Alberto González Pandiella
OECD
3. Supporting the green transition by diversifying renewables and strengthening water and waste management
Copy link to 3. Supporting the green transition by diversifying renewables and strengthening water and waste managementAbstract
Costa Rica has an environmentally friendly economic model but remains vulnerable to climate change. This chapter evaluates the critical role of expanding and diversifying renewable electricity sources to support the electrification of transport, a cornerstone of Costa Rica’s decarbonization strategy. Expanding and diversifying renewables would also be crucial for strengthening energy security, by reducing dependency on imported fuels and ensuring a stable and resilient energy supply. With waste accounting for a large share of emissions, there is also a pressing need to improve waste collection systems to ensure efficient and regular collection across the country. Climate change is also impacting water availability, calling for stepping up efforts to renovate water infrastructure and improve wastewater collection and treatment.
Costa Rica has an environmentally friendly economic model and is the first tropical country to have reversed deforestation (OECD, 2023[1]). Its ambitious climate agenda includes a commitment to reach net-zero emissions by 2050 (Figure 3.1, panel A), aligning with global efforts to limit warming to 1.5°C, a goal that few OECD countries are on track to meet. To meet this target, Costa Rica aims to cut emissions by 2030 to 2010 levels, with current policies showing progress in achieving these targets (Climate Action Tracker, 2023[2]). Recent progress includes expanding electric vehicle infrastructure, with electric vehicles fleet quintupling between 2021 and September 2024, and implementing policies to reduce methane emissions in livestock. These are critical steps in addressing emissions in the transport and agriculture sectors, the country’s two largest sources of greenhouse gases (Figure 3.1, panel B). However, progress in the waste sector, the third largest emitter, has been slower, underscoring the need for action.
Despite its environmental leadership, Costa Rica is highly vulnerable to climate change, particularly as rising temperatures and sea levels, and altered rainfall patterns intensify. These phenomena threaten to erode coastlines, increase the frequency and severity of floods and droughts, disrupt agricultural production, and degrade vital ecosystems. Such impacts not only endanger Costa Rica's natural resources but also pose serious challenges to its economy and the livelihoods of its population. In 2022, the country launched a National Adaptation Plan, prioritizing disaster risk management system and enhancing infrastructure resilience. Climate risks have also been recently integrated into budget planning and banks risks assessments. Meeting decarbonization and adaptation goals come with significant fiscal demands. Meeting intermediate emission targets and enhancing infrastructure resilience to climate change are projected to require approximately 1% of GDP annually over the next five years. While Costa Rica is attracting new multilateral and private climate financing to support these efforts, improving public spending efficiency and broadening the tax base, as analysed in Chapter 1 of the survey, will be important to create the additional fiscal space needed to fund these investments.
Previous Economic Surveys emphasized reducing emissions in the transport sector, recommending a stronger public transport network and improving tax design (Table 3.1), still pending challenges today. Environmental tax revenues in Costa Rica are relatively high but introducing a carbon tax (see discussion in Chapter 1) is another pending challenge to encourage further carbon reduction emissions. This could take the form of a carbon tax element of the fuel excise levy, and it would involve adjusting the fuel excise tax to account for the carbon content of the fuel (Chapter 1). This chapter focuses on how to expand renewable electricity, critical to support the planned electrification of the transport sector, and how to diversify it, critical to buttress energy security. The chapter also explores the urgent need to improve waste management practices, essential for achieving the country’s decarbonization goals. It also provides an overview of adaptation policies, with a focus on water management, as climate change increasingly threatens water availability.
