The country is Costa Rica, a slice of Central America roughly 51,100 square kilometers in area — smaller than West Virginia. In the late 1980s, roughly 21 percent of its land was forested, down from about 75 percent at the start of the twentieth century. Today, forest covers close to 60 percent of the country again. The reversal happened in roughly 35 years — one human generation — and it was engineered, not accidental. The mechanism has a name: Pago por Servicios Ambientales, or PSA. Starting in 1997, Costa Rica became the first country in the world to pay private landowners, in cash, to keep trees standing.
The money came from a national fuel tax — a small levy on every liter of gasoline sold at the pump — and from later contributions channeled by the World Bank and a UN carbon program. Landowners received payments to protect forest, plant native species, or manage watersheds. By the early 2020s the program had enrolled well over one million hectares.
The starting point was catastrophic
To grasp the recovery, hold the collapse in mind first. Between 1940 and 1987, Costa Rica lost forest faster than almost anywhere on Earth. Cattle were the engine. Beef exports to the United States surged after World War II, and the World Bank and Inter-American Development Bank financed loans that let ranchers clear lowland rainforest for pasture. By 1983, forest cover had fallen to roughly 26 percent. Guanacaste, the Pacific northwest province, was largely stripped. The annual deforestation rate in the 1970s and early 1980s ran above 50,000 hectares — a rate that, extrapolated, would have finished the country’s primary forest before the millennium.
The pattern was the same one now playing out in Nicaragua’s Bosawás Biosphere Reserve, where cattle ranchers have cleared more than 30 percent of primary forest since 2000 and where 740 square kilometers were lost in 2024 alone. Costa Rica in 1980 looked like Bosawás in 2024. What changed was policy.
A gas tax that pays for trees
The 1996 Forestry Law, known as Law 7575, did three things at once. It banned the conversion of forest to any other land use without a government permit — effectively outlawing clear-cutting for pasture. It created the National Forestry Financing Fund, FONAFIFO, to run the payment scheme. And it earmarked a share of the national fuel tax to fund the payments. Later, a small water tariff was added so downstream users pay upstream landowners to keep forested watersheds intact.
The elegance is in the accounting. A driver in San José filling up a Toyota pays a few colones that end up, months later, in the bank account of a smallholder in the Talamanca mountains who has agreed not to log a hillside of oak and cecropia. The forest keeps producing water for the reservoirs that feed the driver’s tap. The carbon stays in the wood. The howler monkeys stay in the canopy.
Ecotourism made trees more valuable than cows
The payments alone would not have been enough. What sealed the reversal was that, by the mid-1990s, a live tree in Costa Rica had started to earn more than a dead one. Tourism arrivals climbed from hundreds of thousands in the late 1980s to more than three million by 2019, and roughly two-thirds of those visitors listed nature as their reason for coming. National parks — Corcovado, Manuel Antonio, Monteverde, Tortuguero — became the country’s largest single source of foreign exchange, overtaking bananas and coffee.
A hectare of pasture in Guanacaste might net a rancher a few hundred dollars a year in beef. The same hectare adjacent to a reserve, with a few cabins and a canopy walkway, could generate that in a weekend. The math tipped, and land-use decisions tipped with it. Abandoned pasture began to fill in with pioneer species — Cecropia, Ochroma, Vismia — and within twenty years many plots looked like young secondary forest again.
The soil beneath the story
Not every abandoned pasture bounces back at the same speed, and a study by a team led by the University of Leeds finally explained why. Working across 76 forest plots in the Agua Salud landscape of central Panama — on soils and under rainfall patterns broadly comparable to much of Costa Rica’s Caribbean and Pacific lowlands — the researchers ran what they describe as the world’s largest and longest fertilization experiment on regrowing tropical forest. Plots that received supplemental nitrogen recovered roughly twice as fast as unfertilized controls.
