This case describes the process, and presents the main problems faced in levying, collecting and distributing funds from the water sector (hydro electricity and water users) for use in protection of the environmental services. In the framework of laws that allow for payment for environmental services, Costa Rica has introduced several cases of pricing water to pay for services provided by forests in watershed areas.
The first catchment programs financed through cost recovery were started in 2002. As a result, Costa Rica’s watershed owners, both public and private, are beginning to be rewarded for providing water, whether for drinking or for generating electricity. The problem now is to ensure that these rewards are indeed spent in the catchments, to maintain environmental services.
Lessons learned
Initiatives that ensure that local groups are included in the benefits of conservation are needed to involve them in helping to protect the water catchment areas.
Government's proactive attitude has been very valuable in promoting the concept of payment for environmental services, and giving it credibility with a wide group of stakeholders.
A major criticism of the program is that funds are not administered specifically for the intended use. Funds go straight to the Government treasury instead of to a specific environmental services fund. Many believe that the current water pricing policy will not achieve the protection of water resources until this method of fund administration is changed.
However, much has been achieved; Costa Ricans no longer see water as a public good. There is evidence that local people are adopting a sustainable development ethic which values protection of water catchment areas. Nevertheless, correct water pricing "per se" is not a solution unless it is accompanied by rigorous land use planning and strong environmental policies.
Importance of the case for IWRM
This case is one of the few, if not the only example of a country recognizing the importance of its forests in providing environmental services, including water catchment protection and recovery of the water resources. The water charge recognizes the value of water to the communities from which it comes; compensating them with a charge levied on downstream users. The introduction of the charge reflects a shift towards the implementation of the principle of water as an economic good.
Photo credit: Fred Hsu