Table 3.1. Past OECD recommendations on green growth
Copy link to Table 3.1. Past OECD recommendations on green growth|
Past recommendation |
Actions taken since the 2023 survey |
|---|---|
|
Align the tax rates on diesel and bunker fuel with the gasoline rate and gradually increase the carbon tax rate once high energy prices start falling, and channel part of the revenues towards low-income households. |
No action taken. |
|
Broaden the sources of financing of the Payment for Environmental Services scheme. |
A draft roadmap has been prepared. |
|
Align taxes on vehicles with their emissions to encourage a shift towards less polluting vehicles. |
Efforts are underway to enhance electric vehicle infrastructure, by declaring activities such as energy storage and electric vehicle charging, as "services of general interest", which allows that private players can provide these services, and to expand the fleet of zero-emission public vehicles. |
|
Update toll fees to ensure they reflect the cost of road use and introduce congestion charges. |
No action taken. |
Figure 3.1. Costa Rica aims at reaching net-zero emissions by 2050
Copy link to Figure 3.1. Costa Rica aims at reaching net-zero emissions by 2050
Note: In Panel A, GHG = Greenhouse Gas; LULUCF = Land Use, Land-use Change and Forestry; NDC = Nationally Determined Contribution. Net GHG emissions include those from the LULUCF sector. Data on GHG emissions from fuel combustion are produced by the International Energy Agency (IEA).
Source: OECD (2023), OECD Environmental Performance Reviews: Costa Rica 2023.
3.1. Expanding and diversifying renewables sources
Copy link to 3.1. Expanding and diversifying renewables sourcesCosta Rica is a frontrunner in renewables energy use, but it now faces the dual challenge of rapidly increasing electricity demand and the growing impact of climate change on hydropower, its primary renewable source. With the electrification of the transport sector expected to increase electricity demand fourfold by 2050 (OECD, 2023[3]), and potential further increases coming from foreign direct investment and trade integration (discussed in Chapters 1 and 4), the country’s electricity needs will increase substantially. However, much of Costa Rica’s untapped hydropower is in protected natural areas or indigenous lands, limiting its expansion. At the same time, climate change, particularly prologued dry seasons, is already disrupting hydropower production, causing electricity shortages and a recent increase in oil-based electricity generation. Hence, expanding, and diversifying renewables is also crucial for strengthening energy security, reducing dependency on imported fuels and ensuring a stable and resilient energy supply in the face of growing climate risks.
Since 2015, nearly all electricity generation has come from renewables, with hydropower contributing around 70% of total output, supplemented by wind and geothermal sources (Figure 3.2., panel A). Renewables constitute close to half of the total energy supply, surpassing the OECD average (Figure 3.2, panels B and D). Oil, fully imported, accounts for 51% of Costa Rica’s energy mix (Figure 3.2, panel B), predominantly used for transport. Costa Rica’s National Decarbonization Plan emphasizes the need to diversify its renewable energy portfolio, recognizing the limitations of relying too heavily on hydropower due to climate change impacts like reduced rainfall. While the overarching goal is to maintain nearly 100% renewable electricity generation, Costa Rica does not currently have explicit targets specifying the contribution of each renewable source in its overall electricity mix.
Figure 3.2. Electricity generation is clean, with a larger share of hydroelectric
Copy link to Figure 3.2. Electricity generation is clean, with a larger share of hydroelectricCosta Rica has significant untapped potential in wind, solar (Figure 3.3) and geothermal energy. Its unique geographical features, particularly the strong and consistent winds, grant Costa Rica with substantial wind energy potential. The technical potential for wind energy is estimated at up to 3,800 MW, indicating ample room for expansion from the current 450 MW installed capacity. Several projects to be commissioned in 2025 and 2026 will contribute an additional 412 MW of capacity from solar, wind, and biomass sources. The country's geological characteristics, marked by numerous volcanoes and geothermal hotspots, make it highly suitable for further harnessing geothermal energy.
Figure 3.3. Costa Rica has untapped potential in solar energy
Copy link to Figure 3.3. Costa Rica has untapped potential in solar energyAverage photovoltaic (PV) long-term practical potential, PVOUT level 1, kWh/kWp/day
Unlocking Costa Rica’s large potential in wind, solar and geothermal sources require improvements in both planning and regulations. An administrative unit within the state-owned electricity company, ICE, is in charge of the overall planning of the electricity system. At the same time, ICE operates most of the country’s hydroelectric plants, which can lead to conflict of interest. Transferring the electricity system planning to an independent body would provide a neutral and objective perspective on the system’ long-term needs and enable quicker response to emerging challenges. Strengthening planning could involve optimising that energy sources are balanced throughout the year, especially given the seasonal variability in hydropower. Better planning would also involve expanding the grid ability to absorb more solar and wind energy, which can fluctuate and require advanced grid management. This independent body could be tasked with developing a medium-term strategy for expanding and diversifying renewable energy, including setting specific targets for each renewable source. Such a strategy would offer clearer direction to public and private investors, encouraging targeted investments in infrastructure, technology, and innovation to meet these goals.
