Climate Change Regulation 2023 Comparisons

Costa Rica is a party to the United Nations Framework Convention on Climate Change, the Kyoto Protocol and Paris Agreement. Since 2014, Costa Rica has also belonged to the Independent Alliance of Latin America and the Caribbean (“AILAC”), which includes Chile, Colombia, Peru, Paraguay, Panama, Honduras and Guatemala, as well as Costa Rica.

AILAC supports the adoption of a climate finance and transparency accounting regime to keep track of financial resources allocated to climate adaptation, mitigation, technology development and transfer, capacity building, a transparency framework and other cross-cutting activities, according to the needs and priorities of developing countries.

Technology development and transfer are a priority for developing countries so they can accelerate progress and make more effective innovations that enable economic growth and sustainable development. AILAC seeks to strengthen co-operation for the development and transfer of scalable and replicable technology, respecting human rights and promoting gender equality and cultural exchange.

Costa Rica is part of the Central American Climate Change Agreement and the Regional Strategy on Climate Change. Countries in the region are highly vulnerable to the impacts of climate change and natural events.

There are regional strategies on environmental issues, climate change, agriculture, health, gender equality, and comprehensive disaster risk management, among others.

Regional Climate Change Strategy

The Regional Climate Change Strategy proposes a development model committed to protection of the region’s natural and cultural resources, with mitigation actions, and with an adaptation approach to climate variability, due to the damages and impacts of natural events associated with climate change that the region already faces. The strategy establishes actions for capacity building, institutional strengthening, technology transfer, education, and access to financial resources.

National climate change policy is informed by prevailing climate change science, such as that proposed by the Intergovernmental Panel on Climate Change (IPCC) under Representative Concentration Pathways (RCPs) 2.6, 4.5, 6.0 and 8.5. In addition, the nationally determined contribution (NDC) was updated in 2020, with projected regional scenarios from the National Meteorological Institute. Impacts include a mean temperature increase of 0.2°C registered between 1960 and 2017 compared to the base period between 1900 and 1959. The risks that the country will face due to change climate are mostly linked to extreme hydro-meteorological events where intense rains are the most recurrent factor (81%), followed by temporary, convective storms and hail. The increase in droughts related to El Niño–Southern Oscillation affects economic development and production in the north of the country. Other negative impacts include floods, landslides and strong winds.

Nationally Determined Contribution (NDC)

Costa Rica’s mitigation goal is to achieve an absolute maximum of net emissions in 2030 of 9.11 million tons of carbon dioxide equivalent (CO₂e) and to achieve net-zero emissions by 2050. For adaptation, Costa Rica is committed to strengthening the social, economic and environmental resilience of the country in the face of the effects of climate change, through the development of capacities and information for decision-making; the inclusion of adaptation criteria in financing instruments and planning; the adaptation of public services, productive systems and infrastructure; and the implementation of nature-based solutions. NDCs are not conditional to the availability of international funding.

Science-Based Policymaking

Systematic observation is essential for monitoring changes and providing decision-makers with technical-scientific criteria on the potential impacts of climate change. The National Meteorological Institute maintains ongoing systematic observation in the country and provides forecasts, warnings and weather information targeted at supporting and promoting the production of goods and services in different socio-economic sectors, the protection of the atmosphere and the environment, mitigation, and adaptation to climate change.

Transparency

To ensure transparency, the country has created a monitoring system to track the progress of the NDC, which is open to public access. By 2030, the government will enable public platforms to facilitate access to climate information and services by all citizens, including a platform of the National Forest linked with the National Exchange Climate Metric System and other national systems for environmental reporting and safeguards.

Costa Rica approved the United Nations Convention on Climate Change by Law No 7414 on 13 June 1994. The Kyoto Protocol to the Convention was approved by Law No 8219 on 8 March 2002. The Paris Agreement was ratified by Law No 9405 on 3 October 2016. 

The constitution of Costa Rica recognised in 1994 the right to a healthy and ecologically balanced environment, which provided the basis for the development of a robust framework for the protection of the environment as a human right.

The Forestry Law of 1996 prohibits land-use change (deforestation is thus illegal by law) and recognises the obligation of the government to compensate landowners for the services provided by their forests to the ecosystem. The Payment for Environmental Services Programme (“PES”) recognises the benefits provided by forests for the protection of watersheds, conservation of biodiversity, carbon sequestration and scenic beauty. The PES is an important mechanism to prevent deforestation and promote forest conservation as carbon sinks.

Costa Rica does not have a climate change law; however, the country has adopted regulations and public policies that provide a political framework to address climate change, including:

• the Action Plan of the National Strategy for Climate Change, approved by Executive Decree No 39114-MINAE in July 2015;
• the Energy National Plan for 2015–2030, made official by Executive Decree No 39219-MINAE in September 2015, which establishes a roadmap for decarbonisation of the national economy;
• the National Policy for Risks Management for 2016–2030, made official by Executive Decree No 39322-MP-MINAE-MIVAH in October 2015;
• the creation of the Scientific Council on Climate Change, approved by Executive Decree No 40615-MINAE, in 2017, as an “agency to advise the Government on scientific research and technological development in climate change”;
• the creation of the Citizen Advisory Council on Climate Change, adopted by Executive Decree No 40616-MINAE, in 2017, as a “platform for citizen participation to collaborate with the implementation of the Nationally Determined Contribution”;
• the National Adaptation Policy of 2018 as a guiding framework for the implementation of adaptation actions;
• the National Plan for Decarbonisation of the Economy of 2019;
• the general guidelines for the incorporation of resilience measures in public infrastructure, adopted by  Executive Decree 42465-MOPT-MINAE-MIVAH in 2020; and
• the Nationally Determined Contribution of 2016, updated in 2020.

Costa Rica has not concluded formal bilateral agreements pursuant to Article 6.2 of the Paris Agreement, although it intends to participate in different forms of international voluntary co-operation under Article 6 of the Paris Agreement, in addition to its domestic efforts to decarbonise the economy.

The key policy, administrative, governance and regulatory authorities and bodies responsible for climate change policy development and regulatory enforcement in Costa Rica include:

• the Ministry of Environment and Energy of Costa Rica (“MINAE”), which is responsible for adopting and implementing policies on climate change, environmental protection, and the promotion of renewable energy;
• the Ministry of National Planning and Economic Policy (“MIDEPLAN”), which is responsible for the long-term planning of climate change policy in accordance with the NDC and with sustainable development goals (SDGs);
• the Climate Change Department (“DCC”), which is responsible for co-ordinating and leading the implementation of national climate change policies;
• the National Meteorological Institute (“IMN”), which is responsible for carrying out meteorological observations and atmospheric monitoring;
• the Scientific Council on Climate Change, which is an independent, consultative body that provides advice to the government of Costa Rica on scientific research, development and technology relating to climate change; and
• the National Change Metric System Climate (“SINAMECC”), which is an official platform for institutional co-ordination and the exchange of information on climate change.

The National Plan for Decarbonisation (“PND”) is a public policy that seeks to decarbonise all sectors of the economy, with the goal of net-zero emissions in 2050. The NDC mitigation objectives listed below are supported by this national policy.

Actions for a sustainable mobility and transport sector:

• Electrify and adopt zero-emission technologies in public transport.
• Accelerate the transition of the vehicle fleet towards zero-emission technology.
• Promote technological efficiency in the cargo transport sector.

Actions for the energy sector:

• Promote energy efficiency.
• Improve building practices and promote sustainable buildings to reduce GHG emissions.

Actions for the industrial sector:

• Promote technological transformation to lower emissions in the industrial sector.
• Promote the development and consumption of products and services under circular economy models.

Actions for sustainable waste management:

• Promote policies for low-emission waste management and a circular economy.
• Create conditions to improve integrated management of solid and liquid waste.

Actions for agriculture and cattle ranching:

• Develop innovative processes in the value chain of priority products that facilitate the generation of decarbonised agricultural goods.
• Encourage the livestock sector to contribute to decarbonisation through efficient practices and carbon capture, the protection of ecosystem services and the generation of resilience.

Actions for mitigation through nature-based solutions:

• Implement the REDD+ strategy for emissions reduction from deforestation and forest degradation, and conserve forests and ecosystems in rural and urban areas.
• Promote the protection, restoration and management of other high-carbon ecosystems.

The Tax Simplification and Efficiency Law No 8114 establishes a fuel tax and allocates 3.5% of its revenue to the Payment of Environmental Services, which pays landowners for carbon credits from forest protection and conservation.

Climate change mitigation is not considered in the granting of environmental permits/authorisations.

The National Policy for Adaptation to Climate Change is a public policy that establishes actions at the national and local level for adaptation to climate change.  NDC adaptation objectives are supported in this national policy. Actions include:

• strengthening conservation programmes and the expansion of the environmental services payment programme to include ecosystem-based adaptation;
• promotion of integrated landscape management, watershed management and municipal land-use planning;
• the adaptation of public services and the establishment of a resilient infrastructure;
• the adaptation of eco-competitive production systems; and
• the strengthening of the National Risks Policy.

Climate change adaptation is not considered in the granting of environmental permits/authorisations.

Costa Rica has not yet participated in the carbon markets evolving under Article 6.4 of the Paris Agreement.

However, Decree No 37926-MINAE, a national regulation, sets the rules for the national voluntary domestic carbon market, to help achieve carbon neutrality. Carbon credits are established in the INTE Standard 01-12-06:2011 and are called Costa Rican Compensation Units (“UCCs”). They are issued and traded among participants in the market. The UCC price per ton of carbon may be defined by a minimum price, to be established by the Carbon Board, and a maximum price based on market supply and demand. UCCs can be traded at the national stock exchange or through bilateral agreements.

