Costa Rica reverses deforestation through economic incentives

Costa Rica has successfully reversed decades of devastating deforestation, increasing its forest cover from a low of 21% in 1987 to over 50% today. In 1940, the country was 75% forested, but agricultural and livestock expansion—specifically for beef, bananas, coffee, and cocoa—led to a massive decline in forest density throughout the mid-20th century.

The recovery was driven by the 1996 Forestry Law (No. 7575), which prohibited unauthorized logging and established the Payment for Environmental Services (PSA) program. Managed by FONAFIFO, this program incentivizes landowners to conserve or reforest land rather than using punitive measures alone. Over 20 years, approximately $524 million has been allocated to this initiative, protecting more than one million hectares of forest.

Additional contributing factors to the reforestation include the rise of ecotourism, rural exodus, and shifts in the agricultural economy. The program is primarily funded through an eco-tax on fossil fuels.