Costa Rica unveiled an expanded ecosystem services payment framework that values the nation’s natural capital at US$14.5 billion annually, marking a significant evolution of the world’s longest-running environmental payment scheme.
The Payment for Ecosystem Services 2.0 proposal builds on Costa Rica’s pioneering 1996 Forest Law that established the first national ecosystem services payment program. The original scheme compensated private landowners for forest conservation covering carbon sequestration, water protection, biodiversity, and scenic beauty. Over nearly three decades, the program invested US$524 million protecting 1.3 million hectares while benefiting more than 18,000 families, including indigenous communities and smallholder farmers.
Costa Rica reversed one of the world’s highest deforestation rates through the ecosystem services payment approach. Forest cover plummeted from over 50% in 1950 to just 25% by 1995 as cheap cattle credit, land-titling laws rewarding deforestation, and rapid road expansion drove conversion. The National Forestry Financing Fund manages the program, funded by fossil fuel taxes and water fees. Today, forests cover nearly 60% of Costa Rica while the country maintains economic growth and ranks among the world’s happiest nations.
The new valuation study published in Ecosystem Services provides the first comprehensive assessment of Costa Rica’s total value of natural capital. Researchers calculated ecosystem service values per hectare for different ecosystems using standardized methodologies. Mangroves deliver the greatest economic benefit per hectare at US$8,744 annually, followed by coral reefs at US$3,051, forests at US$1,760, and oceans at US$184.
Forest ecosystem services break down with pollination valued highest at US$1,047 per hectare annually, erosion prevention at US$309, and climate regulation at US$167. The analysis reveals that pollination and erosion-prevention services exceed the carbon-sequestration value despite the current program’s focus on climate regulation. These findings support expanding the ecosystem services payment scheme beyond carbon to additional services from diverse ecosystems.
When multiplied by total ecosystem area, oceans contribute the highest aggregate value despite lower per-hectare returns. The expanded framework proposes covering ten ecosystem services across forests, mangroves, coral reefs, wetlands, and marine areas rather than the current four services limited to forests. The Natural Capital Trust concept would manage all of Costa Rica’s natural capital, including private property, public lands, and coastal and marine ecosystems.
The ecosystem services payment 2.0 framework introduces implementers as a new category of participants who conduct conservation and restoration on public lands, including urban forests, mangroves, rivers, coral reefs, and open ocean. This contrasts with the current model compensating only private landowners. Expanded participation enables broader societal engagement while creating livelihood opportunities for diverse actors beyond forest property owners.
Costa Rica launched its first marine ecosystem services payment pilot in June 2025 in the Gulf of Nicoya, along the Pacific coast. The initiative extends results-based finance from terrestrial to coastal and marine environments, with support from the World Bank and the Earthshot Prize. Six community associations representing 157 mollusk gatherers manage over 6,000 hectares of mangrove forest under the program.
Participants receive annual payments of US$2,698.85 distributed quarterly, representing approximately 2.5 times their typical income from harvesting activities. Payments depend on verified compliance with conservation activities, including mollusk aquaculture and restocking, ecosystem monitoring, surveillance against illegal activities, and sustainable harvesting aligned with approved management plans. Each association signs annual renewable contracts based on performance and available resources.
The Ministry of Environment and Energy, the National System of Conservation Areas, the National Forestry Financing Fund, the Costa Rican Institute of Fisheries and Aquaculture, and the Environmental Bank Foundation formalized the marine pilot through a multi-institutional cooperation agreement. Executive Decree 44558-MINAE provides a legal foundation for recognizing and compensating sustainable mangrove practices while positioning coastal communities as frontline ecosystem guardians.
The marine ecosystem services payment model addresses the unique ecological and socioeconomic characteristics of mangrove forests, providing benefits for biodiversity, fisheries, and climate resilience. Mangroves store carbon at rates exceeding most terrestrial forests, protect coastlines from storms and erosion, and serve as nursery habitat for commercially important species. Their dense root systems trap sediment while filtering pollutants.
Financial sustainability challenges prompted the redesign of the ecosystem services payment. Fossil fuel tax revenues that support the original program are declining as Costa Rica pursues clean energy transitions. The 2024 redesign explores alternative funding mechanisms, including green taxes, subsidy reforms, fees, and the establishment of a Natural Capital Bank. Innovative financing ensures program continuity while expanding scope and participation.
Researchers developed a Natural Capital Priority Index identifying areas where investments generate the highest socioeconomic and environmental returns. The index spatially estimates ecosystem service provision, sustainability threats, and high-conservation-value zones. This targeting tool enhances efficiency by directing limited resources to locations that deliver the most benefit per investment dollar.
Costa Rica received international recognition for its forest conservation achievements, including US$60 million from the World Bank’s Forest Carbon Partnership Facility to reduce carbon emissions by 12 million tons through 2025. Initial payments totaling US$33.9 million compensate for verified emission reductions while supporting benefit-sharing plans that improve rural incomes and economic resilience in forest-dependent communities.
The evolution of ecosystem services payments incorporates gender equity and indigenous rights. Women-owned farms receive priority scoring in forest protection projects, while indigenous territories operate under special conditions promoting community participation. Around 100,000 indigenous people benefit from program incentives. A Gender Action Plan guides equitable distribution of benefits from emissions reduction activities.
Community participation extends beyond payment recipients. Awareness campaigns educate residents about ecosystem values and conservation practices. Volunteer initiatives enable citizen engagement in restoration activities. Schools integrate environmental education while businesses sponsor plantings and provide land for green infrastructure. The program shifted from a purely environmental mechanism to a social instrument that fosters pro-environmental behavior across Costa Rican society.
The expanded framework represents adaptive management responding to changing needs and opportunities. The Natural Capital Trust would operate under flexible governance, allowing the incorporation of new conservation modalities, technological innovations, and adjustments to financial mechanisms without complicated bureaucratic processes. This adaptability ensures relevance as understanding of ecosystem services and conservation techniques advances.Costa Rica’s ecosystem services payment evolution offers a model for countries seeking to value and protect natural capital through market-based mechanisms. The framework demonstrates how governments can create economic incentives for conservation while supporting rural livelihoods and community wellbeing. By expanding beyond forests to encompass mangroves, coral reefs, and ocean ecosystems, the program acknowledges the full spectrum of nature’s contributions to human welfare and national prosperity.
