in substantial part because it stopped the clearing, and the forest, once left alone, largely did the rest.
Stewart Maginnis, the global director of the nature-based solutions group at the International Union for Conservation of Nature, has described the outcome plainly: “In the 1970s and 1980s Costa Rica had one of the highest deforestation rates in Latin America, but it managed to turn that around in a relatively short period of time.”
The current position
Forest cover in Costa Rica currently stands at approximately 57 per cent of the country’s total land area, according to figures published by the country’s Ministry of Environment and Energy. That figure represents more than a doubling of the 1987 low point. Approximately 25 per cent of the country’s territory is under some form of formal legal protection, including national parks, biological reserves, and wildlife refuges. And Costa Rica remains, on current per-capita measures, one of the top agricultural exporters in Latin America, meaning that the doubling of forest cover has been achieved without a corresponding collapse in agricultural output.
The programme is not without ongoing criticisms. Some Costa Rican farmers argue that PES payments are set below the opportunity cost of the land, particularly on high-value agricultural terrain, and that the programme rewards forest protection but does relatively little for landowners whose forests were already being maintained without payment. Peer-reviewed economic evaluations, including work by Sven Wunder at the Center for International Forestry Research, have noted that the additionality of PES payments, meaning the extent to which they cause forest protection that would not otherwise occur, is difficult to measure and probably lower than the headline numbers suggest.
These are, on the strongest current reading, reasonable criticisms rather than fundamental objections. They point to specific ways the programme could be refined rather than to grounds for concluding that the approach has failed.
What the case shows
The Costa Rican reforestation record is, on the accumulated evidence of three decades of implementation, one of the more successful large-scale conservation outcomes anywhere in the modern world. It shows that the reversal of tropical deforestation is possible on national timescales, provided the specific set of legal, financial, and cultural conditions that support it are put in place and maintained.
Some of those conditions are difficult to reproduce. Costa Rica’s political stability, its small size, its absence of a military budget, and its early adoption of ecotourism as an economic strategy are all difficult to transfer to other national contexts. Other conditions, including the direct-payment structure, the fossil-fuel funding source, and the multi-decade timeframe, are more straightforwardly portable.
The most durable lesson from the Costa Rican case is not the specific mechanism.
It is the demonstration that tropical forest cover, once lost, can be substantially recovered within the lifetime of the people who lost it.