PROJECT BRIEF 1. IDENTIFIERS: PROJECT NUMBER: CR-GE-61314 PROJECT NAME: Ecomarkets DURATION: 5 years IMPLEMENTING AGENCY: World Bank EXECUTING AGENCY: The National Forestry Financing Fund (FONAFIFO) REQUESTING COUNTRY OR COUNTRIES: Costa Rica ELIGIBILITY: Costa Rica ratified the Convention on Biological Diversity on August 26, 1994 GEF FOCAL AREA: Biological Diversity GEF PROGRAMMING FRAMEWORK: Forest Ecosystems and Mountain Ecosystems (Operational Programs: Nos. 3 & 4). 2. SUMMARY: The development objective of the proposed project is to increase the production of environmental services in Costa Rica by supporting the development of markets and private sector providers for services supplied by privately owned forests, including protection of biological diversity, greenhouse gas mitigation, and provision of hydrological services. The global environmental objective of the proposed project is to foster biodiversity conservation and preserve important forest ecosystems through conservation easements on privately-owned lands outside of protected areas in the Mesoamerican Biological Corridor in Costa Rica. The project will strengthen offices within the Ministry of Environment and Energy (MINAE), as well as local and regional non-governmental organizations, responsible for the execution, promotion, supervision, and monitoring of the forest conservation program. Results of project activities generating global benefits would include: (a) an additional 50,000 hectares of privately owned lands in Tortuguero, La Amistad Caribe, and Osa Conservation Areas incorporated into Costa Rica’s conservation easement program; (b) establishment of a financial instrument to support conservation easements in Costa Rica over the long term; and (c) increased landowner participation in, and benefits from, forest conservation-related activities within the Mesoamerican Biological Corridor in Costa Rica. 3. COSTS AND FINANCING (MILLION US): GEF: -Project US$8.0 million - PDF: US$0.33 million Subtotal GEF: US$8.33 million CO-FINANCING: -GOCR: US$31.9 million -World Bank: US$20.0 million Subtotal Co-Financing: US$ 51.9 million TOTAL PROJECT COST: US$60.23 4. OPERATIONAL FOCAL POINT ENDORSEMENT: Name: Carlos Herrera Amighetti Title: Delegate Executive A: Project Development Objective 1a. Project development objective: (see Annex 1) The development objective of the proposed project is to increase the production of environmental services in Costa Rica by supporting the development of markets and private sector providers for services supplied by privately owned forests. As such, the project directly supports the implementation of Forestry Law No. 7575: providing market-based incentives to forest owners in buffer zones and interconnecting biological corridors contiguous to national parks and biological reserves for the provision of environmental services relating to carbon sequestration, biodiversity conservation, scenic beauty, and hydrological services. The project aims to contribute to environmentally sustainable development in Costa Rica through: (i) supporting the supply of and demand for environmental services provided by forest ecosystems; (ii) strengthening management capacity and assuring financing of public sector forestry programs administered by the Ministry of Environment and Energy (MINAE), including the National Forestry Financing Fund (FONAFIFO) and the National System of Conservation Areas (SINAC); and (iii) increasing inflows of private capital into the forestry sector, sustaining natural forests which are critical for biodiversity conservation and which form the basis for existing (e.g., ecotourism) and emerging industries. 1b. Global Environment objective: (see Annex 1) The global environmental objective of the proposed project is to foster biodiversity conservation and preserve important forest ecosystems through conservation easements on privately-owned lands outside of protected areas in the Mesoamerican Biological Corridor in Costa Rica. 2. Key performance indicators: (see Annex 1) Key performance indicators related to the project development objective include: · 30 % increase in number of providers of environmental services by end-of-project; · 25% increase in land area covered by Environmental Service Payments (ESP) program contracts; · 30 % increase in the participation of women land owners in the ESP; · 30 % increase in the participation of women organizations in the ESP; Key performance indicators related to the Global Environment objective include: · 50,000 hectares of privately owned lands within the Mesoamerican Biological Corridor incorporated into Costa Rica’s ESP program through conservation easements; · Establishment of a financial instrument to support conservation easements in Costa Rica; · Increased landowner participation in, and benefits from, forest conservation-related activities within the Mesoamerican Biological Corridor in Costa Rica. B: Strategic Context 1a. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: Date of latest CAS discussion: The most recent Country Assistance Strategy was prepared in 1993. A draft Country Economic Memorandum was prepared in 1995. The CEM points out that higher and sustained economic growth in Costa Rica depends on the Government’s success in strengthening the outward-orientation of the economy and increasing the role of the private sector. The proposed project directly supports the CEM objective of placing Costa Rica on a higher growth path by improving incentives for private sector-led growth and by supporting improved natural resource management through the conservation of forest ecosystems. Finally, the project supports poverty alleviation through targeting small farmers and the rural poor for contracts for conservation easements, sustainable forest management, and reforestation. 1.b. GEF Operational Strategy/Program addressed by the project: Costa Rica ratified the Convention on Biological Diversity on August 26, 1994. The proposed project is eligible for GEF financing under two of the four Operational Programs supporting the conservation and sustainable use of biodiversity: Forest Ecosystems and Mountain Ecosystems (O.P. Nos. 3 & 4). Furthermore, the project is in accordance with Article 8 of the Convention on Biological Diversity and is consistent with guidance from the Conference of the Parties as it addresses in situ conservation; includes capacity building at the local level for biodiversity conservation; strengthens conservation management and suitable use of ecosystems outside of state- owned protected areas; strengthens the involvement of local peoples and supports conservation-oriented poverty alleviation in rural areas. The project complements a number of ongoing and recently-completed GEF-financed activities in Costa Rica, including: the National Biodiversity Strategy and Action Plan; the GEF/World Bank/INBio Biodiversity Resources Project; the GEF/UNDP Medium-sized project in the Talamanca-Caribe Biological Corridor project; and the GEF/World Bank/IICA Sustainable Cacao Medium-Sized Project. The project preparation team has carried out discussions with UNDP program officers in Costa Rica and the Talamanca-Caribe Biological Corridor project to ensure complementarity and avoid overlaps between the two projects. Finally, consultants working on the GEF/UNEP/OAS San Juan River Basin Project are likewise involved in the formulation of the proposed project, ensuring an avoidance of overlaps between the two projects. In addition, the project is complementary to the larger GEF/UNDP/UNEP/CCAD/GTZ/DANIDA regional program to consolidate the Mesoamerican Biological Corridor (MBC). The Costa Rica national technical coordinators for the regional project – who are responsible of the inter-agency coordination of activities related with the consolidation of the MBC – have been consulted with respect to jointly defining priority corridor areas according with the strategy defined at national and regional levels. This strategy for the conservation and sustainable use of biodiversity within the Mesoamerican Biological Corridor, was formulated building upon efforts carried out within Costa Rica, such as the GRUAS Project (UNDP/GEF/MINAE), as well as in neighboring countries, including the Panama Atlantic Mesoamerican Biological Corridor Project (World 2. Main sector issues and Government strategy: Forestry Sector Costa Rica is one of the world’s leading proponents of environmentally sustainable development, pursuing social and economic growth in conjunction with a strong and healthy environment. The environmental policy of the government has been progressive, including use of economic instruments such as electricity surcharges and reforestation credits which are targeted at protecting forest ecosystems throughout the country. Nonetheless, Costa Rica was beset with one of the highest rates of deforestation worldwide during the 1970s and 1980s. In 1950, forests covered more than one-half of Costa Rica; by 1995, forest cover declined to twenty-five percent of the national territory. Approximately sixty percent of forest cover, totaling 1.2 million hectares, exists on privately owned lands outside of protected areas. World Bank estimates indicate that eighty percent of deforested areas, nearly all on privately owned lands, were converted to pastures and agriculture. Deforestation was principally driven by inappropriate Government policies including cheap credit for cattle, land titling laws that rewarded deforestation, and rapid expansion