The finding matters because the standard assumption in tropical ecology has long been that phosphorus, not nitrogen, is the limiting nutrient in old, weathered tropical soils. The Leeds team found that in secondary forest — the young stuff regrowing on former pasture — nitrogen is often the bottleneck, because decades of cattle grazing stripped it out. As SciTechDaily reported on the study, that single nutrient can double the speed at which climate-cooling biomass returns to the land.
The implication for Costa Rica’s recovery is that the country got lucky in one respect: much of its abandoned pasture sat on young volcanic soils that held onto nitrogen better than the deeply weathered lateritic soils of the Amazon. Reforestation happened faster than the models predicted, in part because the underlying chemistry cooperated.
Who actually planted the trees
A common misconception is that the government sent crews out with saplings. Mostly it did not. The majority of the forest recovery is what ecologists call passive regeneration — pasture left alone, seeds arriving on the wind or in the guts of birds and bats, the canopy assembling itself. The state’s role was to remove the incentive to clear-cut again. PSA contracts typically run for five to fifteen years, and landowners forfeit payments if satellite imagery shows they have burned or cleared.
The active planting that did happen was concentrated in critical watersheds and biological corridors. The Mesoamerican Biological Corridor, an inter-governmental initiative launched in 1997, funded the linking of isolated fragments — a strip of teak here, a hedgerow of native Erythrina there — so that jaguars, tapirs, and quetzals could move between reserves. By the mid-2010s roughly 25 percent of the country’s land area sat inside a formal protected area, one of the highest shares in the world.
The parts that are not a fairy tale
The story has edges. Much of the regrown cover is secondary forest, not primary. A 30-year-old stand of Cecropia stores far less carbon and holds far fewer species than the 400-year-old lowland forest it replaced. Primary forest in Costa Rica still sits at roughly a quarter of its pre-1940 extent. Pineapple plantations have expanded aggressively in the Caribbean lowlands since 2000, and monoculture teak and melina plantations sometimes get counted in national “forest cover” statistics that a jaguar would not recognize as forest.
PSA payments have also flowed disproportionately to landowners with formal title, which in practice means better-off farmers with clean paperwork. Indigenous territories on the Caribbean coast, particularly Bribri and Cabécar lands, have seen less benefit and more conflict with encroaching squatters and banana companies. And the country’s success has become a compliance headache: Costa Rica’s head start on the EU’s incoming deforestation-free supply chain rules may mask a tougher road ahead for smallholder coffee and cocoa growers who now have to prove, plot by plot, that their beans did not come from cleared land.
The money that finally showed up
For most of PSA’s first two decades, the international donor community treated Costa Rica as an interesting experiment rather than a template. That began to change in 2022, when the World Bank’s Forest Carbon Partnership Facility made its first results-based payment to Costa Rica: roughly $16.4 million for reducing 3.28 million tonnes of CO₂ emissions from deforestation between 2018 and 2019. A second tranche of $17.5 million followed in early 2025. In the World Bank’s accounting of tropical forest economics, Costa Rica appears repeatedly as the working proof-of-concept for the argument that standing tropical forest has measurable, monetizable value — a case the Bank is now trying to extend to the Congo Basin.
Payment for the carbon stored in a Talamanca cloud forest, in other words, is finally arriving from outside the country. It took about 25 years.
What the satellites see now
Zoom out on a map of Central America made from Landsat imagery and Costa Rica reads, unmistakably, as green. To its north, the deforestation frontier chews through Nicaragua’s Bosawás and into the Honduran Mosquitia. To its south, gold mining scars the Darién. In between sits the anomaly — a country where the trend line bent, and then bent back.
The last old-growth Ceiba pentandra in the Osa Peninsula, some of them more than 50 meters tall and older than the United States, still stand because a fuel tax passed in 1996 made them worth more alive than cut. Around them, on land that was cattle pasture the year the first commercial CD player went on sale, a new forest is thickening — one seed, one bat, one nitrogen atom at a time.