Trade in Environmental Services and Sustainable Development in Central America: The Cases of Costa Rica and El Salvador

This research paper examines the emergence of markets for global environmental services in Central America, focusing on greenhouse gas emission reduction trading in Costa Rica and the role of shade-grown coffee in biodiversity and carbon sequestration in El Salvador.

• Costa Rica has established a comprehensive institutional and legal framework to capitalize on the international carbon sink market, including the creation of the Costa Rican Joint Implementation Office (OCIC) in 1995 and the National Forestry Fund (FONAFIFO).
• Costa Rica's payment for environmental services (PSA) system evolved through three generations of incentives, moving from simple income tax deductions in 1979 to a 'user pay' principle under Forestry Law no. 7575, which includes a fuel tax to fund conservation.
• Costa Rica has implemented several Joint Implementation Activities (AIJ) to reduce emissions, including the Protected Areas Project (PAP) to protect 555,052 hectares and the Private Forestry Project targeting 20,000 small and medium-sized landowners.
• Costa Rica has successfully marketed Certified Tradable Offsets (CTOs), with a first sale in 1997 of 200,000 metric tons of carbon for $2 million to a consortium of Norwegian companies.
• Despite its success, Costa Rica's payment for environmental services system faces sustainability risks due to the country's fiscal situation and a perceived tax injustice where the fuel tax is paid by people who do not directly benefit from the services.
• In El Salvador, coffee plantations act as 'coffee forests' that provide critical environmental services, including water regulation for urban centers and hydroelectric generation, especially as natural forests have dwindled.
• The economic importance of coffee in El Salvador declined significantly between 1981 and 1997, with its contribution to GDP dropping from nearly 10% to less than 3%, leading to land conversion for urban and industrial use.
• Shade-grown coffee in El Salvador serves as a vital biological corridor for migratory birds from North America; 193 migratory species have been identified in the country, many of which rely on these plantations due to extreme deforestation.
• El Salvador is utilizing a GEF-supported pilot project to integrate coffee production with biodiversity conservation, aiming to create an eco-labeling program for 'biodiversity-friendly' coffee to access new international markets.
• There is potential for El Salvador to use the Kyoto Protocol's mechanisms to promote revegetation through shade-grown coffee, which increases biomass and carbon sequestration, potentially improving the livelihoods of rural producers in the northern highlands.

APA

Cuéllar, N., Herrador, D., & González, M. (1999). Trade in Environmental Services and Sustainable Development in Central America: The Cases of Costa Rica and El Salvador. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/prismasum_en.pdf

Chicago

Cuéllar, Nelson, Doribel Herrador, and Martha González. Trade in Environmental Services and Sustainable Development in Central America: The Cases of Costa Rica and El Salvador. International Institute for Sustainable Development, 1999. https://www.iisd.org/system/files/publications/prismasum_en.pdf.

Wikipedia

{{cite report |last1=Cuéllar |first1=Nelson |last2=Herrador |first2=Doribel |last3=González |first3=Martha |title=Trade in Environmental Services and Sustainable Development in Central America: The Cases of Costa Rica and El Salvador |publisher=International Institute for Sustainable Development |date=1999 |url=https://www.iisd.org/system/files/publications/prismasum_en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cullar1999trade, author = {Cuéllar, Nelson and Herrador, Doribel and González, Martha}, title = {{Trade in Environmental Services and Sustainable Development in Central America: The Cases of Costa Rica and El Salvador}}, institution = {International Institute for Sustainable Development}, year = {1999}, url = {https://www.iisd.org/system/files/publications/prismasum_en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }