Chapter 1. Environmental performance

Abstract

Costa Rica made important strides in delinking environmental pressures from its fast economic growth in the last 15 years. It has expanded forest cover and electricity generation from renewable sources. However, cars are a growing source of emissions of greenhouse gases and air pollutants. Waste disposal still relies on landfills, and much wastewater is untreated. Pressures on the environment are likely to increase with sustained economic growth and rising living standards. This chapter provides an overview of Costa Rica’s environmental achievements since 2010, and its remaining challenges. It reviews progress in moving towards a low-carbon and climate-resilient economy, controlling air pollution, ensuring sound waste services and improving management of water resources.

1.1. Introduction

Costa Rica is considered a global environmental leader, particularly in the field of biodiversity conservation. It is a megadiverse tropical country, rich in water and forest resources. It produces all its electricity from renewable energy sources. Costa Rica is a pioneer in nature-based tourism, which is a pillar of the economy. Income per capita has increased in the last two decades, thanks to strong economic growth. However, poverty and inequality remain stubbornly high.

Costa Rica has made some progress in improving its environmental performance since 2010. The continued increase of forest cover to nearly 60% of the land area is a major achievement. This has contributed to absorbing emissions of greenhouse gases (GHGs) and offsetting their continued growth. However, targeted policy measures are needed to address several remaining challenges. Energy use, especially for transport, has continued rising. Transport is a major source of GHG emissions and local air pollutants. Poor air quality affects most of the population. Most waste is still disposed of in landfills, and wastewater from homes and industries flows into rivers without treatment. Human pressures on the country’s rich biodiversity have intensified, including unplanned urban development, tourism, farming and fishing (Chapter 3).

This chapter provides an overview of the main environmental trends observed in Costa Rica. It highlights the country’s progress in the last decade towards its national and international goals, as well as remaining challenges for green growth and sustainable development. Where possible, trends are compared with those of other OECD member countries, as well as countries in Latin America and the Caribbean (LAC).

1.2. Promoting sustained and inclusive economic growth

1.2.1. Economic performance and structure of the economy

Costa Rica is an upper middle-income country that has continued to grow steadily over the last decades. In 2010-19, before the COVID-19 pandemic, the country’s gross domestic product (GDP) grew on average by 3.2% per year, faster than in other major Latin American economies and the OECD. Costa Rica has one of the highest GDP per capita in LAC, but this is still less than half the OECD average (Figure 1.1).

In the aftermath of the 1980 oil crisis, the country started transforming its economic profile from a predominantly rural base to a manufacturing- and service-based economy, thanks to more liberal trade policies and openness to foreign direct investment. Nonetheless, agriculture, forestry and fishing play a larger role than in most other OECD countries. They accounted for about 5% of value added in 2021, or nearly double the OECD average. The agro-food sector made up 38% of exported goods in 2021 (PROCOMER, 2022_[1]). Costa Rica is the world’s largest producer of pineapple. Industry accounted for over 18% of value added in 2021, below the OECD average, while services accounted for over 73% of value added, slightly above the OECD average. Before the pandemic, tourism accounted for 37% of service exports (OECD, 2022_[2]).

The country’s dependence on foreign markets for investment and trade makes it highly vulnerable to external shocks. GDP fell by 4% in 2020 due to the impact of the COVID-19 crisis with tourism most affected. The economy rebounded strongly and recovered to pre-crisis levels in 2021 (Figure 1.1). However, economic growth slowed down in 2022 and is expected to slow further in 2023 due to the complex international scenario (OECD, 2023_[3]). The Russian war in Ukraine strengthened inflationary pressures, especially of energy and food.

The fiscal situation has recently improved, but maintaining fiscal prudence is critical for macroeconomic sustainability (OECD, 2023_[3]). With its 2018 fiscal reform, Costa Rica worked to reduce its high public debt (which was nearly 70% of GDP in 2022). This has resulted in severe cuts to government spending. The government has also been considering measures to raise more tax revenue. With about 45% of employment being informal, total tax revenue is low (23% of GDP in 2020). Nearly 10% of this revenue is from environment-related taxes (Chapter 2).

Figure 1.1. The economy has grown steadily over the last decades, but GDP per capita lags behind

1.2.2. Population’s well-being

Higher population, urbanisation and tourist arrivals have exacerbated the pressure on the environment and the demand for public services, such as public transport, waste collection, and water supply and sanitation (WSS) (Sections 1.6, 1.8 and 1.9). Costa Rica’s population increased by 11% in 2010-22 to reach about 5.2 million inhabitants and is projected to reach 5.4 million by 2025 (INEC, 2021_[4]). Population density has steadily risen in the last decade from 88 inhabitants per square kilometre (km²) in 2010 to 101 inhabitants/km² in 2021, above the OECD average of 37 inhabitants/km². Urbanisation has progressed, with the share of the population living in urban areas reaching 72% in 2022 from about 60% a decade earlier. Most of the country’s population (73%) live in the Greater Metropolitan Area (GAM) around San José (INEC, 2021_[4]).1 In 2018-19, prior to the pandemic, international tourist arrivals were more than 3.3 million in 2018-19, equivalent to about 60% of the country’s population (OECD, 2022_[2]). Tourism is highly seasonal and concentrates in relatively few areas of the country (Chapter 3).

Costa Rica’s social outcomes could be improved further. Life expectancy (81) is in line with the OECD average and is among the highest in Latin America. Costa Rica has among the highest shares of women in managerial and ministerial positions in the OECD (OECD, 2023_[5]). The country has achieved almost full enrolment in primary education. However, only half of the population aged 25-34 has completed upper secondary education, far from the OECD average (85%). Nearly 30% of Costa Ricans between 18 and 24 years are neither studying nor in formal employment. This is the fifth highest share in the world and the third highest in Latin America (OECD, 2022_[6]).

Poverty remains a historic burden and inequality has kept rising. The challenging economic context and rising inflation can further deepen poverty and inequality. Poverty, defined as having an income below half the median household income of the total population, has fluctuated at more than 20% of households since 2010 (Figure 1.2). The COVID-19 pandemic triggered an increase of poverty in 2020. Extreme poverty affects around 6% of Costa Rica’s households. Inequality is higher than in most LAC economies and OECD countries (Figure 1.2). The poorest 20% of households earn 4.2% of total income (OECD, 2021_[7]).

Figure 1.2. Poverty increased during the pandemic, and inequality is trending upwards

1.3. Strengthening resilience to the impacts of climate change

1.3.1. Costa Rica’s vulnerability to climate change

Costa Rica is highly vulnerable to the environmental, social and economic consequences of climate change. Nearly 80% of Costa Rica’s population live in areas at high risk from multiple hazards, including those related to climate. These high-risk areas are also where 80% of the GDP is produced. Floods (42%) and storm surge (16%) were among the main climate-related extreme weather events that occurred in 1980-20 (World Bank Group, 2020_[8]).2 Extreme weather events took the lives of some 546 Costa Ricans between 1980 and 2017 (IMN, 2021_[9]). The lack of adequate land-use and urban planning exacerbates the impact of natural disasters on infrastructure and settlements and increases people’s vulnerability to climate-related events. Only a few land-use plans include an assessment of vulnerability to hydrogeological risks (CONARE, 2022_[10]).

From 2016 to 2020, losses due to natural disasters amounted to USD 820 million. Tropical storm Nate alone caused the highest losses in the last 25 years, amounting to 1% of Costa Rica’s GDP. The National Adaptation Policy 2018-30 indicates that costs of climate-related extreme weather events could reach between 1.6% and 2.5% of GDP by 2025, including to repair damaged water and transport infrastructure. Among the total costs caused by natural disasters between 2011 and 2018, 31% were assigned to the reparations of water systems, sewers, fords and other infrastructure; and 26% to roads and bridges (CNE, 2018_[11]).

The year 2020 was the warmest of Costa Rica’s history. Climate change is expected to severely reduce the country’s water availability by the end of the century (ECLAC, 2018_[12]). This will also affect the production capacity of hydroelectric power plants, which are the main source of electricity in the country (Section 1.5). While Costa Rica is a water-abundant country, climatic trends have exacerbated droughts in some key agricultural regions (OECD, 2017_[13]). The country’s agriculture is also exposed to extreme precipitation events.

Exposure to wildfire is significant and widespread (Figure 1.3). It represents a hazard to ecosystem services, notably biodiversity and carbon capture, as well as to human life. About 5-10% of the population in Costa Rica live in areas at very high risk of wildfire (OECD, 2022_[14]). In 2019-20, about one-third of the country’s forest-covered areas was exposed to very high or extreme wildfire danger (IEA/OECD, 2023_[15]). The government should continue to pay attention to wildfire risk given the key role forests play in Costa Rica’s climate change mitigation strategy (Section 1.4).

Figure 1.3. Costa Rica’s forests are exposed to wildfire danger

1.3.2. Policies to adapt to climate change impacts

The National Adaptation Policy 2015-30 and the National Climate Change Adaptation Plan (PNACC) 2022-26 aim to improve the resilience of infrastructure and economic sectors to climate-related natural disasters. The plan has a strong focus on reducing the climate vulnerability of tourism, water resources, biodiversity and forestry. In 2021, the Ministry of Environment and Energy (MINAE) released three technical guidelines to support local governments in developing their plans to prepare for and adapt to climate change impacts.