Regulatory reforms would also be needed to foster investment and innovation. Now, the state-owned company (ICE) has nearly a full monopoly in the electricity sector, with private companies limited to electricity generation and mandated to sell their output exclusively to ICE. Private-sector generators must compete for contracts through ICE's tendering process, which specifies both the quantity and terms of electricity purchases. The share of electricity generation allowed for private companies is capped at 30% and foreign investment restricted to a maximum of 65%. Opening the electricity market, as advised in previous Economic Surveys ((OECD, 2023[1]) and (OECD, 2020[4])), would stimulate investment and contribute to renewables expansion and diversification. Costa Rica could follow the example of many OECD countries which have increasingly introduced some degree of separation between electricity generation, transmission, and retail supply. Effectively separating monopolistic activities (such as the operation of the transmission network) from activities that can be subject to competition (such as generation and retail supply) can bring large benefits in the form of innovation, customer responsiveness and lower prices. Introducing a legal separation would be a good step to boost performance, while ownership separation would offer the largest benefits. Phasing out restrictions and caps on private sector participation and foreign ownership would be other substantial steps to boost investment. A legislative proposal aimed at reforming the electricity market has been presented to the Legislative Assembly and seems well aligned with some of recommendations from previous OECD Economic Surveys.
There is also space to improve the process for obtaining permits to develop renewable energy projects, as it remains lengthy and complex. Agencies involved in granting permits tend to operate on different timelines, causing significant delays. Some regulatory bodies would benefit from stricter deadlines for processing applications, helping to avoid long waiting periods for developers. Solar panel users also face a high "backup" or "grid access" fee imposed by the state-owned utility company. The fee, designed to cover the costs of maintaining the national electricity grid, can increase electricity costs for solar users by up to 400%, which discourages the adoption of solar power. Reducing the fee would make renewable energy more affordable for consumers and encourage more widespread use of solar energy, including in the agroindustry sector. Local public opposition to the expansion of renewable energy is relatively limited in Costa Rica, compared to other countries, partly because about 80% of the population lives in the Greater Metropolitan Area, which reduces direct local impact from many renewable projects, such as those in rural or remote areas. However, involving affected local communities early in the planning and decision-making process for renewable projects, and ensuring that potential harm to ecosystems and local biodiversity is mitigated, can help build public trust and further reduce opposition.
The substantial increase in electricity demand implies a need to upgrade and expand the electricity grid. To tackle this challenge, the government could prioritize funding for grid infrastructure projects and create incentives for private sector investment in grid upgrades. This includes reinforcing power lines, upgrading substations, and expanding grid capacity to ensure a stable supply as electricity consumption rises. Energy storage technologies will also be crucial for managing Costa Rica's variable renewable energy sources, particularly wind and solar. The government could incentivize research, development, and deployment of energy storage solutions like batteries or pumped hydro. Smart grid solutions will also be essential for efficiently integrating Costa Rica's renewable energy mix. Costa Rica is well positioned to tackle this challenge, as it is gradually deploying smart meters, which would help to put in place real-time monitoring systems, ensuring the grid can dynamically respond to fluctuations in supply and demand.
3.2. Improving waste management
Copy link to 3.2. Improving waste managementWaste management accounts for 14.8% of emissions in Costa Rica, a larger proportion than in other OECD countries. Improving waste management will therefore be crucial to meet decarbonization targets and mitigate climate change. Waste generation is lower than in the OECD average country, reflecting lower-income levels. However, it is on an increasing trend, and the expected increase of population and per capita income, together with resulting changes in consumption patterns, imply accelerating waste generation (OECD, 2023[3]).
