Resource-rich countries find it pays to pay landholders to protect their land

Dimitri Selibas

By compensating landholders for land restoration, government programs support services worth more than the cost

The Osa Peninsula on Costa Rica’s west coast occupies just 0.001% of the planet’s surface area, yet is home to an estimated 2.5% of all the biodiversity in the world. Inhabited by jaguar, tapir and close to 400 species of birds, the forests here — and others like them around the world — combat biodiversity loss and play a key role in capturing carbon and fighting climate change.

Importantly, recent research shows, such benefits come not only from keeping forests standing, but also from regrowing degraded and secondary forests. In this vein, the Osa Peninsula region has become internationally recognized for showing how financial incentives can lead to landscape restoration and protection, while also creating jobs and supporting rural economies.

“For us it has been important because before, we protected [the forests], we looked after them, but we didn’t receive anything for it,” says Lineth Picado Mena, a rural farmer living on the peninsula and participant in the government’s Payments for Environmental Services (PES) program. “Now we can support ourselves with what we have.”

Previously, Picado explains, other farmers in the region cleared forests to plant crops or to create pastures for cattle. Now, Picado earns US$58 per hectare per year for having reforested her land, agreeing to keep 75% of her 48-hectare (119-acre) property conserved as forest. These funds help her family survive and maintain the farm, while using the remaining portion of the property to raise cattle and grow crops.

“This is a paradise for us … that’s why visitors come and visit,” Picado says.

Global Benefits

“When [landowners] are conserving forests, they stop generating income from agriculture, livestock and other things. That economic sacrifice is what in economics we call externalities,” says Carlos Muñoz-Piña, an economist with the World Resources Institute (WRI) who has worked for more than a decade on environmental economic incentives. “It is something that generates a benefit for the rest of the world … that is not recognized by the market.”

By paying landowners for ecosystem services, the government incentivizes them to conserve the environment, Muñoz-Piña says. That counteracts the market forces that put pressure on landowners to convert tropical forests to farmland or other land uses.

In Costa Rica, the PES program’s annual budget is between US$20 million and US$25 million, of which 92% is funded from a sales tax on fossil fuels, while nearly 6% comes from water usage fees.

This allocation is fixed and provides assurance that funds will be available each year. The remaining amount is collected through various government initiatives, such as carbon credits and public-private partnerships. In the future, with the transition to more renewables, biodiversity credits and carbon credits from, say, private companies or international climate funds could make up more of the mix. The program, which is administered by the environmental ministry’s Forestry Financing Fund (FONAFIFO), is credited with turning Costa Rica’s deforestation rate from one of the highest in the world to a net reforestation.

Gilmar Navarrete Chacón, FONAFIFO’s director for environmental services, says that since its inception about a quarter of a century ago, the fund has protected 1.3 million hectares (3.2 million acres) of forest and formalized more than 19,000 contracts with landowners. Currently it is actively working with 350,000 hectares (865,000 acres) and about 5,500 landowners.

“The most striking thing for me is the way in which Costa Ricans have appropriated the program,” says Navarrete. “Above all, farm owners have truly understood that there is a greater value beyond cutting the wood and selling it — that rather there is more value in having the trees, taking care of the ecosystems, being able to provide these environmental services and obtaining a good financial income for the work they are doing.”

Competing Interests

Guatemala is also considered a world leader in sustainable forestry. This rainforest-rich Central American country has forest conservation, plantation and silvopastoral programs that have been operating for over 20 years. More recently, it began implementing land restoration programs.

The country has two programs, PROBOSQUE, which works with 6,000 landowners — those who have a land title — and PINPEP, which works with 54,000 landholders — those who don’t have a land title. (In many areas in Latin America, farmers who move from one region to another, often to escape violence or conflict, may occupy a piece of land, sometimes for generations, without having a title. Many governments are in the process of formalizing occupation, but this can be a lengthy process. Programs like PINPEP become a means to involve them and their lands in conservation work without formal documents proving ownership.) Together, the programs incentivize the protection of more than 320,000 hectares (790,700 acres) of forest, explains Ciriaco Antonio Urrutia Lemus, who previously served as climate change director in Guatemala’s environment and natural resources ministry. Depending on the type of program, contracts with landholders can last between 5 and 10 years and pay US$380 per hectare per year.