Nature-based solutions (NbS), including the sustainable management of forest, marine and freshwater ecosystems, are among the main lines of action of the PNACC. This is welcome, as NbS may be more cost effective and adaptable to uncertain future climate conditions than traditional approaches, such as hard defences or other “grey” infrastructure (OECD, 2018_[16]). Further extending the use of NbS would provide multiple benefits, including reducing GHG emissions and biodiversity loss, as well as creating employment and income opportunities for local communities (OECD, 2020_[17]). For example, active collaboration with indigenous communities permitted the installation of checkpoints in overflow areas and early warning posts. However, additional investment will be needed to build climate-resilient infrastructure, retrofit existing infrastructure and protect the most vulnerable communities. Additional funding is also needed to reinforce capacity for responding to natural disasters. The National Commission of Emergencies has issued a binding resolution, assigning criminal and civil liability to officials in charge of risk assessment.

The PNACC acknowledges the urgent need to generate robust information on climate and hydrological risks and impacts, as well as to enhance the institutions’ capacities to develop adaptation measures based on scientific knowledge. Some progress has been made with the establishment of the national system to monitor climate change (SINAMECC), which also maps adaptation actions. Costa Rica should build on this system to monitor the effectiveness of adaptation actions. Improved collaboration with the private sector, scientific institutions and local communities would help generate robust information to support climate adaptation policy and raise public awareness.

1.4. Moving towards a low-carbon economy

1.4.1. Greenhouse gas emissions profile and trends

Costa Rica’s GHG emission profile differs from that of most other OECD countries. Most of the country’s emissions are energy-related, but less than on average in the OECD (Figure 1.4). Thanks to the country’s fully renewable-based electricity generation (Section 1.4), GHG emissions from energy industries are a minor share of total emissions. Fuel combustion in end-use sectors (manufacturing, transport, households and services) account for nearly all energy-related emissions. Transport, nearly exclusively by road, is the largest emission source making up 42% of emissions in 2017. Agriculture accounted for a fifth of GHG emissions in 2017, a larger share than on average in the OECD, reflecting the importance of agricultural production in Costa Rica’s economy. With 15% of emissions in 2017, waste management is also a larger source of emissions than on average in the OECD, due to the reliance on landfills for waste disposal (Section 1.8). Agriculture and waste are major sources of methane, which made up nearly 30% of total emissions in 2017, more than on average in the OECD (Figure 1.4).

According to IEA data, GHG emissions from fuel combustion grew by 11% in 2010-21, at a lower rate than GDP. Emissions dropped in 2020 due to the pandemic but picked up again in 2021 (Figure 1.5). Emissions from road transport grew by over 30% in 2010-19 (OECD, 2023_[19]). According to the 2021 national GHG emission inventory, Costa Rica’s gross GHG emissions (i.e. excluding land use, land-use change and forestry, or LULUCF) grew by 12% in 2010-17. However, when considering LULUCF, net GHG emissions declined by 13% in the same period, thanks to increased removals from forests and agricultural soil (Figure 1.5; Chapter 3). Costa Rica did not have a 2020 GHG emission mitigation target under the United Nations Framework Convention on Climate Change (UNFCCC).

Figure 1.4. Energy accounts for a lower share of GHG emissions than on average in the OECD

1.4.2. Progress on climate mitigation action

Costa Rica has intensified its efforts to curb energy-related emissions in the last decade. However, the range of implemented policies is limited and not sufficiently stringent. According to the OECD Climate Actions and Policies Measurement Framework (CAPMF), Costa Rica expanded its climate action in the transport, buildings, electricity and industry sectors in 2000-20, with an acceleration since 2013. In that period, the number of policies adopted increased from 5 to 16, out of 56 policies included in the CAPMF. The average stringency of adopted policies (defined as the degree to which climate actions and policies encourage or enable GHG emissions mitigation at home or abroad) also increased, from 5.6 in 2000 to 6.6 in 2020 (on a 0-10 scale). The progress in policy adoption is mainly linked to adoption of GHG emission reduction targets and improvement in climate governance.

Costa Rica’s climate policy mix heavily relies on non-market-based instruments (regulations and voluntary approaches) and governance tools such as target setting and reporting. Measures in the buildings and industry sectors are mainly minimum energy performance standards or labels for appliances and industrial motors (Section 1.5). Market-based instruments are limited to fuel taxes, which apply mainly to the transport sector. There is no carbon tax in place (Chapter 2). In 2020, market-based instruments represented 6% of the measures to mitigate energy-related emissions adopted in Costa Rica. This is the lowest share among OECD countries, including those with an electricity mix comparable to that of Costa Rica (i.e. largely based on renewables and/or nuclear) (OECD, 2023_[19]) (Figure 1.6).

Figure 1.5. GHG emissions grew in the last two decades but less quickly than Costa Rica’s economy

Policies in the agriculture sector focus on encouraging farmers to adopt practices that can reduce GHG emissions. Costa Rica launched two Nationally Appropriate Mitigation Actions (NAMAs) – for coffee production (2013) and livestock (2015). Within the NAMA framework, the government provides training and technical assistance to public servants, farmers and producers on practices and technology to mitigate GHG emissions, adapt to climate impacts and reduce the impact of farming on biodiversity (Chapter 3). The “Coffee NAMA” aims to reduce emissions of nitrous oxides (N₂O) by reducing fertiliser use, as well as to increase carbon sequestration in soil and improve efficiency in water and energy use. By 2020, the Coffee NAMA helped reduce 72 kilotonnes of carbon dioxide equivalent (ktCO₂e) compared to a target of 340 ktCO₂e by 2021 (ICAFE, 2020_[20]). The “Livestock NAMA” aims to mitigate methane emissions through practices such as rotational grazing, pasture improvement and silvopasture. The programme aims to enrol 70% of all herds and 60% of the total livestock area between 2015 and 2030. By 2021, almost 8% of the national herd and almost 13% of the grazing area were participating in the NAMA (Presidencia Costa Rica, 2021_[21]). In 2022, in line with the National Decarbonisation Plan 2018-50, Costa Rica was piloting additional NAMAs in the musaceae (banana), rice and sugarcane sectors, with a view to covering all the highest emitting sectors. Another NAMA aims to curb emissions from waste disposal (Section 1.8).

The National Forest Development Plan 2011-20 and the National Strategy REDD+ (reducing carbon emissions from deforestation and forest degradation) are the foundation of Costa Rica’s policy to increase carbon sink capacity by curbing deforestation and promoting afforestation and sustainable management of forest resources. The long-standing Programme of Payment for Environmental Services (PPSA) and the network of protected areas are the main instruments to implement this strategy (Chapter 3). They have been key to achieving a zero net deforestation rate and increasing the GHG absorption capacity of forests. The REDD+ Strategy aims to absorb 20 million tonnes (Mt) of CO₂e emissions in 2018-24 (MINAE and IMN, 2019_[22]). In addition, the Sustainable Landscape Initiative (IPS) aims to reduce emissions from agriculture, forestry and other land use (AFOLU) sectors in 2022-30, in line with Costa Rica's commitments under the 2021 Glasgow Declaration on Forests and Land Use. The IPS foresees to maintain zero net deforestation and curb forest clearance, reduce the use of fossil fuels, nitrogen fertilisers and agrochemicals in agriculture, implement good agricultural practices and invest in REDD+ actions to promote the use of forests over marginal agriculture.

Figure 1.6. Costa Rica’s climate policy is the least oriented to markets among OECD countries with a low-carbon electricity mix

Costa Rica should improve the system for monitoring and reporting GHG emissions as a priority. This is essential for evidence-based decision making and fulfilling the biannual reporting obligations under the Paris Agreement’s Enhanced Transparency Framework. The complexity of data collection and processing means that national GHG emission inventories are issued with a time lag of several years, with the latest inventory (released in 2021) comprising data up to 2017. At the time of writing, the update of the GHG emission inventory was in progress. Many mitigation policies and measures lack clear objectives against which progress can be tracked, as well as related monitoring indicators. The government should increase funding for a faster and more agile development of data, including through the use of Earth observation technologies, and further encourage collaboration with the scientific community.

1.4.3. The path towards net zero

Costa Rica has raised its ambition towards a net-zero economy. In 2020, it submitted an update of its Nationally Determined Contribution (NDC) from 2015 to the UNFCCC. It committed to keep its cumulative net GHG emissions within 106.53 MtCO₂eq in 2021-30, and to reach 9.1 MtCO₂e in 2030. This represents an additional reduction of 0.26 million tCO₂e compared with the 2015 NDC. The new target implies cutting net emissions by about 20% below their 2017 level of 11.5 MtCO₂eq (Figure 1.7). By achieving the target, net GHG emissions will be some 35% below their projected level under a business-as-usual scenario in 2030. Costa Rica is among the few LAC countries whose targets are unconditional on receiving international financial support.