More than 80% of waste in Costa Rica is generated by households. Over the past 15 years, Costa Rica has closed 48 illegal dumpsites. However, the country still relies on landfills for waste disposal, which not only contributes to carbon emissions but also exerts pressure on ecosystems and public health. The remaining landfills and dumpsites receive nearly 80% of the total waste generated (Figure 3.4), one of the highest shares among OECD countries.
Figure 3.4. The share of landfilled waste is high
Copy link to Figure 3.4. The share of landfilled waste is highMunicipal waste treatment and generation, 2022 or latest
Note: Other recovery includes refuse derived fuel, waste used for backfilling, process loss from mechanical biological treatment (MBT) facilities, incinerator bottom ash sent for recycling, metals from incineration sent for recycling. Other disposal includes waste treated/disposed through other unspecified treatment processes as well as process and moisture loss.
Source: OECD Municipal Waste: Generation and Treatment (database).
Recovery rates have increased since 2016 but remain among the lowest in the OECD. In 2022, only 10.7% of total waste generated was recovered, with recycling, composting and processing representing 4.7%, 2.8% and 3.2%, respectively. This falls short of the 15% waste recovery target established in the 2016-21 National Strategy for Waste Separation, Recovery, and Valorisation. Modernizing waste collection systems to ensure efficient and regular collection in all areas across the country, including rural and underserved regions, remains a significant challenge. Public-private partnerships and stronger cooperation between municipalities, responsible for waste collection, and the central government could help municipalities to strengthen their financial and technical resources to respond to such challenges.
Despite a legal requirement to establish waste management plans, 15 out of 84 local governments in Costa Rica have yet to do so. Additionally, nearly 30% of municipalities lack regulations for waste collection, deposit, and treatment services (CGR, 2021[3]). Waste management practices in those municipalities are often informal or inconsistent, which can lead to inefficiencies, environmental damage, and public health risks. As of the most recent data, waste collection services for recyclable materials are now provided in 300 districts (61%) out of the 486 districts studied, marking good progress in extending coverage for recyclable waste. However, comprehensive separate waste collection systems, which manage multiple streams, including recyclables, organic waste, and hazardous materials, are only in place in 24 municipalities, benefiting around 14% of households (CGR, 2021[5]). In 2022, municipalities collected 1.1 million metric tons of solid waste, of which only 33,165 tons (3%) were recyclables. This falls short of the 8% target set in the National Development and Public Investment Plan (CGR, 2023[6]).
OECD experience suggests that encouraging separate waste collection for recycling and composting (Box 3.1), as well as building waste incinerators to deal with residual waste can help to reduce per capita waste generation, and landfilling. To tackle this challenge, current plans include strengthening the central government's role in waste management. Municipalities will have the option to adopt one of three strategies for organic and inorganic waste separation: sending waste to composting, collecting and separating at source, or collecting all waste together for later separation. Additionally, there are plans to implement a deposit-refund system and introduce a fee on non-recyclable materials. These actions can substantially improve waste collection and recovery.
Box 3.1. OECD Principles concerning a comprehensive waste management policy
Copy link to Box 3.1. OECD Principles concerning a comprehensive waste management policyThe OECD outlines a comprehensive approach to waste management that encompasses all stages of a product's life cycle, from initial design to final disposal. Key principles for comprehensive waste management are:
Reduction of waste at its source. Strategies to avoid or reduce waste generation may include designing and marketing products with extended lifespans or reducing the use of excessive packaging. Encouraging the reuse of products and packaging and promoting the use of alternative materials are also essential elements of source reduction.
Reclamation and Recycling. To support sustainable waste management, countries should adopt measures that promote recycling and reclamation. This includes considering the potential for waste to be used in land reclamation, as a source of raw materials or energy, and to recover the energy value embedded in products.
Cost Allocation. The OECD emphasizes the application of the Polluter-Pays Principle to encourage waste prevention and recycling.
Access to Information. Effective waste management relies on the availability of accurate and comprehensive information. This also applies to waste disposal firms, particularly those that take on waste management responsibilities for third parties. The provision of such information helps to guarantee that waste is managed in the most economically sound and environmentally protective manner.
