Costa Rica Launches Carbon Trading, a First For a Developing Country

In September, Costa Rica’s President, Laura Chinchilla, signed a decree launching the developing world’s first carbon trading program, part of its plan to be carbon-neutral by 2021.

Called the "Costa Rican Voluntary Domestic Carbon Market," carbon credits will be issued and traded between local companies to compensate for emissions they can’t reduce. As the name indicates, however, it is a voluntary program. 

Polluters can also buy Certified Emissions Reductions from the United Nation’s Clean Development Mechanism, which invests in projects in developing countries. 

The credits will be used for forest protection and reforestation and other projects that capture and sequester carbon, reduce emissions and increase energy efficiency.

Yes, Costa Rica has a "Department of Climate Change" – which is administering the program. Credits have started to be issued and trading begins next year. 

In a unique move, Costa Rica launched an environmental bank, aptly named BanCO2! – to broker carbon trades. The bank is setting up an exchange where companies can buy and sell carbon credits. Currently, it costs $5 for a ton of carbon.

Costa Rica Carbon Bank

BanCO2 will also make lower interest rates available to finance fuel-efficient cars and home energy retrofits. 

Costa Rico is one of eight countries to receive a $350,000 grant from the World Bank to assist in the design and implementation of a carbon market. And the World Bank’s Carbon Fund is buying up to $63 million worth of forest-based carbon credits in Costa Rica’s program. That will allow Costa Rica to expand its program that pays landowners to protect forests to an additional 340,000 hectares. 

About 8000 landowners are paid $25 million a year to protect their forests. Most of the money comes from a tax on gasoline – the world’s first national fee used to reduce emissions from deforestation and forest degradation.

Costa Rica has tripled its GDP over the past 25 years while doubling the size of its forests.

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