Figure 1.7. Costa Rica aims to be carbon neutral by 2050

In 2018, Costa Rica committed to achieving net zero by 2050 and adopted the National Decarbonisation Plan (PND for its initials in Spanish) 2018-50. This is among the few long-term decarbonisation strategies released by LAC countries (World Bank Group, 2022_[23]).3 The PND is more comprehensive than previous plans and strategies and has been developed through an extensive participatory process. It lays out the priorities to decarbonise the economy and the necessary policy and institutional reforms (Box 1.1). The 2030 NDC is in line with the pathways to reach the 2050 net-zero goal set by the PND. Achieving these targets relies heavily on carbon sinks (Figure 1.7). However, as they grow older, secondary forests will tend to lose their absorption capacity (MINAE, 2017_[24]). Therefore, a reduced pace of afforestation and reforestation could severely undermine the achievement of climate mitigation targets (Chapter 3).

The implementation of the PND was divided into three phases to measure the achievement of intermediate targets: 2019-22, 2023-30 and 2031-50. Costa Rica did not meet all its intermediate targets for the initial phase. As of February 2022, it had met 61% of these objectives, and the government expected to achieve 83% of them by the end of 2022. Most of the targets achieved or on track for achievement related to sustainable buildings, the industrial sector, agri-food systems and territorial management (Government of Costa Rica, 2022_[25]). The targets related to transport and waste were missed.

The authorities should thoroughly analyse the results of the first PND phase and harness the lessons learnt to improve implementation of the 2023-30 phase. To reach its 2030 NDC and carbon neutrality by 2050, Costa Rica should address planning, regulatory and political economy barriers (Groves et al., 2020_[26]). There is a need to improve co-ordination of mitigation actions between the central government and the municipalities, which share responsibilities over the large emitting sectors of transport and waste management. The administrative and financial capacity of municipalities should be strengthened. Securing the necessary public funding and mobilising private finance towards low-carbon investment will be crucial for the transition to a net-zero economy (Chapter 2). Achieving the PND targets would require massive investments, estimated at USD 37 billion in 2020-50, and generate more than USD 40 billion in net benefits (Groves et al., 2020_[26]). Implementing the PND would also yield numerous co-benefits. Reduced pollution would improve health, electrification would save fuel costs; and preserved and enhanced forests would preserve ecosystem services (Chapter 3).

Box 1.1. Costa Rica’s National Decarbonisation Plan to 2050

The PND lays out the strategy and actions to decarbonise the economy, articulated into ten main axes and eight transversal strategies, including policy and institutional reforms (e.g. green fiscal reform; attraction of foreign direct investment for the low-carbon transformation; and digitalisation, among others). At the heart of the PND are:

taking advantage of the country’s significant natural resource endowment, specifically its renewable hydro, solar and wind resources, which can potentially provide clean electricity for the whole economy
improving efficiency of and access to public transport
preserving and enhancing the carbon sequestration capacity of forest resources
improving processes to reduce energy use and carbon intensity in buildings, industry, agriculture and livestock
collecting, treating and re-using liquid and solid waste.

Under a business-as-usual scenario, Costa Rica’s net GHG emissions could increase from about 12 MtCO₂e in 2018 to almost 19 MtCO₂e by 2050. Under baseline assumptions, the largest reductions in net emissions would occur in the transport sector (-7.4 MtCO₂e by 2050), as well as agricultural, livestock and forestry sectors (-6 MtCO₂e). Reductions in buildings, industry and waste account for an additional reduction of 5.4 MtCO₂e.

The PND covers all sectors of the economy and all GHGs. Some key actions and targets are expected to deliver the largest emission abatement. These include the electrification of public and private vehicle fleet; increased reliance on public transport; electric trains for freight and passengers, especially in the Greater Metropolitan Area; upgraded electricity transmission and distribution systems to support electrification of the economy; improved energy efficiency and shifting to electricity use in buildings and industry; increased waste recycling and composting; completed sanitation and sewer system coverage; improved farming practices to reduce emissions from agriculture and husbandry; maintenance and increase of forest coverage.

Source: (Government of Costa Rica, 2018_[27]; Groves et al., 2020_[26]).

1.5. Accelerating the clean energy transition

1.5.1. Energy supply

Costa Rica’s long-standing use of renewables is an asset for reaching net zero. Renewables accounted for nearly half of total energy supply (TES) for most of the last ten years. This is well above the OECD average and the highest share among Latin American countries in the OECD (Figure 1.8). Notably, electricity generation has been based on renewable energy sources since 2015 (Figure 1.8). However, Costa Rica’s energy supply still relies heavily on oil products, which are primarily used for transport purposes. Oil, which is fully imported, accounted for the other half of TES in 2021. In 2019, the government suspended oil exploration and exploitation projects on its territory until 2050. The country is a founding member of the Beyond Oil and Gas Alliance of governments and stakeholders, which was launched at the 2021 UNFCCC Conference of the Parties to facilitate the managed phase-out of oil and gas production.

Figure 1.8. Renewables account for a large share of energy supply

Most renewable energy is of geothermal source, which accounted for 47% of all primary energy from renewables and nearly one-quarter of TES in 2021. In the same year, hydropower accounted for 31% of renewable primary energy and 16% of TES, followed by biomass and wind (Figure 1.8). Electricity generation from renewables has increased steadily over the past decade (Figure 1.8). This is mainly driven by more use of hydropower and wind. Hydropower is the main source of electricity generation (73% of power output in 2021), followed by wind and geothermal (about 12.5% each).

Electricity demand has been rising, increasing by over 30% in 2010-20. Electricity demand is projected to grow nearly four-fold between 2020 and 2050 to achieve Costa Rica’s net-zero goal (Box 1.1). An electricity-based transport sector will account for nearly half of power consumption forecasted in 2050. Electricity use in industry is projected to increase more than three-fold and electricity use in residential and commercial buildings is projected to double by 2050 (Groves et al., 2020_[26]).

Expanding and diversifying renewable electricity generation capacity will be crucial to maintain clean electricity generation and decarbonise energy use. Costa Rica has an excess electricity generation capacity, which can be used to meet the projected additional electricity demand at low costs (Groves et al., 2020_[26]). However, climate change is projected to severely affect hydropower production capacity by the end of the century, mainly due to a consistent decrease in precipitation and runoff (IEA, 2021_[28]). In addition, most hydropower potential has already been exploited. For example, about 35% of the remaining hydropower potential is inside indigenous zones, and another 20% in national parks and forest reserves. A large part of potential geothermal generation is also in national parks (Hernández-Blanco and Costanza, 2022_[29]).

To address this challenge, the seventh National Energy Plan (PNE) for 2015-30 promotes investment in renewable electricity other than hydro. Installed capacity of wind and solar power technologies has increased (Figure 1.9). Electricity generation from wind can complement hydropower throughout the year.4 Solar photovoltaics (PV) has limited potential in Costa Rica due to high cloudiness but can be used to power buildings. Installed capacity for biomass also increased from a small base. Most of the new capacity uses agricultural organic waste, mainly bagasse from sugar cane mills.5 Expanding energy generation from biomass will contribute to both waste recovery and reducing GHG emissions. The government plans to expand production and use of biofuels from agricultural organic waste to replace transport fuels. Work is ongoing to develop a national bioenergy strategy, as indicated by the PNE. The state-owned electricity company, Costa Rican Electricity Institute (ICE), plans to start generating wave power by 2030 (Hernández-Blanco and Costanza, 2022_[29]).

Figure 1.9. Costa Rica has increasingly invested in wind, solar and biomass electricity generation capacity

Costa Rica needs to upgrade its electricity grids and improve the operating efficiency of power systems to integrate rising generation from variable renewable sources and support growing electricity generation and use, particularly in transport. As recommended by OECD (2023_[3]), removing the various regulatory barriers to competition in the electricity sector will be essential to encourage investment and innovation in the sector. ICE is the largest single producer and distributor of electricity, in addition to being the transmission system operator. Only 30% of electricity can be produced by private companies, on the basis of tendering contracts with ICE. There is also a cap on foreign ownership of power generating companies.6 In 2022, the government presented a bill to reform the national electricity system, with a view to making it more efficient and removing some of the barriers to competition in the electricity market.

1.5.2. Energy use and intensities

In 2010-21, energy use increased at a slower pace than the economy, leading to a 20% decline in the economy’s energy intensity, in line with the trends observed on average in the OECD (Figure 1.10). The energy intensity of Costa Rica’s economy is less than 60% of the OECD average (see Basic Statistics), reflecting lower average income and living standards. Nonetheless, energy consumption trends are of concern, especially in the transport, residential and commercial sectors.

Figure 1.10. Energy intensity has declined, but energy use trends in transport and services are of concern

Transport is the main energy consumer, followed by industry. Road transport makes up nearly all energy use for transport purposes and accounts for nearly half of total final energy consumption (TFC). Energy use in road transport grew by over 30% in 2010-19. In 2020, despite a remarkable dip in consumption – linked to mobility restrictions related to COVID-19 – energy consumption for road transport was still 10% higher than at the beginning of the decade (Figure 1.10). Industry, mostly food processing, accounted for 23% of TFC in 2020. Industrial energy use declined in the last decade, following changes in production. Residential and commercial were 24% of energy use. Energy use in the service sector dropped with the pandemic, which hit tourism hard, but is likely to recover its previously rising trend. After a consistent decline in 2006-17, energy use in households picked up again at the end of the decade (Figure 1.10). Virtually the whole population has access to electricity in Costa Rica. The 0.3% of the population not covered live in rural areas.