Costa Rica will not be affected by the CBAM because it does not export any of the goods listed in Annex II of the Regulation (EU) 2023/956 to the EU.

Costa Rica mainly exports bananas, pineapples and melons (43%), medical equipment (37%), and food preparations (5%).

The TCFD has had an influence on climate change liability and reporting. However, national policies and regulations have not been enacted on these matters.

The Ministry of Planning has a registry with information on climate financing, for projects financed with international co-operation. The financial and insurance sectors have developed a mechanism for tracking information on climate financing and investment. 

The General Superintendence of Financial Entities is developing a methodology for gathering information on climate change through the credits managed daily by all supervised financial entities, including the classification of climate actions and investments. The financial sector has a specific tool for the initial analysis of projects for investment with the potential to reduce GHG emissions and/or bring about adaptation to the impacts of climate change. The “Guidelines for reporting information on climate finance in Financial Institutions” supervised by SUGEF is based on international methodologies to identify climate change activities, such as the OECD Rio Markers and the International Finance Corporation (IFC) Definitions and Metrics for Climate-Related Activities. The objective of the Guidelines is to identify, classify and report the amount and origin of funds and the type of funding modality of climate financing related to credit operations.

Civil society does not have any influence on investments and industrial operational decisions on climate change.

In Costa Rica there are no specific provisions for liability for climate change, although the General Environment Law No 7554 establishes liability for causing harm to the environment in general. In cases of pollution, the polluter is responsible for cleaning the site and mitigating the impacts of pollution by restoring the site to its previous ecological condition. If the administrative authority determines the liability, the polluter is responsible for paying all the compensation costs.

Directors can be held liable for climate change impacts, either as individuals or on behalf of their companies, if there is proven harm to the environment. Under civil law, directors are also liable if the company fails to exercise reasonable care and causes harm to another person through negligence or imprudence. 

Infrastructural investments and/or financing arrangements that could have a negative climate change impact could become the focus of judicial or civil society attention in cases where there is potential or actual harm to the environment or people.

Under strict liability standards, a person who holds shares in a company can be held liable for the breaches of environmental law of that company. Since the legal system allows the choice of law and forums, it is also possible for parent companies to be sued in court for pollution caused by a foreign subsidiary.

In Costa Rica, ESG reporting is not a regulatory requirement. Financial and insurance companies are, however, integrating ESG aspects into their operations.

In November 2020, the securities regulation CNS 1620/11 established new requirements for sustainable investment funds, such as third-party verification – from entities authorised by the Climate Bonds Initiative or the General Securities Superintendency (“SUGEVAL”) – if they wish to label an investment fund as green, social, or sustainable. In November 2018, the pension regulator, “SUPEN”, issued a new regulation on “socially responsible asset management policies” as part of the investment policy of pension funds.

Corporations are incorporating ESG voluntarily into their structures as a measure to prevent and manage climate and financial risks, to comply with international market requirements and anticipate future domestic ESG mandatory regulations.

In Costa Rica there are no requirements for climate-change due diligence for finance and property transactions. However, corporate lenders and institutional investors are expected to identify and assess actual and potential adverse environmental and social risks in general, not specifically to climate-change mitigation and adaptation.

The VII National Energy Plan (2015–2030) establishes specific guidelines to encourage actions to address climate change, through technological change, innovative processes, research and knowledge.

The Law for the Regulation of the Rational Use of Energy, No 7447 provides tax incentives for the development and use of renewable sources of energy and  for energy efficiency. Tax exemption includes sales tax, VAT and selective consumption tax. The Law includes a list of equipment and materials subject to tax incentives, such as:

• solar water heaters and water storage tanks for solar heating systems;
• photovoltaic power generation panels;
• control systems for photovoltaic panels, direct current wind and hydroelectric generators;
• efficient fluorescent and halogen lamps;
• wind and hydroelectric generators;
• voltage and frequency control equipment for wind and hydroelectric generators;
• direct current household appliances, to be used with photovoltaic panels, and direct current wind and hydroelectric generators;
• materials to build equipment to take advantage of renewable energy;
• absorbent plates and finned tubes for water heaters;
• specific aluminum profiles to build solar water heaters;
• thermal insulators for water pipes;
• pumping systems powered by photovoltaic and wind systems; and
• refrigerators and solar cookers.

The objective of the National Strategy for Low-Carbon Cattle Ranching is to create policy, technology and investment conditions for cattle ranchers in Costa Rica to help them achieve greater productivity and profitability, with fewer GHG emissions. By adopting and applying low-emission, transformative production practices, the livestock sector will become more eco-competitive.

The National Strategy on circular economy creates conditions to attract investments for the development of new technology-based businesses in the circular economy. It seeks to strengthen the competitiveness of Costa Rican industry, directly related to the adoption of standards and norms as a member country of the OECD, which represents a competitive advantage in the medium term and potential access to new green and sustainable markets.