Administrative Arrangements promoting efficient and rational waste management. This may include creating inventories of waste types and quantities, organizing waste collection systems that facilitate reclamation (e.g., pre-sorting or special collection schemes), and establishing regional disposal centres that operate under cost-effective conditions. Promoting research and development in waste disposal technologies, supporting markets for recycled products, and conducting public information campaigns are also key.
Local governments face high collection operating costs that are not reflected in waste collection tariff models. In 70% of municipalities, waste collection fees are outdated, and 25% are operating at a deficit (CGR, 2021[5]). Municipalities are recommended by the municipal code to periodically review their waste collection models and cost structures, but seldom do it. The government could turn regular tariff updates into a requirement, and could support municipalities in doing so, for example by publishing samples of tariff and cost structures that municipalities could adapt to their local circumstances.
3.3. Adapting to climate change
Copy link to 3.3. Adapting to climate changeCosta Rica has a comprehensive approach to climate change adaptation, embedded in national policies and development strategies. Its National Adaptation Plan has already positively impacted over 890000 people through tailored adaptation plans, enhancing resilience in vulnerable communities. The plan prioritizes nature-based solutions, recognizing the critical role of ecosystems in mitigating climate impacts. Efforts include the restoration of wetlands, reforestation projects, and the conservation of mangroves, all of which serve to buffer communities against floods and rising sea levels. To improve the resilience of food systems, Costa Rica is focusing on promoting climate-smart practices in the agriculture sector. This includes improving soil management, implementing water-efficient irrigation systems and encouraging crop diversification to reduce vulnerability to extreme weather events. Efforts to improve adaptation governance are also ongoing, particularly by enhancing the leadership role of the Ministry of Energy and Environment and of the Ministry of Agriculture and Livestock.
While Costa Rica has made strides in integrating climate adaptation into national policies, it faces challenges at the local level. Municipalities, which are key players in implementing adaptation projects, often lack the necessary financial resources and technical expertise to carry out effective climate measures. To address this, the Ministry of Environment and Energy issued three technical guidelines in 2021 to aid local governments in developing plans to prepare for and adapt to climate change impacts. Strengthening the capacity of local governments, by providing training to local officials, and ensuring better coordination between national and municipal authorities are essential steps to ensure climate adaptation efforts reach all regions. There is also a need to integrate more firmly climate considerations in territorial planning by requiring the inclusion of climate risks in territorial management instruments.
Improving early warning systems is crucial for Costa Rica’s ability to respond to climate-related disasters. Some early warning systems are in place but upgrading them to provide-real time data and widening its coverage, particularly in basins where floods and landslides are more recurrent and generate more losses to cover a wider range of climate-related hazards, such as droughts, is a priority. SINIRUBE, the registry of social programmes recipients, can facilitate a stronger coordination between disaster management systems and social programmes, allowing for a quick identification of at-risk populations during extreme weather events.
Robust insurance mechanisms can help to protect communities and industries against climate-related losses. A first step is to ensure that insurers incorporate climate change considerations into their governance and risk management frameworks. Recently published best-practice guidelines for insurance companies (November 2023) and the sustainable finance taxonomy (August 2024) offer valuable support for this integration. Costa Rica’s Adaptation Plan aims for 40% insurance companies to integrate climate risk considerations into their governance and risk frameworks by 2026. Costa Rican smallholder farmers, who are most exposed to climate variability, have so far limited access to insurance mechanisms. Initiatives are underway to promote access to insurance schemes against crop loss, including the development of methodologies to measure climate risk and demonstrate how insurance can reduce vulnerability to these risks. Enhancing public awareness campaigns, ensuring citizens are aware of the risks posed by climate change, can promote adoption of insurance mechanisms.