A broader set of regulatory, fiscal and education measures is needed to encourage energy savings. Measures to improve energy efficiency have been limited. They include minimum energy performance standards (MEPS) and mandatory labels for some electrical household appliances and industrial motors. There are no MEPS for buildings, but a voluntary labelling and technical guidance for sustainable buildings has been implemented since 2020. A regulation for sustainable social housing, including energy efficiency parameters, was under development at the time of writing. The energy labelling criteria are aligned with the standards defined by the International Organization for Standardization and are co-ordinated with other countries in the region. The 1994 law on the rational use of energy allows for establishing fiscal incentives aimed at encouraging energy consumers, including companies, to acquire equipment producing small-scale renewable energy, high-efficiency equipment and electric vehicles (EVs). The goods and equipment benefiting from the incentives are defined by ministerial decree; the last one was issued in 2021.

In line with the PNE 2015-30, the government developed a National Strategy for Smart Grids 2021-31 to improve the operating efficiency of the electrical system, enhance electricity price competition and support diversification of renewable power sources and electrification of end-uses. The strategy set a target of 1 million smart meters installed by 2026, equivalent to about 60% of households. As of 2022, Costa Rica was on track to achieve the target, with about 740 000 smart meters installed, up from about 100 000 in 2019. Smart metering would also contribute to demand management and help consumers understand their energy use and adapt their consumption to prices.

1.6. Decarbonising transport

1.6.1. Mobility patterns

Costa Rica’s heavy reliance on road transport has led to rising environmental pressures. Transport, predominantly by road, was nearly half of total energy consumption and three-quarters of GHG emissions from fuel combustion in 2020 (OECD, 2023_[18]). Energy use for road transport and related GHG emissions grew by over 30% in 2010-19 (before dropping with the pandemic). Private cars account for most fuel use and related CO₂ emissions, followed by freight vehicles (Figure 1.11). Road vehicles, and especially motorcycles, are also a major source of air pollutants such as carbon monoxide (CO) and hydrocarbons (Figure 1.11). More than 80% of vehicles run on petrol and 18% on diesel. The vehicle fleet has grown by about 60% in the last decade, but more than half of vehicles are over ten years old.

Figure 1.11. Road vehicles are a major source of emissions of GHGs and air pollutants

In the GAM, the share of passenger travel by buses declined from 41% in 2007 to 34% in 2017 (CONARE, 2020_[30]). Urban and interurban railway services are limited; trains account for a minor share of public transport. For many people, generally corresponding to students and lower-income households, public transport is the only means of travel. Information on cycling and walking is limited. In 2015, cycling accounted for about 2% of total trips. Roads are mostly not safe for walking and cycling due to the lack of sidewalks and bicycle lanes. In 2012-15, 31% of transport-related fatalities in Costa Rica were cyclists and pedestrians (CONARE, 2018_[31]).

Costa Rica’s increasing car dependence arises from a long-standing policy and investment focus on road infrastructure, combined with unplanned urban development that has neglected access to public transport. The road network is extensive but of generally poor quality. It has suffered from years of underspending on maintenance due to weak governance, planning and execution (Chapter 2). Most of Costa Rica’s municipalities lack an up-to-date or completed land-use plan (Chapter 3). Much of the new built area is at the margin of urban areas, contributing to urban sprawl and car dependence. On average, settlements built between 2016 and 2019 were nearly 2 kilometres (km) from a bus stop (compared to a commonly accepted walking distance of 400-500 metres), with a large variability between the GAM and rural zones (CONARE, 2020_[30]).

The GAM has no integrated public transport system. Most bus lines pass through San José centre and interconnect only there, if at all (CONARE, 2018_[31]). Nearly 90 private bus companies operate over 400 routes, based on concession contracts. Each company sets its own prices for its routes, which leads to substantially different fares for similar journeys (CONARE, 2018_[31]). Bus frequency is generally inadequate to serve demand. Access to public transport varies substantially within the GAM. Two-thirds of the GAM population have good access to the bus network. However, the distance from a bus stop increases towards the outskirts of the GAM, where the lower-income households live (CONARE, 2021_[32]). Several municipalities have implemented actions to improve walkability and develop cycling infrastructure. However, progress has been slow and fragmented.

Inadequate public transport services, chaotic building development, and poor road design and quality have led to heavy congestion on the main national roads and in the four metropolitan areas of the GAM (San José, Alajuela, Heredia and Cartago). In a vicious circle, heavy congestion reduces public transport performance and attractiveness. The metropolitan area of San José is also a major crossroads for road freight. The only tool to manage congestion in the metropolitan area has been a driving restriction based on licence plates during weekdays.7 This measure has largely been ineffective because many households own more than one car, which allows them to circumvent the restriction. In 2017, the social costs of transport in the GAM were estimated at USD 3.1 billion (or about 5% of GDP), more than 90% of which were linked to accidents and road congestion (CONARE, 2018_[31]).8

Improving public transport, and walking and cycling conditions, is of outmost urgency to reduce car dependence and extend access to employment and social opportunities. The PND 2018-50 aims to reach 32.5% of passenger travels covered by public transport by 2035 (from 25% in 2018). It also aims to increase the share of travels by walking and cycling to 4% by 2035. The targets by 2050 are 45% for public transport and 10% for walking and cycling.

Some progress has been made in modernising bus transport in the GAM in recent years, including setting 68 km of priority bus lanes and assigning some concession contracts by sector (area) of the city rather than by route. In 2020, the Ministry of Public Infrastructure and Transport (MOPT) launched a plan to implement an integrated public transport system in the GAM in 2020-35. Among other goals, it aims to complete the sectorización of bus lines, grouping them into geographical sectors and sub-sectors. According to estimates, completing this process would increase travel speed by 61% and reduce GHG emissions by 506 tCO₂ per year (CONARE, 2018_[31]).

The institutional setting for transport policy is complex. In addition to the role of the MOPT, three autonomous entities and several councils are each responsible for a transport mode or infrastructure type. In 2005, responsibility over the network of municipal roads was transferred to municipalities. However, the transfer of financial and human resources needed to comply with this legislative change has not been completed. Lack of co-ordination between the Costa Rican Institute of Railways and the Council of Public Transport hinders development of an intermodal transport system in the GAM (CONARE, 2018_[31]).

The establishment of a public metropolitan transport authority could improve co-ordination of planning, investment and operation of transport infrastructure and services across municipalities in the GAM. Such an authority could also be tasked with implementing an integrated and multimodal transport system. In several large metropolitan areas in the world, including Barcelona, London, Medellín, Mexico City, Paris and Sao Paulo, the establishment of metropolitan transport authorities has been key to substantially improving public transport performance (ITF, 2018_[33]; UITP, 2022_[34]).

1.6.2. Electric transport

The PND 2018-30 puts great emphasis on electrifying public and private transport. It aims to achieve a 30% portion of EVs in the fleets of both buses and light vehicles (including cars) by 2035. It also sets the targets of 85% of EVs in the public fleet and 95% of EVs in the private fleet by 2050. Despite a rapid increase in sales over the last few years, EVs still represented 0.5% of the vehicle fleet in 2021 (Figure 4 in Assessment and recommendations). This limited deployment is common in other middle-income countries. Costa Rica shares with other emerging economies some challenges to develop electromobility, including weak electricity grids, reliance on second-hand vehicles and lack of fuel efficiency or CO₂ emission standards for vehicles (IEA, 2022_[35]).

In line with the 2018 National Plan for Electric Transport (PNTE), the government approved the regulatory framework for the promotion of EVs and installation of the charging network. EVs and their spare parts benefit from several tax exemptions (general sales tax, selective consumption tax and customs value tax). In 2020, these exemptions amounted to CRC 365 million (about USD 650 000) (Ministerio de Hacienda, 2021_[36]). In addition, private EVs benefit from other incentives such as green plates and dedicated and free parking spaces. The PNTE also foresees introducing favourable electric tariffs for EV recharging. The experience of the leading EV markets shows that EV purchase subsidies should be combined with stringent vehicle efficiency and/or CO₂ standards and higher taxation of internal combustion engine vehicles (ICEVs) (Chapter 2). This is crucial to reduce the difference in purchase price or lifetime cost between EVs and ICEVs. As the country’s EV market matures, purchase subsidies should be gradually phased out (IEA, 2022_[35]). Costa Rica should also continue to support the expansion of publicly available charging infrastructure and ensure equitable access to them for all communities. As of 2022, the network included 48 charging stations and 30 semi-fast chargers.

Measures are in place to foster EV deployment in the public sector and for public transport. As of 2022, the procurement procedures of 37 public institutions were favourable to EV purchase. Electric buses have been piloted on two routes in the GAM. Extending the use of electric buses faces various barriers, notably high investment and maintenance costs. The investment payback period goes well beyond the seven-year concession period. At the time of writing, draft legislation aimed to extend the concession term to 15 years to facilitate cost recovery. The government should strengthen the emissions standards for diesel buses and consider providing financial assistance to buy electric buses with a view to limiting the impact of high investment costs on bus fares.

The combination of EVs, improved public transport system and implementation of European-like CO₂ emission standards for vehicles would reduce transport-related GHG emissions by 10% per year (CONARE, 2018_[31]). As in other emerging economies, electrification of road transport should prioritise two/three-wheelers and urban buses, which are the most cost-competitive vehicle categories (IEA, 2022_[35]). The uptake of electric motorbikes would also contribute to reducing air pollution (Figure 1.11). Lower-income households depend on public transport for their mobility needs and would not be able to afford a private EV, even if subsidised. Consequently, investing in an extended and electricity-based public transport would help reduce car dependence and avoid exacerbating inequality.

1.6.3. Using green hydrogen for transport

With its large renewable power base and water resources (Section 1.9), Costa Rica is in a good position to produce and deploy green hydrogen to fuel transport vehicles and industry. As the country depends on imported fossil fuels, developing local clean fuels will not only decarbonise the transport sector but also improve its trade balance (Cordonnier and Saygin, 2022_[37]). Hydrogen could also be used to power hard-to-abate sectors that use oil, such as the chemical and steel industry, aviation and shipping.

Costa Rica has been piloting the application of hydrogen produced through its fully renewable electricity in the transport sector (Box 1.2). The PNE 2015-30 foresees development of a national hydrogen strategy. A green hydrogen bill was under discussion at the time of writing. However, there is a need to create a sufficiently large demand for hydrogen by stimulating deployment of hydrogen fuel cell buses and trucks (Cordonnier and Saygin, 2022_[37]). Significant infrastructure investment and technology will be needed to produce green hydrogen on a large scale and improve safety of its storage and transport. In addition, given the sizeable amount of water required for hydrogen production, this could compete with other water uses such as agriculture and drinking water supply. These trade-offs, as well as the opportunity of technological development, need to be carefully assessed.

Box 1.2. The Costa Rica Hydrogen Transportation Ecosystem project

The Costa Rica Hydrogen Transportation Ecosystem project was developed over the past ten years with a total investment of USD 8.8 million (49% from the company Ad Astra Energy and Environmental Services, 35% from the Costa Rican government, 9% from non-governmental organisations, 7% from other investments and sponsorships). The project aims to test the technology and understand how to operate green hydrogen infrastructure in tropical climates and to mitigate risks related to high temperatures. The project started operations in 2018 in the Guacanaste province. Hydrogen was produced with solar and wind electricity. This green hydrogen was then used in a “Nyuti” bus, the first hydrogen-based transport unit in Costa Rica. The Nyuti bus can transport 35 passengers, has a range of 338 kilometres (km) and a speed limit of 110 km per hour. Since 2019, the green hydrogen project has been feeding a fleet of four Toyota Mirai that operate in the tourist areas of Guanacaste.

The project will be continued by the joint venture ProNova Energy (between Ad Astra and Mesoamerica, a renewable energy investment company), which will expand the electrolyser capacity of the current pilot project. This project, expected to cost USD 6 million and become operational in 2024, will produce 450 kilogrammes of hydrogen per day and operate a fleet of around ten buses or trucks. Under the pay-per-use model under discussion, Ad Astra/ProNova Energy plans to lease vehicles (including the fuel) at a given tariff per kilometre.

Source: (Cordonnier and Saygin, 2022_[37]).

1.7. Improving air quality

1.7.1. Emissions of air pollutants

Air pollution emissions have gradually increased over the last 20 years in Costa Rica. Sulphur dioxide (SO₂) and non-methane volatile organic compounds (NMVOCs) are the air pollutants with the highest increase, followed by CO, NO_x and black carbon (BC). NO_x emissions, mostly from road vehicles, have almost doubled since 2000 (OECD, 2022_[38]). Road transport is also a major source of NMVOCs and CO emissions (Figure 1.12). Sulphur oxide (SO_x) emissions declined between 2014 and 2017 thanks to a gradual switch to lower sulphur content fuels in industry, the largest SO_x source. However, in 2017, SO_x emissions were three times higher than at the beginning of the century (Figure 1.12). Fuel combustion, especially from vehicles, is the main cause of air pollutants in the country, accounting for 70-95% of total emissions (Figure 1.12).

Figure 1.12. Emissions have more than doubled for most air pollutants in Costa Rica

1.7.2. Air quality and exposure to pollutant concentrations

Nearly all Costa Rica’s population is exposed to harmful levels of air pollution from fine particulate matter (PM_2.5), i.e. to PM_2.5 concentrations above 10 microgrammes per cubic metre (µg/m³) (OECD, 2023_[40]). This poses risks to human health as it is above the 2021 World Health Organization (WHO) Air Quality Guidelines of 5 µg/m³ of PM_2.5. Much of the population is exposed to even higher PM_2.5 concentration (above 15 µg/m³), with some variation across provinces (Figure 1.13). Exposure to PM₁₀ concentrations has declined since 2010 and concentrations of PM_2.5were relatively stable between 2013 and 2020. Since 2013, when PM_2.5monitoring started in the GAM,9 the annual average concentration at all sites has been above 15 µg/m³(MINSA et al., 2020_[39]).

Health restrictions imposed on mobility to prevent COVID-19 infections, especially at the beginning of the pandemic, led to reduced air pollution in several sites in the GAM. For example, the concentration of nitrogen dioxidein San José dropped by 32.4% between 2018 and 2020 (MINSA et al., 2020_[39]). However, these air quality improvements can be lost due to several factors: easing of vehicle restrictions with reactivation of the economy; dependence of public transport on diesel fuel; and weak vehicle inspections (CONARE, 2022_[10]).

Contrary to the OECD average, the average number of premature deaths caused by PM_2.5 exposure in Costa Rica during the last decade has slightly increased. Cardiovascular diseases and chronic respiratory complications were the most common causes of death (IHME, 2022_[41]). If PM₁₀ concentrations were within the previous 20 µg/m³ WHO guideline, Costa Rica would save more than USD 17 million per year in health spending linked to chronic bronchitis and generate a global welfare gain of USD 186 million (Alpízar, Piaggio and Pacay, 2017_[42]). Mortality from exposure to ambient PM_2.5reached its highest level in 2019, with 185.8 per 1 million inhabitants (OECD, 2023_[43]). Moreover, throughout 2017-20, different natural phenomena affected air quality in the country, including volcanic eruptions and dust from the Sahara. These phenomena pushed exposure beyond compliance with national regulations, aggravating the population’s health risk linked to air pollution.

Figure 1.13. Concentration levels of fine particulate matter surpass WHO standards

1.7.3. Regulations and monitoring

In 2022, the government strengthened emissions limits in place since 2011 for boilers and furnaces in all sectors. Emission limits are established for particulate matter, SO₂ and NO_x. Operators have emission reporting obligations and are inspected by the health ministry. Vehicle emission standards have been in force since 2018, but they are lenient. The entry into force of stricter Euro 6 or Tier 3 emission standards was first postponed from 2021 to 2023 and subsequently to 2027. The second postponement aimed to contain rising energy prices, as the stricter vehicle standards would entail the import of more expensive fuels (Chapter 2).10 Two-wheelers are the main source of CO and hydrocarbons (Figure 1.11). Regular vehicle inspections (RTV) only check emissions of CO, CO₂ and hydrocarbons for petrol vehicles and opacity for diesel vehicles. However, many vehicles continue to circulate even after failing the RTV due to lax enforcement (CONARE, 2020_[30]). Stricter limits on sulphur content of petrol were expected to become law in September 2022.

The Ministry of Health, with the help of experts from other institutions, co-ordinates and designs the National Air Quality Monitoring Network, as well as approving and disseminating the data gathered. The National University of Costa Rica monitors air quality, but constrained budgets and limited support from the central government have hampered the consistency and expansion of its work.

Although air quality limits are set in legislation, there is no penalty for exceeding the limits. The monitoring network is too limited to generate sufficiently frequent and consistent data on air quality and exceedances of thresholds. As of 2022, the country’s network included only two automatic and continuous monitoring stations, with three more expected in 2023, all in the GAM. Several manual stations are also in place, but data are gathered only three times per week. This lack of data on air pollutants emissions and air quality, as well as the absence of continuous monitoring, is a serious concern since it restricts establishment of models, targets or baselines. The country needs to expand its air emissions monitoring network to other locations both inside and outside the GAM. The country should contemplate use of automatic sensor and satellite data when possible for more systematic and automatic information collection.

Costa Rica has developed a webpage and mobile application to help map and present continuous data on air quality (i.e. Costa Rican Air Quality Index). This puts the country on the right track to improve information diffusion, one of 11 priorities in the Latino American Intergovernmental Air Pollution Network. These tools will also serve to warn the population of possible air pollution exposure with high impact on health, as directed by the 2016 Air Quality Regulation for Air Pollutants.

1.8. Moving towards a circular economy

1.8.1. Waste and materials management

Material consumption, intensity and environmental footprint have increased since 2000 driven by urbanisation, and economic and population growth. However, the increase was slower than GDP growth, resulting in improved material productivity. Non-metallic mineral resources and biomass accounted for 56% and 34% of material consumption, respectively, in 2019 (BCCR, 2022_[44]). This mainly took the form of construction materials from the extraction of sand and gravel, and imports of chemicals and fertilisers.

Costa Rica’s municipal waste generated per capita is among the lowest in the OECD (see Basic Statistics), partly reflecting low-income levels (OECD, 2022_[45]). However, the generation of municipal waste has grown. During the COVID-19 pandemic, household waste rose by 24% compared to 2019 levels due to teleworking practices (Figure 1.14). The expected increase of population and per capita income, and resulting changes in consumption patterns, are likely to result in higher waste generation.

Since 2010, trucks have collected most household waste, but nearly 10% of households still burn or bury it (INEC, 2022_[46]), mainly due to low coverage in certain areas of the country. Less than half of households properly separate their organic waste, glass, paper, cardboard and aluminium (Figure 1.15). Overall, between 44-52% of biodegradable waste generated by households is adequately retrieved, with quantities varying given a household’s social status and living area (CNA, 2022_[47]). This is a pressing issue since between 50-60% of waste generated by households and communities in Costa Rica is biodegradable, with food waste an important component (Soto Córdoba, 2019_[48]). The country has set a target to halve biodegradable waste discharged in landfills by 2050 (CNA, 2022_[47]).

Figure 1.14. Households generate more than two-thirds of Costa Rica’s municipal waste, which is mostly disposed of in landfills

Over the past 15 years, Costa Rica has closed 48 illegal dumpsites. However, the country still relies on landfills for waste disposal, which exert pressure on ecosystems and human health. In 2021, 7 landfills and 53 dumpsites were still open, receiving nearly 80% of the total waste generated (Figure 1.14). This is one of the highest shares of landfilled waste in the OECD (Figure 5 in Assessment and Recommendations). Waste disposal in inappropriate sites remains considerable, predominantly in rural regions such as Brunca (Soto Córdoba, 2019_[48]). Additionally, according to the First Situation Report of the Costa Rican Solid Waste NAMA (Box 1.3), around 361 000 tonnes (t) of waste are not adequately managed. Estimating the amount of improperly disposed waste in the country is also challenging. Thus, it is difficult to know how much waste could be washed into sewers or end up in rivers, wetlands and/or oceans (MINAE, 2021_[49]).

Costa Rica has set extended producer responsibility schemes for 14 types of products.11 However, they do not cover major waste streams (e.g. construction waste, packaging) and lack compulsory recovery (Soto Córdoba, 2019_[48]; Abarca-Guerrero et al., 2022_[50]). Costa Rica has also started to using construction and demolition waste as a base for roads. Around a third of the waste produced in Costa Rica is recoverable (Soto Córdoba, 2019_[48]). Recovery rates have increased since 2016 but remain among the lowest in the OECD (OECD, 2022_[45]). In 2021, only 7% of total waste generated was recovered, with recycling and composting representing 4% and 3%, respectively (Figure 1.14). Thus, Costa Rica failed to meet its 15% waste recovery target set in the 2016-21 National Strategy for Waste Separation, Recovery and Valorisation (ENSRVR) (MINSA, 2016_[51]; OECD, 2022_[45]). Only metals and plastics are recovered and exported, mainly to Asia, Europe and the United States (BCCR, 2022_[44]).

Figure 1.15. Most households rely on garbage trucks, even as waste separation gains in popularity

Box 1.3. Solid Waste NAMA, a tool to enhance climate mitigation

In 2019, the solid waste sector in Costa Rica emitted around 1 329 ktCO₂e (Soto Córdoba, 2019_[48]), including emissions from landfills, transport and recycling. To achieve its net-zero objective by 2050, Costa Rica formulated a Nationally Appropriate Mitigation Action (NAMA) for the solid waste sector. This engaged the Ministry of Health, the Climate Change Directorate of the Ministry of Environment and Energy (MINAE), the Deutsche Gesellshaft für Internationale Zusammenarbeit (GIZ), and other key stakeholders such as the Institute for Municipal Development and Advisory, the Union of Local Governments and the Chamber of Industries.

The NAMA sets a mitigation target of 480 ktCO₂e per year on average through the active capture of gases (especially methane) generated in landfills and their possible use for electricity generation. It fosters treatment of organic waste for biogas generation and waste segregation at source to increase the number of dry materials (e.g. plastics, paper/cardboard, metals and glass) recovered for recycling. Moreover, it seeks to enhance efforts for a better integrated waste management, improve environmental education to promote use of family and farm composting, and facilitate implementation of advanced technologies.

Source: Soto Córdoba (2019). DCC (2019), NAMA Residuos Sólidos, NAMA-Residuos-Solidos.pdf (cambioclimatico.go.cr) / (accessed 1 December 2023).

Despite higher awareness of plastic pollution, around 40 150 tonnes of plastic in Costa Rica still end up in natural environments each year, putting biodiversity at risk (UNDP and University of Costa Rica, 2019_[52]). On average, about 15 truckloads of plastics are dumped into the sea each year (CNA, 2022_[47]), affecting fishing, marine transport, tourism and livelihoods in coastal areas. The 2021 “Law to Combat Plastic Pollution and Protect the Environment” prohibits state institutions from using single-use plastics, requires all plastic packaging to be recyclable by 2030, bans the marketing and free distribution of single-use plastic (e.g. plastic straws, plastic bags), and requires differentiated containers for reusable and non-reusable plastic waste in all businesses that sell single-use plastic products. In addition, a ban on polystyrene cups and plates is in place. Enforcement of these regulations will be key to improve waste recovery and endorse behavioural changes. Work is under way in Costa Rica to align its national policies with international plastic pollution initiatives.

A mix of financial, institutional and socio-cultural factors limit recycling and recovery of waste (Table 1.1). The country would highly benefit from a more selective waste collection and better awareness and communication on waste separation at source. Incentives for the use of recovered and recycled materials as inputs into production processes are needed to develop a domestic market. An integrated and publicly accessible digital platform is needed to provide data on waste collection and treatment, as well as quantities of materials disposed and viable for recycling.

Table 1.1. Barriers for waste recycling and recovery
Financial	Institutional	Socio-cultural	Technological
Low international prices of recycled materials, not covering operation and investment costs.	Excessive requirement for permits, as well as complex and slow registration processes.	Poor separation of recyclable materials in households.	No technical support from knowledge organisations for the transformation of materials.
Limited market; a few companies determine local prices and buy materials.	No government support for procurement of products with recycled material.	Little recognition of informal waste pickers and their work by municipalities, businesses and citizens.	Companies lack knowledge on modern machinery and technologies to improve and increase production processes.
High direct costs: taxes, social charges, electricity prices, high transportation costs.	Lack of support to the recycling sector from decision makers.	Different stakeholders in the recycling value chain do not understand each other’s needs.	Workers at recycling-related business are low skilled.
Recycling sector has difficulties accessing credit due to guarantees needed; equipment is not allowed as collateral; high interest rates.	Unfair competition from non-formal companies, which operate with lower costs.	Lack of recognition of the good initiatives and investments in the solid waste sector.	There are no detailed statistics on waste collection by sector, available materials, real savings or ecological footprint related to recycling.
Lack of measures to consider waste pickers when the landfills are closed.	Formal companies can no longer buy material from informal waste pickers.		Materials cannot be transformed in the country.
High costs and complicated processes to formalise waste pickers and recycling-related businesses.	Most municipalities do not collect waste separately so most of it ends in landfills.
Important investments needed in waste infrastructure and equipment.
Source: (Abarca-Guerrero et al., 2022_[50]).

1.8.2. Governance and strategies for waste management

Costa Rica has been implementing key actions and strategies to improve its waste management since the enactment of the 2010 Law on Integrated Waste Management and its accompanying regulations. These include the ENSRVR, the 2019-25 Integrated Waste Management Plan, the 2021-30 Marine Litter National Plan and the 2020-50 National Composting Plan. At the time of writing, the government was updating the National Integrated Waste Management Plan.

Despite the legal requirement of establishing an integrated waste management plan for areas in which they have stewardship, 15 of 82 local governments do not have such a plan. Moreover, nearly 30% of municipalities do not have a regulation for waste collection, deposit and treatment services (CGR, 2021_[53]). Local governments are also required to guarantee selective, accessible, regular and efficient waste collection services for all inhabitants in their territory. Yet most municipalities in border areas, as well as those in the province of Limón, have collection rates below 40%. For the 24 municipalities offering separate waste collection services, coverage is limited to 20% of resident households (CGR, 2021_[53]).

Local governments face high operating costs that are not reflected in waste collection tariff models. In 70% of municipalities, the fees are outdated, and 25% are in deficit (CGR, 2021_[53]). Therefore, the Municipal Code encourages municipalities to periodically review their waste collection tariff models and cost structures. In addition, compliance by municipalities with the Integrated Waste Management Legislation is poor (Soto Córdoba, 2019_[48]). Local governments will need further technical and financial resources to promote initiatives around waste separation, recycling, composting and re-use. Co-ordination with both the central government and private sector should be strengthened. This will help build capacity in municipalities to provide better quality public services.

More than 90% of municipalities have developed strategies to motivate citizens to sort waste more effectively, while encouraging selective waste collection, cleanliness of public spaces and integrated waste management (CGR, 2021_[53]). Municipalities in Costa Rica could improve waste service delivery and encourage job creation by integrating informal waste pickers and public-private initiatives such as Ecoins (Box 1.4) into their waste management plans. The 2016-2021 ENSRVR did include informal waste pickers as key actors, but Costa Rica still needs to strengthen its support to them. This should include improving job conditions and raising awareness in the public and private sector, as well as among the population, of their value.

Box 1.4. Ecoins, a public-private partnership to encourage recycling

What is it?

