This country note features selected environmental indicators from the OECD Core Set, building on harmonised datasets available on OECD Data Explorer. The indicators reflect major environmental issues, including climate, air quality, freshwater resources, waste and the circular economy, and biodiversity. Differences with national data sources can occur due to delays in data treatment and publication, or due to different national definitions and measurement methods. The OECD is working with countries and other international organisations to further improve the indicators and the underlying data. The text of this country note is drawn from the OECD Environmental Performance Review of Costa Rica 2023.
Environment at a Glance: Costa Rica
Costa Rica is a small open economy with an outward-oriented strategy and an ambitious sustainable development vision. The economy has grown steadily over the last decades, although gross domestic product (GDP) per person remains less than half the OECD average. The main sectors are manufacturing (in particular high technology), services (in particular tourism) and agriculture, forestry and fishing. Though decreasing, agricultural products still represented 40% of exports in 2020, led by bananas and pineapple. Costa Rica has built a world renowned green trademark as well as a developed eco-tourism, centred on nature conservation, reforestation and national parks.
In 2020, GDP contracted due to the COVID-19 pandemic; the tourism sector was the most affected, which led the country to sign an agreement with the International Monetary Fund (IMF) for USD 1 750 million, in order to recover and stabilise the economy. In 2021, a strong rebound from the manufacturing sector, particularly of medical equipment, and a gradual recovery in services and agriculture lifted GDP above pre-crisis levels (OECD, 2022[1]) .
Despite significant social advances, poverty and inequality are high, and 44% of employment is informal. Population density has increased, in particular in the Great Metropolitan Area of San José, Alajuela, Cartago, and Heredia, which hosts about 73% of the population.
Costa Rica has abundant water resources and about 373 mineral deposits, including copper, manganese, gold, magnetite and bauxite. Located on the Central American Isthmus, the country has over 200 active and extinct volcanoes, steep mountain slopes and 1 290 km2 of coastlines. The country’s geographical and geomorphological conditions result in a rich biodiversity and an incredible variety of flora and fauna. Forests cover about 60% of the territory. There are acres of primary and secondary rainforests, dry forests, mangroves and cloud forests, swamps, wetlands, raging rivers, lakes and waterfalls.
Costa Rica has a low carbon intensity per person thanks to the wide use of renewable energy, which represents almost 100% of electricity supply. The per person production-based and demand-based (or footprint) greenhouse gas (GHG) emissions remain well below the OECD averages, but have remained relatively stable during 1996-2020. They are below the OECD averages. Demand-based emissions are higher than production-based ones, meaning that Costa Rica is a net importer of GHG emissions embodied in its final demand.
In the last decade, Costa Rica managed to decouple its economic activity from CO2 emissions from fuel combustion and total energy supply. Thanks to the country’s fully renewable-based electricity generation, 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 and a growing emission source, due to the increase in the vehicle fleet, especially private vehicles. Agriculture, representing about of fifth of emissions accounts for a larger share that in other OECD countries, reflecting the importance of agricultural production in Costa Rica’s economy. Waste management is also a larger source of emissions than on average in the OECD, due to the reliance on landfills for waste disposal. Emissions from waste grew due to the increasing population and the associated consumption levels.
In its updated Nationally Determined Contribution, Costa Rica has committed to reach 9.1 MtCO2 equivalent by 2030 (a reduction of about 20% below 2017 levels). This is in line with the pathways to reach the 2050 net-zero goal, as set by the National Decarbonisation Plan (NDP) 2018-50.
Costa Rica has a diverse energy mix, including a wide variety of renewable sources used for electricity generation. Renewable energy production relies mostly on hydropower, with significant contributions of geothermal energy and wind power and to a lesser extend biomass and solar energies. In recent years, almost all electricity was generated from renewable sources. However, the country is highly dependent on imported fossil fuels, which are mainly consumed in the transport sector.
Emissions of major air pollutants have increased since 2000. Industrial combustion is the main source of sulfur oxide (SOx) emissions. SO2 emissions dropped significantly between 2014 and 2017 thanks to a switch to lower sulphur content fuels in industry. However, in 2017 they still were three times higher than at the beginning of the century. Transport and industrial combustion are the primary emitters of nitrogen oxide (NOx). NOx emissions from road transport almost doubled since 2000 (due to the increase in number of vehicles). Industrial processes and transport are the major sources of non-methane volatile organic compounds (NMVOCs).
