• Costa Rica Real Estate

A little funding and a lot of ideas on how to decarbonize Costa Rica

March 1, 2019

On Sunday, Costa Rica launched an economy-wide plan to decarbonize the country by 2050. The government presented a 10-part plan with a roadmap on how to decarbonize the country’s agriculture, transportation, electric and cargo sectors.

There were fewer details on how the country, which is facing a growing deficit, will afford its plan.

Amal-Lee Amin, chief of the climate change and sustainability division at the Inter-American Development Bank (IDB), came to Sunday’s launch with colleagues to show support for the plan and help implement it.  

“I think the key message [from the launch] is that this is about modernizing the economy but also enhancing the world of nature-based solutions, which of course Costa Rica has got a relatively advanced agenda on already,” Amin said. “So building on a lot of what has already been done here over the last 30 to 40 years and continuing to take that next step in terms of leadership on this agenda.”  

The IDB, which has loaned more than $1.5 billion to different companies in Costa Rica and helped complete 570 projects, donated $3.5 million to Costa Rica’s decarbonization plan. It will focus on the forests and biodiversity axis and is meant to “improve the conservation and sustainable use of biodiversity through the management of terrestrial ecosystem services.“

Amin’s Ph.D. on policy and regulatory implications for scaling up investment in renewable energy in developing countries has been central to her life work. She’s worked on multilateral and bilateral agreements and partnerships on climate change institutions, technologies and finance.

She understands the challenges Costa Rica will face, and while the bank donated money to conservation, she says the biggest roadblock is on the street.

“It’s going to be a challenge to decarbonize the transportation sector, which we heard today was 44 percent of emissions in the country,” Amin said.

First Lady Claudia Dobles focused on transportation in her talk. She laid out a plan that focused around an electric train. Eventually, they’d want every vehicle to run off the electric grid.

Right now, they’re pretty expensive. The cheapest car on display at the decarbonization fair, a Chinese made-BYD sedan, cost $25,000. In 2018, the per capita income per household was just above $7,300.

Adrian Vogt-Schilb, an IDB economist, reinforced President Carlos Alvarado’s point that this plan can’t work if it doesn’t work for the middle class.  

“[Alvarado] mentioned in particular, vulnerable households,” Vogt-Shilb said. “So I think having a clear mandate to find solutions to decarbonize and make it work for the population is key.”  

According to a report by Bloomberg New Energy Finance (BNEF), it’s likely that electric cars will be cheaper than fossil-fuelled cars by as soon as 2025. “The price of electric batteries have dropped five times since 2013,” Vogt-Shilb adds.  

“One of the challenges we see in other countries is what to do with the old cars and buses [when people transition to electric vehicles],” Amin said. “Do they just move into the other cities, or to the poor populations? You’re not necessarily delivering overall emissions. So that’s something I know needs to be considered.”  

Shifting to an economy with electric vehicles will have other effects on the economy. Electric cars don’t require the same maintenance that normal combustion engines do. How the government is going to develop the skills and training to create more opportunities and jobs requires a clear labour and skills strategy, which Amin says is part of the plan and needs to be prioritized.  

According to Amin, one of the key issues talked about during the launch is that the economy and the fiscal agenda is fairly reliant on the taxes that are obtained by fossil fuel subsidies.  

This January, 6.8 percent of Costa Rica’s tax revenue came from fuel taxes.

“One of the myths that the fossil fuel industry is good at perpetuating is that if you are phasing out or moving to electric vehicles, it’s going to be unfair to the poor. Whereas actually it’s not the case, and the current system tends to disproportionately benefit the wealthy parts of society,” Amin said.

“The main solution to that is to simply increase the tax over time. Say for instance we put a new carbon tax on gasoline and we increase it 3 percent every year and people know in advance,” Vogt-Shilb said. “People will know it’s going to be more expensive and have an incentive to shift to electric vehicles.”  

Vogt-Shilb also said you can’t neglect the fact that these taxes make up a higher share of the budget for a poor household.

“Instead of them not taxing fuel, what the results show is that it’s much better to compensate poor and vulnerable households by using public [transportation] that are more effective at doing that than low gasoline prices,” Vogt-Shilb said.

Monica Araya, a co-founder of Costa Rica Limpia, a strategy group to promote renewable energy and electric mobility says decarbonization also needs to be tangible and visible to everyday citizens.

That’s why she says Costa Rica must have at least five electric buses by the end of 2019. She thinks that Costa Ricans will have an easier time understanding decarbonization if we just get a few electric buses up and running to display a tangible example of progress in motion.  

It might sound like an underwhelming number, but Araya uses Chile as an example. Chile went from having two electric buses to 100 in under a year. Then 200 in another month. They are currently the country with the most electric buses in Latin America. Their progress hasn’t been linear, and she thinks it could work in Costa Rica.

“Managing the transition [from fossil-fuelled cars to electric] is where you succeed or fail,” Araya said. “We know we have to electrify.”

Costa Rica can’t do everything at once. At the moment, the decarbonization plan is simply a plan. Alvarado is playing the music, and citizens need to get on the dance floor for things to work.  


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