3.3.1. Improving water management
Water management is a key challenge in Costa Rica to adapt to climate change. Costa Rica has abundant water, as measured by renewable freshwater resources per capita. However, access to drinkable water has recently decreased, from 95.7% to 89.9% of the population (PEN, 2024[7]). Water losses are high, particularly in public water supply networks (Figure 3.5), due to aged pipelines, and have lately increased. Recently, water restrictions have been implemented in the Greater Metropolitan Area of San José, as water availability was hampered by losses, the lack of seasonal reservoirs and tanks, storage and distribution problems and illegal connections. Water stress is expected to exacerbate, as climate change intensifies La Niña and El Niño phenomena, making them more unpredictable. Improving water management would therefore be key to foster adaptation to ongoing climate change.
Water availability is also constrained by an underdeveloped sewerage network and a low level of wastewater treatment, which contribute to water pollution and a deterioration of rivers water quality. Only about a quarter of Costa Rica's population is connected to a public sewerage network, a proportion significantly lower than that of OECD and regional peers (Figure 3.6). Most of the population has independent wastewater treatment (septic tanks), and less than 10% are connected to public wastewater treatment plants. Septic tanks usually typically capture only a small share of households’ wastewater, with the rest discharged untreated into rivers. Unless carefully managed and monitored, septic tanks leak into the soil and groundwater, resulting in contamination. In addition only about 15.5% of the sewage collected receives some type of treatment (PEN, 2022[8]).
Figure 3.5. Water losses are high, particularly in the public network system
Copy link to Figure 3.5. Water losses are high, particularly in the public network systemFreshwater withdrawal losses by activity, % of total withdrawal by activity
Figure 3.6. Water treatment lags severely behind other countries in the region and the OECD
Copy link to Figure 3.6. Water treatment lags severely behind other countries in the region and the OECD
Note: OECD average refers to a weighted average, and excludes Iceland and Portugal in the right panel, and Iceland and New Zealand in the left panel. LAC average is an average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: OECD Environment Statistics: Water (database).
All this underscores that renewing and expanding water infrastructure and scaling up investment in sanitation and wastewater treatment are key to foster Costa Rica’s adaptability to climate change and the associated more frequent drier seasons. Only about 15% of the population is projected to be connected to public wastewater treatment systems by 2045, falling short of the 100% target set by the 2026 National Wastewater Sanitation Policy. Weak planning and execution have hampered water and sewage infrastructure, with only half of the 2023 budget allocation for water infrastructure being utilized and approximately 60% of ongoing projects experiencing delays. Investment in wastewater has been largely neglected for some time. Costa Rica would benefit from long-term strategic financial planning for water and wastewater infrastructure investment. This should include exploring a broad range of options to mobilise the necessary finance, such as public-private partnerships or green bonds. Establishing a portfolio of infrastructure projects, prioritized transparently and based on sound criteria, ready to be executed as financing becomes available, would expedite water infrastructure availability. Comprehensive and realistic project plans, including clear timelines, milestones, and resource allocations, would facilitate efficient project execution. In this vein, Costa Rica has recently established a plan to expedite the execution of 51 priority projects, of which 45 are drinking water projects, five sanitation projects and one project focused on improved management.
Water utilisation levies should in principle, reflect the value of water use and the environmental service provided by the water resources, and provide some of the necessary funding to maintain and expand infrastructure. However, these levies remain very low in Costa Rica (OECD, 2023[3]), limiting their use as an economic incentive for responsible water use and to raise revenue for sustainable water management. Moreover, water supply and sewerage tariffs do not reflect the full economic cost of service provision. There is also room to improve their efficiency as there are significant cross-subsidies among users, with residential users typically paying lower water tariffs than commercial or industrial users. Tariff levels should better reflect the costs of service provision and long-term strategic investment plans. Following the example of other OECD countries, such as France (Box 3.2), Costa Rica is well placed to tackle resulting affordability issues through targeted transfers to low-income households, given the availability of SINIRUBE, the registry including all recipients of social programmes in Costa Rica.