Emissions intensities per person are below the OECD average (except emissions from carbon monoxide [CO]), but intensities per unit of GDP are above the OECD average (except for SOx). High CO emission intensities are due to the relatively old vehicle fleet.
The level of exposure of the population to PM2.5 concentrations has decreased since 2010. It remains however, above the OECD average and the 2021 guideline value of 5 µg/m3 recommended by the World Health Organization (WHO) in all regions.
Costa Rica has abundant freshwater resources and is under low water stress. Authorised abstractions of freshwater for public supply (permits) have increased by 25% between 2016 and 2023. The related per person intensity remains amongst the highest in the OECD, partly due to tourism. The level of freshwater abstracted beyond legally authorised amounts is not known. Hydropower accounts for the largest share of freshwater abstractions and agriculture is the second largest user.
In the past two decades, Costa Rica has been experiencing growing water demands due to urbanisation and developments in industry, irrigation and hydroelectricity. In coming decades, demands are projected to rise much further, raising questions as to the sustainability of supply. Despite ample water reserves, the contamination of aquifers and rivers by untreated wastewater, stormwater, unsustainable land use, and industrial effluents combined with the effects of climate change, exerts an important pressure on the country’s water resources.
In Costa Rica, most of the population (71%) has an independent treatment, 28% are connected to a public sewage treatment network, but only 7% are connected to a public wastewater treatment plant with primary or secondary treatment. The relative increase in primary treatment is due to the commissioning of a new treatment plant (Los Tajos), which serves a large part of the wastewater generated in the Great Metropolitan Area. Only about 15.5% of the sewerage collected receives some type of treatment (CONARE, 2022[2]).
Water sanitation has long been an important environmental issue in Costa Rica. Since 2016, the government is working towards implementing individual or collective treatment systems and established a National Wastewater Sanitation Policy (PNSAR) with the objective to achieve, by 2045, the safe management of all wastewaters generated in the country.
The generation of municipal waste has increased since 2016, mainly driven by waste from commerce and trade, small businesses, office buildings, institutions and municipal services. Waste generated by households remained stable. Amounts generated per person are among the lowest in the OECD, partly reflecting low income levels. The Covid-19 pandemic has led to an increase in municipal waste from households and a reduction of waste from the catering and tourism sectors. Waste collection rates vary widely across municipalities and nearly 10% of households still burn or bury their waste.
Waste management has long been an important environmental issue in Costa Rica. Despite remarkable progress in closing illegal dumpsites, waste disposed of in inappropriate sites remains considerable, especially in some rural regions. Measures to recover municipal waste were initiated in 2014, but recovery rates remain low and are among the lowest in the OECD. In 2020, only 8% of collected municipal waste were recycled and 3% composted.
The government is working towards implementing a comprehensive waste management system that is efficient and low in greenhouse gas emissions. Examples are the Action Plan for Comprehensive Waste Management and the National Composting Plan adopted in 2021, as well as the Decarbonization Plan 2018-2050 and the Nationally Determined Contribution 2020 that include measures (targets) to ban organic waste from landfills by 2030.
Costa Rica has some mineral resources and is an exporter of agricultural products. Material autonomy is high for most categories except for fossil fuels. Main imports are machinery and transport equipment, chemicals and manufactured goods. Consumption of materials has been fluctuating since 2000 with an overall increase driven by urbanisation and population growth. However, the increase was slower than GDP growth, resulting in an improved material productivity. Material intensity and footprint per person are below the OECD average, partly reflecting Costa Rica’s low income levels.
Biomass accounts for half of material consumed, followed by non-metallic minerals (mainly construction materials from the extraction of sand and gravel, imports of chemicals and fertilizers, etc.).
Costa Rica is home to more than half a million species (around 6% of the world's biodiversity) and has a crucial role to play to protect biodiversity. Its terrestrial ecosystems comprise dry forests, tropical rainforests, paramos, mangroves and other wetlands and cover more than half of the territory. Costa Rica has managed to increase its forest cover to about 60% of land (through reforestation policies), while 35% of land is used for agricultural purposes. The long coastlines in the Caribbean and in the Pacific result in a wealth of coastal marine ecosystems, including: coral reefs, mangroves, mangrove forests, seabed coastal ecosystems, muddy bottoms, sandy and rocky beaches, seagrass meadows, a fjord, upwelling areas such as the Gulf of Papagayo, estuaries, an oceanic island estuaries, an oceanic island (Cocos Island), offshore islands, an oceanic trench more than 4 000 m deep, hydrothermal vents and depth, hydrothermal vents and a thermal dome.
