Up to the 1980s, Costa Rica experienced one of the highest rates of deforestation in Latin America. This was driven principally by inappropriate policies. Today, the country is seen as a front-runner in environmental legislation and policies. Among the instruments developed to stem deforestation is the economic one known as Payment for Environmental Services (PES). The Costa Rican PES Programme is one where landowners receive direct payments for ecological services which their lands produce by those who benefit from such services. Principal sources of funding for the PES Programme come from tax on fuel sales, payments for water by hydroelectric companies and other water blotters, and Certified Tradable Offsets or carbon bonds. Fundamental to the implementation of the program has been the forest policy institutional framework. It includes establishment of the Fund for handling the financial issues for forests and natural resources, legislation to protect the environment and biodiversity, establishment of a fuel tax, and technical support for reforestation and forest management. The success of the Programme may, however, not be cost-optimal in all circumstances. Countries intending to apply such a programme have to make sure the legal, institutional, financial and political frameworks are in place, and that they include transparency and accountability.
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