Mainstreaming Market-Based Instruments for Environmental Management Project

Abstract*

The Mainstreaming Market-Based Instruments for Environmental Management Project enhances the provision of environmental services significant at the national and global levels, and secures their long-term sustainability through a scaled-up payment for environmental services system in Costa Rica. There are three project components. Component 1 develops new sustainable financing mechanisms for the Payment for Environmental Services (PSA) Program through... Show More

Development Objective

The Project Development Objective is to enhance the provision of environmental services of a national and global significance and secure their long-term sustainability through a scaled-up payment for environmental services system in Costa Rica.

Key Details

Project Details

Project ID
P093384
Status
Closed
Team Leader
Christian Peter
Borrower 2
N/A

Country
Costa Rica
Disclosure Date
November 23, 2005
Approval Date
(as of board presentation)
June 8, 2006
Effective Date
July 31, 2008

Total Project Cost 1
US$ 80.30 million
Implementing Agency
FONAFIFO
Region
Latin America and Caribbean
Fiscal Year 3
2006

Commitment Amount
US$ 32.55 million
Environmental Category
B
Last Update Date
March 15, 2022
Closing Date
March 31, 2014

Last Stage Reached
BANK APPROVED

Associated Projects
P098838

Notes
1. Total project cost includes funding from World Bank and non-bank sources in US$ millions. Active and Closed projects show current commitments. Proposed (pipeline) and dropped projects show the forecast amount. The commitment amount for projects in the pipeline is indicative and may be modified during the project preparation.
2. Borrower refers to the Borrower of a Loan or Recipient of a Grant.
3. ”Fiscal Year” is the fiscal year in which the project was approved (or dropped if the status is dropped). The World Bank's fiscal year is from July 1 - June 30. For example, a fiscal year of 1996 corresponds to July 1, 1995 - June 30, 1996.

Sectors

Themes

FY17 - Environment and Natural Resource Management

FY17 - Climate change11%
- FY17 - Mitigation11%
FY17 - Environmental policies and institutions23%
FY17 - Renewable Natural Resources Asset Management22%
- FY17 - Biodiversity22%
FY17 - Water Resource Management22%
- FY17 - Water Institutions, Policies and Reform22%

FY17 - Private Sector Development

FY17 - Jobs100%

FY17 - Public Sector Management

FY17 - Rule of Law22%
- FY17 - Legal Institutions for a Market Economy22%

Project Map

Interactive Map

Finances

Financing Plan (US$ Millions)

Financier	Commitments
PROTOTYPE CARBON FUND	2.55
Borrower/Recipient	47.55
International Bank for Reconstruction and Development	30.00
Local Sources of Borrowing Country	0.20

Total Project Financing (US$ Millions)

Product Line	IBRD/IDA
IBRD Commitment	30.00
IDA Commitment	N/A
IBRD + IDA Commitment	30.00

Lending Instrument
Grant Amount	2.55
Total Project Cost**	80.30

Summary Status of World Bank Financing (US$ Millions) as of February 28, 2025

No data available.

Detailed Financial Activity as of February 28, 2025

Download:

Period	Financier	Transaction Type	Amount (US$)
Nov 15, 2013	IBRD-73880	Int Charges	72,023.72
Nov 15, 2013	IBRD-73880	Loan Repay	1,371,576.50
Dec 19, 2013	IBRD-73880	Loan Disb	2,219,004.80
Sep 23, 2013	IBRD-73880	Loan Disb	2,991,047.00
Nov 15, 2014	IBRD-73880	Int Charges	70,106.36
Nov 15, 2014	IBRD-73880	Loan Repay	1,719,087.00
Jun 8, 2006	IBRD-73880	Loan Commitment	30,000,000.00
Nov 15, 2020	IBRD-73880	Int Charges	16,327.38
Nov 15, 2020	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2021	IBRD-73880	Int Charges	4,313.43
May 15, 2021	IBRD-73880	Loan Repay	1,715,838.10
May 15, 2020	IBRD-73880	Int Charges	56,542.40
May 15, 2020	IBRD-73880	Loan Repay	1,719,087.00
Nov 15, 2019	IBRD-73880	Int Charges	99,766.82
Nov 15, 2019	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2019	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2019	IBRD-73880	Int Charges	134,350.77
Nov 15, 2018	IBRD-73880	Int Charges	145,984.73
Nov 15, 2018	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2018	IBRD-73880	Int Charges	113,108.77
May 15, 2018	IBRD-73880	Loan Repay	1,719,087.00
Nov 15, 2017	IBRD-73880	Int Charges	118,764.64
Nov 15, 2017	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2017	IBRD-73880	Int Charges	117,436.22
May 15, 2017	IBRD-73880	Loan Repay	1,719,087.00
Nov 15, 2016	IBRD-73880	Int Charges	101,903.52
Nov 15, 2016	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2016	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2016	IBRD-73880	Int Charges	81,246.32
Nov 15, 2015	IBRD-73880	Int Charges	69,577.66
Nov 15, 2015	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2015	IBRD-73880	Int Charges	65,160.14
May 15, 2015	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2014	IBRD-73880	Int Charges	77,796.78
May 15, 2014	IBRD-73880	Loan Repay	1,719,087.00
May 15, 2014	IBRD-73880	Int Charges	1,085.77
May 15, 2014	IBRD-73880	Int Charges	1,908.60
May 15, 2014	IBRD-73880	Int Charges	516.76
Nov 15, 2013	IBRD-73880	Int Charges	1,189.74
Nov 15, 2013	IBRD-73880	Int Charges	2,525.52
Nov 15, 2013	IBRD-73880	Int Charges	7,019.90

Footnotes

Ratings

IMPLEMENTATION RATINGS

Name	Review	Date
Progress towards achievement of PDO	Satisfactory	2014-03-26
Monitoring and Evaluation	Satisfactory	2014-03-26
Project Management	Satisfactory	2014-03-26
Counterpart Funding	Satisfactory	2014-03-26
Procurement	Satisfactory	2014-03-26
Financial Management	Moderately Satisfactory	2014-03-26
Overall Implementation Progress (IP)	Moderately Satisfactory	2014-03-26

COMPLETION RATINGS

INDICATOR	IMPLEMENTATION COMPLETION & RESULTS REPORT: 09-29-2014
Outcomes
Risk to Development Outcome	Substantial
Bank Performance
Borrower Performance
Government Performance
Implementing Agency

INDEPENDENT EVALUATION RATINGS

INDICATOR	ICR REVIEW: 05-07-2015	PROJECT PERFORMANCE ASSESSMENT REPORT:
Outcome Rating	Moderately Satisfactory	N/a
Risk To Development Outcome	Significant	N/a
Bank Performance	Moderately Unsatisfactory	N/a
Borrower Performance	Moderately Satisfactory	N/a
Government Performance	Moderately Satisfactory	N/a
Implementing Agency	Moderately Satisfactory	N/a
Icr Quality	Satisfactory	N/a
M&e Quality	Negligible	N/a

Results Framework

PROJECT DEVELOPMENT OBJECTIVE INDICATORS

INDICATOR		BASELINE	CURRENT	TARGET

By the end of the project, at least 288,000 hectares of land with environmental service contracts generating environmental servicesof local, national and/or global importance.	Value	250,000 ha	297,432 ha	310,000 ha
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment	The unit of measure is hectares (ha) and not text as indicated to the side	Earlier high enrollment rates in the PSA program (340,000 ha in 2012), due to the availability of additional funding provided bythe World Bank loan and by contributions from other donors, has led to an overhang of obligations, which has limited enrollmentsover the past two years. As a result, the target of 310,000 ha (revised in the 2012 restructuring) could not been reached.	Costa Rica’s National Development Plan has a target of conserving a total of 310,000 ha a year using PSA.

By the end of the project, conservation of at least 35,000 ha is financed annually by funding from service users	Value	7400.00	24543.00	35000.00
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment	This is the revised version of the indicator: By the end of the project, at least half of the newly-contracted area is financed byfunding from service users.	During the project life the EOP target had been overachieved (e.g. 41,000 ha in 2010), but because of the annual nature of most ofFONAFIFO’s budget and the five-year length of most of its conservation contracts, Costa Rica's PSA program is subject to widefluctuations in the areas under conservation.

Improved efficiency of the environmental services program, as measured by indices of services generated per dollar spent.(Index under preparation)	Value		Indicator dropped.	Indicator dropped.
	Date		April 30, 2013	March 31, 2014
	Comment	Dropped-tracking this indicator has been found extremely difficult. This is primarily due to the technical difficulty ofquantifying the changes in the level of environmental service provision.	Dropped-tracking this indicator has been found extremely difficult. This is primarily due to the technical difficulty ofquantifying the changes in the level of environmental service provision.

By the end of the project 50% increase (from current 1,900 to 2,850) of the number of small- and medium-sized landholders (less than 100-hectare farms) participating in the PSA Program.	Value	1,900 landholders (small- and medium-sized)	4,729	3,500
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment			This indicator was increased to 3,500 in the 2012 Restructuring.

By the end of the project, at least half of the newly-contracted area is financed by funding from service users.	Value	0%	24,543	35,000
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment		Target was revised in June 2012 from its original target of 50%, in part because generating financing from service users hasproven much more challenging than expected (particularly so in the case of carbon financing and biodiversity payments), butprimarily because fuel tax revenues have increased dramatically due to the increase in traffic, resulting in an automatic increasein government funding to the PSA program.

Areas brought under enhanced biodiversity protection (ha)	Value	250000.00	297432.00	310000.00
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment			This CSI has been introduced to address the fact that the original indicator was selected at a time when there were no CSIs. Thevalues are similar to the previous indicators.

INTERMEDIATE RESULTS INDICATORS

INDICATOR		BASELINE	CURRENT	TARGET

% of annual net returns from the FBS invested in PES at productive landscape projects located in buffer zones of protected areas and biological corridors	Value	0.00	0.00	85.00
	Date	June 28, 2012	March 13, 2014	March 31, 2014
	Comment		Given the low returns on the investment following the financial crisis, FONAFIFO was not able to invest any of the FBS return byproject closing.

At least 190,000 ha (2,000 contracts) in productive landscapes in the buffer zones of protected areas and biological corridors in the MBC are maintained annually under PSA contracts of 20 years.	Value	100,000 ha	146,074 ha	190,000 ha
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment		Because of the annual nature of most of FONAFIFO’s budget and the five-year length of most of its conservation contracts, CostaRica's PSA program is subject to wide fluctuations in the areas under conservation.

Effective biodiversity conservation in globally significant areas measured by vegetation cover and indicator species of conservation interest (method under preparation, baseline to be ready by 12/07).	Value	0	Indicator dropped	Indicator dropped
	Date	June 8, 2006	April 30, 2013	March 31, 2014
	Comment		This indicator has proven difficult to measure and has been dropped as part of the June 2012 restructuring.

3.5% from fuel-tax revenues and 25% water-resource-usage tariffs to finance PSA.	Value	3.5%0%	3.5%25%	3.5%25%
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment	% of fuel-tax revenues and % of tax used from water-resource tariff and colones (₡) of revenue received from tax	3.5% fuel (₡12.831m)25% water (₡982m)	3.5% fuel 25% water

FBS with capital participation of at least US$15 million, of which US$7.5 million contributed by GEF.	Value	US$0	US$18.5 million total of which US$9.1 million from	US$15 million total of which US$7.5 million from G
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment	The indicator is US$ and not text as indicated to the side	The Fund has been capitalized with the GEF and KfW contribution. Its capitalization exceeds the target of US$15 million. However,current returns (at 2%) are below expectation and addressing this will be a priority over the next 6 months. The FBS board hasinitiated a number of steps to address this issue, including (i) negotiating a lower management fee for the investment institution(Banco Nacional de CR); (ii) consolidating all funding received in one account to improve the effectiveness of applying theinvestment strategy; and (iii) introduce the possibility of using an international fund manager.

At least 75% of PSA Program resources are placed in PSA contracts.	Value	Present percentage to be evaluated during year 1 o	77%	75%
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment	The unit of measure is percent and not text as indicated to the side

Contract system for payments of environmental services with differentiated payments applied.	Value	Does not exist	System operational and working	System is approved and under implementation
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment

PSA activities are integrated through participatory planning on land use in at least 3 (micro-watershed) communities.	Value	0 micro-watersheds	1 micro-watershed	3 micro-watersheds
	Date	June 8, 2006	April 30, 2013	March 31, 2014
	Comment		2 land-use plans for additional micro-watersheds are under preparation

tons of CO2 from forestry activities will be certified and sold at the global carbon markets	Value	0.00	23084.00	238239.00
	Date	June 28, 2012	March 13, 2014	March 31, 2014
	Comment		At the end of the project 23,084 tons of CO2 from forestry activities were certified sold at the global carbon markets, forUS$95.798.Following appraisal of the project (and the two year delay in becoming effective), the annual emission reductiongeneration proved to be significantly lower. The primary causes for the shortage of CertifiedEmission Reductions (CERs) are twofold: (i) requirements for verification and certification of emission reductions are more stringent and take longer thananticipated at appraisal tocarry out, and (ii) a decline in CER prices, more or less coinciding with the financial crisis, affectedthe proper functioning of theactivity.

Revenues achieved Value 0.00 95798.00 900000.00
Date June 28, 2012 March 13, 2014 March 31, 2014
Comment
Female landholders in the program will be maintained at least to the current level. Value 474.00 877.00 800.00
Date June 8, 2006 March 13, 2014 March 31, 2014
Comment
Indigenous community owned lands in the program will be maintained at least to the current level. Value 25125.00 47572.00 43000.00
Date June 8, 2006 March 6, 2014 March 31, 2014
Comment

Revenues achieved	Value	0.00	95798.00	900000.00
	Date	June 28, 2012	March 13, 2014	March 31, 2014
	Comment

Female landholders in the program will be maintained at least to the current level.	Value	474.00	877.00	800.00
	Date	June 8, 2006	March 13, 2014	March 31, 2014
	Comment

Indigenous community owned lands in the program will be maintained at least to the current level.	Value	25125.00	47572.00	43000.00
	Date	June 8, 2006	March 6, 2014	March 31, 2014
	Comment