Forestry plantations are integrated into the economy, decreasing the need to destroy existing forest for wood and adding to the financial sustainability of forest communities. This is important because in Guatemala, once a landholder’s contract with one of the incentive programs ends, they can’t reapply, according to Urrutia — a major difference between the country’s programs and that of Costa Rica, where participants can partake repeatedly. Urrutia says the fact that participants can only take part once means that forests could be at risk after a contract is done. To rectify this, he says the state would either need to reform current laws or pass new ones that move toward paying people for the long-term environmental services their forests and land restoration provide.

Unlike Costa Rica’s funding model, where money is collected through taxes and fees on fossil fuels and water, funds for Guatemala’s programs come from general taxes, so the allocations compete with interests like healthcare and education, Urrutia says.

He notes that while this is fine if the economy is stable and the tax base is expanding, it has created conflict as different government leaders prioritize the environment differently.

Finding Balance

Early in 2022, WRI released a study brief that evaluated public land restoration incentive programs of six Latin American countries, including Costa Rica and Guatemala. The study analyzed how much countries pay farmers and other landholders to restore land and included recommendations for crafting strong and equitable public incentives for restoration.

These include prioritizing areas that most need investments from public incentives to maximize the impacts of governments with limited resources, improving monitoring and transparency to track the progress and impacts of public incentive programs, diversifying land restoration activities to go beyond just planting trees to focusing on inclusion of native species, and making programs part of laws and embedding them into existing institutions to ensure longevity. This work ties into WRI’s Restoration Policy Accelerator, a peer-to-peer capacity-building program for policymakers looking to improve the implementation of existing public incentives or design new policies or regulations to promote landscape restoration.

“The policy accelerator has a pragmatic angle that we cannot have it all, we cannot convert everything to a natural forest again,” says René Zamora-Cristales, WRI restoration policy senior manager and lead author of the brief. “We need a balance if we want to achieve our well-being targets.”

The U.N.’s Convention to Combat Desertification (UNCCD) says estimates suggest that activities that restore degraded lands return US$7 to US$30 in benefits for every dollar spent — benefits such as recharging aquifers, improving soils, increasing agricultural productivity, and mitigating harm from floods, drought and other disasters. This can act as a measure for how incentives should be priced.

Globally, the economic returns of restoring land and reducing degradation, greenhouse gas emissions and biodiversity loss could be as high as US$140 trillion every year, according to the UNCCD’s 2022 Global Land Outlook (GLO2) report.

The UNCCD says that land restoration must be based on research and science. A database at the World Overview of Conservation Approaches and Technologies (WOCAT) lists more than 1,500 science-based sustainable land management practices to choose from.

One of UNNCD’s flagship projects, the Great Green Wall, runs across Africa’s Sahel zone, involves 22 countries and aims to restore 100 million hectares (247 million acres), create 10 million jobs and sequester 250 million metric tons (276 million tons) of carbon.

So Many Benefits

“We tend to divide all the crises — seeing the climate crisis as one, biodiversity crisis as another, the health crises, economic crises and now land crisis … when they are all interconnected,” says UNCCD’s chief of external relations, policy and advocacy Miriam Medel Garcia, who led the research behind the GLO2 report, which spanned five years, collaborating with 21 organizations.

“I’m not saying it’s free, of course; it requires a lot of effort and a lot of investment,” says Medel Garcia. “[But] land restoration is probably the easiest and the cheaper solution for the other problems.”

Editor’s Note: Many of the interviews were conducted in Spanish and translated by the author.