Ecoins is a digital purchasing power parity in Costa Rica that rewards recycling and encourages households to change consumption habits. It was established through a public-private partnership between the Ministry of Health and sponsoring companies. In 2019, the online platform counted 46 000 members and more than 250 recovery centres and recovered 14 million units of materials. Apart from benefiting households, this initiative offers a win-win for other key stakeholders. Collection centres, for example, benefit from a productivity and profit increase with improved selective waste separation and a higher volume of recoverable waste in good condition. Manufacturers can showcase their sustainable offer of goods and services, while improving their product life cycle. Meanwhile, municipalities receive support to ensure more sustainable waste management, fewer landfill costs, and more green businesses and jobs in their cantons.

How does it work?

Individuals subscribe to an online platform to deposit their waste at the closest collection centre. Waste must be cleaned and separated into plastic (PET bottles and HDPE gallons), glass, Tetra Pak, tinplate (tuna or sardine cans) or aluminium. A value is then attributed to the type of waste collected based on the market rate for recycled materials. Users then benefit from an amount of Ecoins, exchangeable for discount coupons for sustainable products and experiences.

Note: The materials collected include aluminium, plastics, glass, paper and cardboard, oils, tyres, electronics, organics, inks, toners and expired medicines.

Source: Ecoins (2022), Preguntas frecuentes, Ecoins, San José, https://ecoins.eco/preguntas-frecuentes/ (accessed 9 January 2023); Ministry of Health (2018), Costa Rica estrena moneda: los Ecolones, Ministry of Health, San José. Se presenta gran alianza público-privada como herramienta para cumplir la Ley 8839 de gestión de residuos sólidos - Costa Rica estrena moneda: los ecolones (ministeriodesalud.go.cr) (accessed 9 January 2023); Soto (2019).

Costa Rica has launched education campaigns on waste sorting and recycling in schools. This is a step in the right direction, but broader and more regular education, training and awareness-raising campaigns are needed to encourage households and businesses to change behaviours. In the case of recoverable and organic waste, municipalities need to encourage small and medium-scale separation and treatment systems by and for citizens. Moreover, they can create incentives to reward households that reduce their organic waste and embrace responsible practices such as composting. Promoting the generation of compost from the significant share of organic waste produced by households and the re-use of recoverable waste will add value. Moreover, it will help fill the gap of sound waste collection infrastructure and services, while reducing pressures on landfills and GHGs emitted by the sector.

1.8.3. Strategies and actions for a circular economy

With the ongoing work on the National Circular Economy Strategy, Costa Rica aims to facilitate the transition to a circular economy and enable climate mitigation and resilience in the productive chain. The strategy has a special focus on activities linked to industrial production, agri-food systems, tourism and construction, given their environmental impact. An inter-sectoral and multi-stakeholder Technical Committee of Circular Economy (CITEC) was established to oversee policy alignment with the circular economy principles. Improving waste management and circularity is among the pillar of Costa Rica’s strategy to reach net zero by 2050. The PND 2018-50 foresees the implementation of a NAMA on waste (Box 1.3).

At MINAE’s request, the Tropical Agricultural Research and Higher Education Center (CATIE) developed step-by-step guidelines to facilitate the transition to a circular economy for local governments. In 2022, more than 40 municipalities were trained on the matter. The Institute of Technical Standards of Costa Rica developed a technical standard (INTE G106:2020) to guide implementation of the circular economy principles in organisations.

Focus on agri-food systems

Costa Rica has been implementing measures to improve agricultural waste management and organic waste recovery, although more efforts are needed. Nearly half of farms still do not treat their solid waste in any way (Suárez-Espinoza, 2022_[54]). The National Bioeconomy Strategy 2020-30 incorporates the issue of agricultural waste through the axes of sustainable rural development and better environmental management in the processes and creation of value networks. With the seventh National Energy Plan 2015-30, Costa Rica also seeks to promote residual biomass from agriculture, forestry and fishing processes as a source of energy. The country would benefit from scaling up an education campaign on organic agricultural waste to farmers, producers and technicians, and promoting projects on its use in the industrial and food sector (Suárez-Espinoza, 2022_[54]).

1.9. Managing water resources and water supply and sanitation services

1.9.1. Water quantity and quality

Costa Rica has abundant freshwater resources as measured by renewable freshwater resources per capita.12 Though freshwater withdrawals steadily increased over 2010-20, abstractions as a share of total renewable resources remain below the threshold for water stress (see Basic Statistics).13 Hydropower accounts for the largest share of freshwater abstractions (mainly non-consumptive use), with agriculture the second largest user. Despite abundant freshwater resources, high levels of losses from public water supply and irrigation networks are problematic. Water losses as a share of total withdrawals for irrigation declined sharply in 2018, with a slight increase from 2020 to 2021, reaching nearly 40% in 2021. Meanwhile, losses in public water supply remained relatively high over the period, rising to just over 65% in 2021 (Figure 1.16). This underscores the need for renewal and upgrading of ageing infrastructure. The Non-Revenue Water Reduction and Energy Efficiency Optimisation Project diagnosed challenges related to water losses and developed an action plan to address them.

Figure 1.16. Water losses remain high, especially from the public water supply network

Water pollution and deterioration of water quality in rivers are among the major environmental challenges in Costa Rica (CONARE, 2022_[10]). The 2013 Water Agenda of Costa Rica highlighted these are also among the main environment-related concerns voiced by the public, as shown by the significant share of legal complaints to the Administrative Environmental Tribunal related to negative impacts on water bodies (MINAE, 2013_[55]). A pilot programme to monitor water quality was conducted in 2015-20. Its results informed the update of the National Plan for Monitoring the Quality of Surface Water Bodies. However, monitoring remains at early stages and is not sufficient to provide an accurate and comprehensive understanding of the state and evolution of water quality. Although most river basins are monitored, many water bodies only have a few monitoring sites. Further, data are not collected consistently across monitoring sites and pollution parameters at regular intervals. This hinders establishment of a robust baseline on water quality and understanding of changes over time. More comprehensive and robust water quality monitoring is needed.

MINAE and the Ministry of Health share responsibility for monitoring and enforcement of wastewater discharges. The Water Directorate of MINAE carries out inspections and reports violations to the Ministry of Health, which can request a corrective action plan. In cases of non-compliance, the Water Directorate does not have authority to impose sanctions or fines, but it can increase the environmental fee for discharges. Enforcement of violations of wastewater discharge standards should be strengthened with increased sanctions for non-compliance.

1.9.2. Water policy framework and governance

Costa Rica has a number of strategies, plans and policy frameworks related to water, though many are outdated. The National Plan for Integrated Water Resources Management of 2008, the National Water Policy of 2009 and the 2013 Costa Rica Water Agenda set out the main strategic goals and frameworks for water management.14 Despite lacking an updated Water Law, which dates from 1942, the country has made progress to establish policies and governance arrangements to support water management (GWP, 2020_[56]). The move to update the water strategy is a welcome development to ensure it is fit for purpose to address current and future challenges, including a focus on improving water quality and enhancing resilience to climate change. The new water policy framework and implementation of river basin planning should reflect the results of extensive consultations with stakeholders and indigenous communities.

Costa Rica has made progress on water governance with the establishment of regional stakeholder forums and river basin planning. The National Water Governance Mechanism was established in 2018 to provide a platform for dialogue with civil society and public institutions. As in many other countries, a large range of actors at multiple scales is responsible for water management, creating overlap and duplication. Reviewing the institutional arrangements to clarify roles and responsibilities and streamlining co-ordination mechanisms can support more effective and efficient water management.

Costa Rica made important strides in strengthening the allocation regime to manage water abstractions. Water abstractions are managed through concessions, which are granted for a specific use and maximum volume in a given period. Concessions may be granted for up to 30 years, with the expectation of periodic renewal. If a concession is not used during the period, it will be lost – a “use it or lose it” approach. Trading, leasing and transferring of concessions is not allowed. If there is a need to curtail water withdrawals (e.g. due to periodic water shortage), there is a pre-defined order of priority uses: domestic, energy production, industry and, finally, agriculture (OECD, 2015_[57]).

To better account for environmental needs in water allocation decisions, a methodology was formalised in December 2021 to define ecological flow requirements and assess the impact of water concessions granted. Establishing mechanisms to allow MINAE to adjust water volume in concessions is also important to improve flexibility of water allocation arrangements and adjust to changing conditions, including increased variability due to climate change (OECD, 2015_[58]). To that end, the development of a climate change indicator to inform adjustment of concessions was a promising step. MINAE is piloting the indicator in the Tempisque River, where abstractions are monitored monthly during the dry season due to the very low flows that can occur and resulting conflicts related to water use.

A regional control programme that monitors water abstractions has received additional human resources. Nevertheless, the Water Directorate received more than 120 complaints in 2021 and 2022 related to illegal water abstraction, pollution and illegal construction affecting water bodies, among others (Dirección De Agua, 2022_[59]). Regarding monitoring of water abstractions, inspections are mainly random or in response to complaints to the Water Directorate.

1.9.3. Economic instruments for water management

Costa Rica has several economic instruments to manage the quantity and quality of water. For water use, the Water Utilisation Levy (CAA) manages water use and raises revenue for the sustainable management of water resources.15 All users abstracting water from surface water or groundwater bodies must have a concession and pay the corresponding levy. The amount of the CAA should, in principle, reflect the value of use and the environmental service provided by the water resources. Amounts levied are differentiated by the type of use and type of source.16 The amount of the levy is higher for commercial, industrial and tourism uses; followed by agri-business and household uses, with the smallest amounts levied for aquaculture and hydropower. Overall, the amounts levied by the CAA are very low (in 2022, the highest rate was CRC 3.95, equivalent to USD 0.007 per m³ of water). It raises only negligible amounts of revenue, limiting their use as an economic incentive for water use and their contribution to raising revenue for sustainable water management.

The Water Discharge Levy (CAV) applies the polluter-pays principle with a fee on wastewater discharge, based on pollutant loads discharged. The parameters considered are Chemical Oxygen Demand and Total Suspended Solids.17 The law allows MINAE to extend the CAV to cover other pollution parameters but only after consulting stakeholders and with technical and scientific justification. The CAV is complemented by the 2007 Regulations for discharge and re-use of wastewater. These charge a differentiated amount depending on whether discharges are above or below the value of the allowed parameter. Funds are earmarked for purposes established by law.18 Coverage of the pollutants under the CAV could be broadened to apply the polluter-pays principle more fully.

1.9.4. Water supply and sanitation services

There is an urgent need to scale up investment to expand water and sanitation services and wastewater treatment. In 2020, about 80% of the population benefited from access to safely managed drinking water,19 but progress to increase access has stagnated. Access to safely managed sanitation has deteriorated from 35% in 2010 to 30% in 2020 (UNICEF, 2023_[60]). Costa Rica lags considerably behind OECD averages and other countries in the region for the share of population with access to safely managed sanitation (Figure 6 in Assessment and Recommendations). The country also faces challenges to identify vulnerable populations, including the elderly, populations with specific health needs and Indigenous Peoples, among others, which require access to drinking water and sanitation (Government of Costa Rica, 2019_[61]).

The lack of wastewater treatment is also a major issue, with implications for public health and water quality. A large share of wastewater from homes and industries flows into rivers without treatment. Only about a quarter of Costa Rica’s population is connected to a public sewerage network, a low share compared to OECD countries and others in the region (Figure 1.17). The majority of population has independent wastewater treatment (septic tank), while less than 10% are connected to a public wastewater treatment plant (Figure 1.17). Septic tanks usually only capture a small share of wastewater from households (mainly sewage), while the remaining wastewater is disposed in water bodies untreated. Further, the construction, operation and maintenance of septic tanks are not supervised (MINAE, 2013_[55]). Unless carefully managed and monitored, septic tanks can leak into the soil and groundwater, resulting in contamination. Only about 15.5% of the sewage collected receives some type of treatment (CONARE, 2022_[10]).

The Costa Rican Institute of Aqueducts and Sewers (AyA) plans and delivers drinking water and sanitation services, and manages stormwater drainage. AyA can delegate responsibility for water provision and administration in smaller communities and rural areas to community water associations. The financing of WSS services is based on the tariff system regulated by the Public Services Regulatory Authority (ARESEP). WSS tariffs do not reflect the full economic cost of service provision; significant cross-subsidies among users exist. Last year, ARESEP approved a temporary reduction in rates for water supply and sewerage services. Users of the National Irrigation and Drainage Services also benefited from a temporary rate reduction. Tariff levels should better reflect the costs of service provision and be based on long-term strategic investment plans. Targeted programmes to address affordability issues should be strengthened. A National Program of Subsidies for Drinking Water and Related Services 20 promoted by AyA allows access to funds to provide drinking water services to families in conditions of both basic and extreme poverty (Government of Costa Rica, 2019_[61]). Nevertheless, identifying and targeting those who could benefit remains challenging.

Figure 1.17. Wastewater treatment lags severely behind other countries in the region and the OECD

Costa Rica has a dedicated programme to scale up investment in sanitation and wastewater treatment. However, the pace and scale of investment are not commensurate with the investment needed to reach the target of universal coverage. The 2016 National Wastewater Sanitation Policy (PNSAR) set an objective to achieve, by 2045, the safe management of all wastewater generated in the country. Recently, a new treatment plant (Los Tajos) was commissioned to serve a large part of the wastewater generated in the GAM of San José (OECD, 2023_[3]). However, under business as usual, only about 15% of the population will be connected to public wastewater treatment systems by 2045, far from the 100% target in the PNSAR. If plans are executed, coverage is estimated to reach 38% (CONARE, 2021_[32]). Over 2012-19, most investment in water and sanitation was allocated to water supply, with a smaller share for wastewater treatment (Figure 1.18). The Comptroller General has raised concerns regarding delays and cost overruns in the construction of the metropolitan sewerage system. It has highlighted that investment to date to improve sewerage and wastewater sanitation is only a fraction of requirements (Bnamericas, 2021_[62]).

A significant share of investment in public works relies on public funding and loans from development partners. Cost recovery from WSS tariffs and revenue raised by the CAA and CAV are limited. The country could benefit from long-term strategic financial planning for water infrastructure investment. This could include exploring a broader range of options to mobilise additional finance (such as public-private partnerships, use of proceeds bonds and guarantees, among others) (OECD, 2022_[63]). Costa Rica already has experience with green bonds (see Chapter 2), including for water investments. In 2021, ICE was the first hydropower operator issued a green bond aligned with sustainable hydropower criteria of the Climate Bonds Initiative. The revenue raised was used to refinance debt incurred to build the Reventazón Hydropower Plant (IHA, 2021_[64]).

Figure 1.18. Investment has been allocated largely to water supply, with a smaller share for wastewater treatment

Costa Rica also has a dedicated water fund to raise and disperse funding to support the protection and conservation of water resources in the sub-basins of the Grande River and Virilla River. The fund, Agua Tica, provides a collective vehicle to pool funding and technical capacity from various sources, including public institutions, private companies and civil society. It is based on a trust model. Funding is dispersed to projects that support the protection of the watershed, guided by scientific research (Agua Tica, 2022_[65]).

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Notes

← 1. The Greater Metropolitan Area comprises the four largest cities (San José, Alajuela, Cartago and Heredia).

← 2. The areas most affected by extreme flooding are Guanacaste and the provinces of Alajuela, Heredia and Limón (ECLAC, 2018_[12]).

← 3. The other countries are Chile, Colombia, Guatemala, Mexico and Uruguay.

← 4. The cycles of the El Niño phenomenon (dry years) have windier conditions; in La Niña cycles (rainy years) there is less wind but more hydroelectric generation. The wind pattern in Costa Rica is stronger during the summer than in winter.

← 5. The dry pulpy fibrous material that remains after crushing sugarcane stalks to extract their juice.

← 6. Costa Rican companies should own at least 35% of the capital of power generating companies.

← 7. Vehicles with the licence plate ending in 1 or 2 cannot enter the area within the San José ring road on Monday; those with licence plates ending in 3 or 4 cannot circulate on Tuesday, and so on. If a household owns two or more vehicles under restriction on the same day, they can transfer the restriction to the following day for one of the vehicles.

← 8. The costs of air pollution and GHG emissions due to transport were estimated at USD 152 million and USD 17 million, respectively.

← 9. Results are from established monitoring sites and do not necessarily measure concentrations that are maintained or persistent in other parts of the GAM or the country.

← 10. For comparison, Euro 6 standards have been in force in the European Union since 2014 and Tier 3 standards have been in force in the United States since 2017.

← 11. These include used tyres, lead acid batteries, watch batteries and other batteries, air conditioners, refrigerators, refrigeration transport and industrial refrigeration equipment, used lubricating oil, plastic containers to contain lubricating oils, metal containers, plastic and glass to contain agrochemicals, electrical and electronic appliances, fluorescent and compact light bulbs, refrigerants, mattresses, polystyrene, motor vehicles and special equipment.

← 12. In Costa Rica, there are 34 hydrological basins and 59 known aquifers (OECD, 2015_[57]).

← 13. Water stress is measured as water abstractions as a share of total renewable resources. Under 10% is considered as no water stress (OECD, 2012_[66]).

← 14. The 2013 Water Agenda set out six strategic goals expected to be achieved by 2030: i) clean rivers and protected aquifers; ii) improving the governance of water resources; iii) efficient and equitable use for all uses; iv) investment for water infrastructure; iv) a new culture of water: restructuring current practices, habits, valuation and perceptions about water resources in the country; and v) information for decision making.

← 15. Revenue raised by the CAA is allocated as follows: 25% to the National System of Conservation Areas to carry out projects for the protection of water resources; 25% to the Fondo Nacional de Financiamiento Forestal (FONAFIFO) to finance payment for ecosystem services programmes on private land; 5% to the Commission for the Regulation and Management of the Reventazón River Basin (COMCURE); and 45% to the Water Directorate for projects to manage water resources.

← 16. CAA 2022 amounts available at this link https://da.go.cr/wp-content/uploads/2017/07/CAA-importes-por-usos-2022.pdf.

← 17. The amounts established for collection are: CRC 127.34 for each kilogramme of COD discharged; CRC 109.98 for each kilogramme of TSS discharged. The amount for each pollution parameter is adjusted annually to reflect inflation.

← 18. Over 60% of the revenue raised by the CAV goes to fund sanitation and wastewater treatment projects.

← 19. As defined by the target 6.1.1. under SDG 6 on clean water and sanitation.

← 20. Executive Decree N.39,757-MINAE of 2016 and N.40,711-MINAE of 2017.

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