Box 3.2. Updating water tariffs while considering affordability issues: the case of France
Copy link to Box 3.2. Updating water tariffs while considering affordability issues: the case of FranceWater tariff updates in France are done regularly through a collaborative process between municipal authorities and water service providers (OECD, 2016[9]). These updates consider the costs of service provision, infrastructure maintenance, and environmental factors. Municipalities can set tariffs that reflect local conditions while adhering to national guidelines. These guidelines provide a framework that municipalities must follow when setting and updating water tariffs to that local water pricing systems are fair and financially sustainable. Many municipalities implement a progressive water tariff system, where the cost per cubic meter of water increases with higher levels of consumption (EEA, 2021[10]). This ensures that basic water needs remain affordable, while higher charges are applied to non-essential or excessive water use, encouraging conservation and equitable pricing. To address affordability challenges, France offers financial assistance to vulnerable households through the Water Solidarity Fund (Fonds de Solidarité pour l’Eau). This fund provides direct financial aid to help low-income families pay their water bills.
Improving water quality monitoring can also help to improve water management. The information system remains at an early stage, impeding the ability to gain an accurate and comprehensive understanding of the current state and evolution of water quality. Monitoring sites are limited, and data are not collected consistently (OECD, 2023[3]), making it difficult to detect and analyse trends over time. A more comprehensive and robust water quality monitoring framework is essential for better water management, including of external water resources (Box 3.3), which are predominant in Costa Rica. This includes expanding the number of monitoring sites, to cover all critical water bodies, and implementing standardized and frequent data collection protocols.
Box 3.3. Managing external water resources
Copy link to Box 3.3. Managing external water resourcesExternal water resources refer to natural bodies of water, such as rivers or aquifers, that exist outside of managed or controlled facilities and are relied upon for public, industrial, and agricultural water supply. Pollution control, quality monitoring, and natural methods to filter pollutants are key to manage external water resources. Strict pollution control measures are necessary to prevent harmful discharges from agricultural, industrial, and urban sources. Regular quality monitoring, as recommended in the OECD Water Governance Indicator Framework (OECD, 2018[11]), is essential for tracking water quality, detecting contamination early, and enabling quick action to protect these water resources. Natural solutions, such as planting vegetation along waterways and restoring wetland areas, are effective for filtering pollutants before they reach water sources (OECD, 2020[12]). These approaches help trap sediments, absorb excess nutrients, and enhance water quality in an environmentally sustainable way.
Table 3.2. Policy recommendations to support the green transition
Copy link to Table 3.2. Policy recommendations to support the green transition|
MAIN FINDINGS |
CHAPTER 3 RECOMMENDATIONS (Key recommendations in bold) |
|---|---|
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Expanding and diversifying renewables sources |
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|
Costa Rica’s hydropower sector generates up to 70% of the country’s electricity. This reliance on hydropower is increasingly problematic due to dry seasons caused by climate change. The state-owned electricity company operates most of the country's hydroelectric plants and handles the overall electricity planning, which can lead to conflicts of interest. Costa Rica has untapped energy potential in wind, solar and geothermal. |
Transfer electricity planning to an independent body and develop a comprehensive medium-term strategy for expanding and diversifying renewable energy sources. |
|
Costa Rica’s planned shift to electric transport is set to increase electricity demand fourfold. Meeting this demand will require significant investment in the electricity sector. However, strict regulatory barriers hinder private and foreign investment, including limits on private sector involvement and foreign investment. |
Eliminate restrictions and caps on private sector participation in electricity generation and retail supply, and remove barriers to foreign investment in the electricity sector. |
|
The process for obtaining permits to develop renewable energy projects remains lengthy and complex. |
Expedite the permitting process for renewable energy projects by establishing stricter deadlines for processing applications. |
|
Solar panel users face a high fee to connect to the grid, which discourages the adoption of solar power. The fee can increase electricity costs for solar users by up to 400%. |
Lower the fee paid by solar panel users to connect to the grid. |
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Costa Rica’s decarbonization plan foresees that the demand for electricity will multiply by four by 2050. Demand may increase even more if foreign investment and economic growth are higher than expected. Weather patterns are becoming increasingly difficult to foresee. |
Expand grid capacity to cope with the increasing demand for electricity and to handle the integration of multiple intermittent renewable energy sources. |
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Improving waste management |
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Waste management accounts for 15% of GHG because it relies on landfills for waste disposal and waste generation is increasing. Nearly 30% of municipalities do not have a regulation for waste collection, deposit and treatment services. |
Strengthen cooperation between the central government and municipalities to enhance municipal technical resources. Gradually increase investment in organic and inorganic waste separation at municipal level, |
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Municipalities face high operating costs that are not reflected in waste collection tariffs. In 70% of municipalities fees are outdated. |
Require municipalities to regularly update their waste collection tariffs to enhance their cost-recovery capacity. Publish samples of tariff and cost structures that municipalities could adapt to their local circumstances, |
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Adapting to climate change |
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Municipalities are crucial to adaptation projects, but their territorial plans are not yet required to consider climate risks. |
Integrate climate risks in territorial plans and other land use management instruments. |
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Early warning systems, key to respond to climate-related disasters, do not cover all basins where floods and landslides are more recurrent or key climate-related hazards, such as droughts. |
Upgrade early warning systems to provide-real time data and to cover all areas where floods and landslides are recurrent and a wider range of climate-related hazards, such as droughts. |
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Insurance mechanisms can help to protect communities and industries against climate-related losses. |
Ensure that insurers incorporate climate change considerations into their governance and risk management frameworks. |
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Strengthening water management |
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Despite having abundant water resources, Costa Rica has faced recent water restrictions due to high water losses and aging infrastructure. Climate change and the associated drier seasons are also impacting water availability, Investment in water infrastructure has been hampered by poor planning and execution. |
Gradually increase investment in water infrastructure and waste management, including through public-private partnerships and green bonds. Develop a well-prioritized portfolio of water infrastructure projects, ready for execution as funding becomes available, based on transparent and rigorous cost-benefit analysis. Ensure that all projects have comprehensive and realistic plans, including clear timelines, milestones, and resource allocations. |
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Most population has independent wastewater treatment (septic tanks). Unless carefully managed and monitored, septic tanks leak into the soil and groundwater, resulting in contamination |
Ensure adequate supervision of septic tanks to minimise risks of contamination. |
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Water utilisation levies and water supply and sewerage tariffs are low limiting their use to incentivise better water use and financing of infrastructure. |
Improve the methodology to set water use and sanitation tariffs to enhance their cost-recovery capacity. Target water support to vulnerable households using the social registry (SINIRUBE) |
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Water quality monitor is hampered by limited monitoring sites are sparse data collection efforts. |
Enhance the water information system to ensure it provides accurate and up-to-date data on water availability, use, and quality. |
References
[6] CGR (2023), “Informe de seguimiento de la Gestión Pública sobre el Índice de Gestión de Servicios Municipales”, Contraloría General de la República. Informe n. DFOE-LOC-SGP-00004-2023.
[5] CGR (2021), “Indice de Gestión de Servicios Municipales, [Municipal Services Management Index]”, Contraloría General de la República.
[2] Climate Action Tracker (2023), “Climate Action Tracker: Costa Rica.”, https://climateactiontracker.org/countries/costa-rica/.
[10] EEA (2021), “Water management in Europe: price and non-price approaches to water conservation”, European Environment Agency Briefing.
[3] OECD (2023), “Environmental performance”, in OECD Environmental Performance Reviews: Costa Rica 2023, OECD Publishing, Paris, https://doi.org/10.1787/2f336a4f-en.
[1] OECD (2023), OECD Economic Surveys: Costa Rica 2023, OECD Publishing, Paris, https://doi.org/10.1787/8e8171b0-en.
[12] OECD (2020), “Nature-based solutions for adapting to water-related climate risks”, OECD Environment Policy Papers..
[4] OECD (2020), OECD Economic Surveys: Costa Rica 2020, OECD Publishing, Paris, https://doi.org/10.1787/2e0fea6c-en.
[11] OECD (2018), “Implementing the OECD Principles on Water Governance: Indicator Framework and Evolving Practices”, OECD Publishing, Paris.
[9] OECD (2016), “OECD Environmental Performance Reviews: France”.
[7] PEN (2024), “Programa Estado de la Nación 2024”, Programa Estado de la Nación.
[8] PEN (2022), “Informe Estado de la Nación 2022”, Programa Estado de la Nación..