Pollution from unsustainable production and consumption (e.g. intensive fishery and agricultural practices), habitat loss from growing conversion of forested areas into agricultural land and artificial areas, and climate change are the main pressures on biodiversity in Costa Rica.
In 2017, the "Official List of Species in Danger of Extinction and with Reduced and Threatened Populations" included 157 terrestrial species considered endangered or threatened with extinction and 165 species with reduced or threatened populations. Mosses and amphibians show the highest share of threatened species.
Terrestrial protected areas cover about 26% of Costa Rica land, well above the OECD average and the 2020 Aichi Target (under the Convention on Biological Diversity) to protect at least 17% of land area. In addition, the share of protected areas with strict management objectives (IUCN categories I and II) is much higher than the OECD average. Areas with management effectiveness evaluations cover about 21% of the land. Protected Area Management Effectiveness (PAME) evaluations can be defined as: “the assessment of how well protected areas are being managed – primarily the extent to which management is protecting values and achieving goals and objectives" (Hockings and al, 2006[3]). More efforts are needed to reach the 2030 GBF target of protecting 30% of terrestrial and inland water areas.
Marine protected areas cover 28% of Costa Rica EEZ, well above the OECD average and the 2020 Aichi Target (under the Convention on Biological Diversity) to protect at least 10% of coastal and marine areas. This is also close to the 2030 GBF target of protecting 30% of marine and coastal areas. Areas with management effectiveness evaluations cover about 10% of the EEZ.
This section shows selected policy instruments based on data available for most OECD countries and does not provide a complete overview of countries’ policy mix to achieve their environment-related objectives. Interpretation should consider the country specific context.
Environment-related taxes are an important source of fiscal revenue in Costa Rica, due to generally low revenues from income taxes and large informal employment. Their share in GDP, at about 2%, is above the OECD average. Most receipts come from the excise duty on fuels and, to a lesser extent, from vehicle taxes. Taxes on pollution and resource management mainly apply to wastewater discharges and water use and generate limited revenue.
In total, 45.9% of GHG emissions in Costa Rica were subject to a positive Net Effective Carbon Rate (ECR) in 2023. Costa Rica does not levy an explicit carbon price. Fuel excise taxes, an implicit form of carbon pricing, covered 45.9% of emissions in 2023. About 40% of GHG emissions have a Net ECR above EUR 60 per tonne of CO2 eq., a mid-range estimate of current carbon costs. Net ECRs are highest in the road transport sector, which accounts for 37.1% of the country's total GHG emissions. The Net ECR is on average zero in the other GHG emissions sector. The other GHG emissions sector accounts for 51.2% of GHG emissions (OECD, 2024[4]).
OECD estimates show that, Costa Rica implicitly supports the production and consumption of fossil fuels through various direct transfers and tax expenditures. Support is nearly exclusively linked to the use of petroleum products. It increased in the last decade, in line with increased fuel use, except for the pandemic-related drop in 2020. Exemptions from the fuel excise duty for fuels used in aviation, shipping and fishery is the main form of support, followed by a tax discount on liquefied petroleum gas (LPG).
The pandemic’s adverse effect on the country’s tourism sector pushed aircraft fuels to be granted an exemption from the cross-subsidisation charges formerly subjected to, in an effort to support the recovery of the airline industry from May 2020. This conditions, joined with the effects of the war of Russia and Ukraine leaded to an inflation process that motivated the government to deploy direct transfers to vulnerable households for holding the purchase power, among other measures (OECD, 2023[5]).
Costa Rica is a marginal player in the field of environment-related patents. Less than five patents have been filed for protection in at least two jurisdictions by Costa Rican inventors during the period 2010-2021.
References
[2] CONARE (2022), Informe Estado de la Nación 2022, http://www.estadonacion.or.cr.
[3] Hockings, M. and E. al (2006), Evaluating Effectiveness. A framework for assessing management effectiveness of protected areas. 2nd Edition, IUCN, https://portals.iucn.org/library/efiles/documents/PAG-014.pdf.
[4] OECD (2024), Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/b44c74e6-en.
[5] OECD (2023), OECD Inventory of Support Measures for Fossil Fuels: Country Notes, OECD Publishing, Paris, https://doi.org/10.1787/5a3efe65-en.
[1] OECD (2022), OECD Economic Outlook, Volume 2022 Issue 1, https://doi.org/10.1787/62d0ca31-en.
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