Costa Rica has quietly reversed decades of tropical forest loss, pushing its tree cover back toward 60% of its land area after hitting historic lows in the 1980s. The recovery, fueled by a payments-for-ecosystem-services model and backed by tens of millions of dollars in carbon-reduction financing, offers a working blueprint at a time when most tropical nations are still losing canopy. With a fresh $4 million grant now aimed at strengthening Indigenous participation in forest governance, the program is entering a phase that will test whether financial incentives alone can hold without deeper community ownership.
From Historic Lows to 60% Forest Cover
Most discussions of tropical reforestation focus on pledges and pilot programs. Costa Rica skipped that stage years ago. The country’s forest cover now sits near 60% of national territory, a dramatic reversal from the deforestation crisis that stripped much of its landscape bare during the second half of the twentieth century. That recovery did not happen by accident. Beginning in the mid-1990s, the government built a system that pays landowners directly for maintaining forests, treating standing trees as economic assets rather than obstacles to agriculture or development.
The turnaround is visible not only in national statistics but also in new spatial data. A forest and land-use map launched by Costa Rican researchers in 2022, described by the National University in a release on a countrywide forest map, shows how native forests, secondary growth, and other land categories have shifted over time, providing a fine-grained picture of recovery. That mapping effort complements the payments-for-ecosystem-services program by giving authorities and communities a clearer view of where forest regrowth is happening and where pressures remain strongest. Together, policy incentives and better data have allowed Costa Rica to move from emergency response to long-term planning.
Carbon Payments Turn Proof Into Revenue
The approach is unusual because it treats conservation as a transaction, not a sacrifice. Farmers and Indigenous communities receive regular payments tied to the ecological services their forests provide, including carbon storage, watershed protection, and biodiversity habitat. That financial logic attracted international backing and eventually connected Costa Rica to the World Bank’s Forest Carbon Partnership Facility, which channels results-based payments to countries that can prove they have cut emissions from deforestation. Few nations in the tropics have managed to turn that proof into actual cash at scale. Costa Rica has done it twice, leveraging its existing payment-for-ecosystem-services framework to meet the technical and governance standards required for performance-based finance.
The first major payout arrived in 2022, when the Forest Carbon Partnership Facility delivered US$16.4 million for 3.28 million tCO2 in verified emission reductions during 2018 and 2019. That payment was not based on estimates or projections. Independent validation and verification confirmed the reductions before any money changed hands, a safeguard that separates this mechanism from looser carbon-offset markets where additionality is often contested. The agreement governing these transactions, known as an Emission Reductions Payment Agreement, provides for up to US$60 million in total payments for up to 12 million tCO2e by the end of 2025, turning avoided deforestation into a predictable revenue stream.
Indigenous Communities and the Governance Gap
A second payment of US$17.5 million followed the initial disbursement, reinforcing the financial viability of the model and bringing total receipts close to US$34 million. That sum matters not just for Costa Rica’s treasury but for the broader argument that tropical countries can generate reliable income from keeping forests intact. The structure ties every dollar to measured results, creating a feedback loop: better monitoring leads to stronger verification, which unlocks larger payments, which fund more conservation. Yet this same structure raises difficult questions about who ultimately benefits from the money and how it is shared with those who steward the land.
Money alone does not protect forests. One persistent criticism of results-based payment systems is that they can concentrate benefits among large landholders or government agencies while bypassing the communities that live closest to the trees. Costa Rica has tried to address this through a benefit-sharing plan built into the emission-reduction program, directing portions of carbon revenue to local and Indigenous groups. But the gap between policy design and on-the-ground reality remains a challenge in any initiative that spans remote rural territories with limited institutional reach, language barriers, and historical mistrust of state agencies.
Indigenous Leadership at the Center of Forest Policy
A new grant of US$4 million from the EnABLE trust fund is designed to close that gap by focusing specifically on social and Indigenous inclusion within the broader emission-reduction program. The funding targets governance capacity, aiming to give Indigenous peoples a stronger voice in decisions about how forests are managed and how benefits are distributed. According to the World Bank, the resources will support training, institutional strengthening, and mechanisms for Indigenous participation in national climate and forest strategies, with the goal of aligning carbon finance flows with local priorities.
This is where the Costa Rican model faces its most honest test. Carbon payments can sustain forests in the short term, but long-term resilience depends on whether the people who manage those forests day to day have genuine authority and resources. The World Bank has highlighted Indigenous custodianship as central to healthy forest ecosystems, noting that territories under Indigenous management often show lower deforestation rates. Bringing those insights into the core of Costa Rica’s emission-reduction strategy could help ensure that climate finance not only rewards carbon outcomes but also strengthens cultural traditions, land rights, and community-led conservation. If successful, the EnABLE-supported reforms would turn Indigenous leadership from a side component into a structural pillar of the national forest policy.
What Other Tropical Nations Can Learn
Costa Rica is not the only country attempting to reverse forest loss. Vietnam, for example, has managed to shift from net forest loss to net gain, driven primarily by reforestation programs over recent decades, according to a satellite-based analysis using high-resolution land-use data. But the two cases differ in important ways. Vietnam’s gains have come largely through state-directed planting and restoration schemes, while Costa Rica built a market-linked mechanism that generates its own revenue stream from verified emission reductions. The distinction matters for scalability: a model that partially pays for itself through performance-based finance may be easier for lower-income countries to replicate than one that depends entirely on sustained national budgets.
The real question is whether the Costa Rican approach can work in countries with weaker institutions, higher corruption risks, or more intense pressure from agriculture and mining. Independent verification of emission reductions is the linchpin; without it, carbon payments risk becoming another form of opaque aid rather than a transparent reward for measurable outcomes. Costa Rica’s experience suggests that three elements are essential: robust forest monitoring systems, clear and equitable benefit-sharing arrangements, and meaningful participation by Indigenous and local communities. As more tropical nations look for ways to align climate finance with forest protection, the combination of technical rigor, financial incentives, and community-centered governance emerging in Costa Rica will be watched closely as a potential template, and as a reminder that restoring forests is ultimately as much about power and inclusion as it is about trees and carbon.
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*This article was researched with the help of AI, with human editors creating the final content.
