Bridging Costa Rica’s green growth gap

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Advisor on green growth to the German Ministry for Economic Cooperation and Development
4 March 2016

How to support further transformation towards a green economy in Costa Rica

Countries around the world are increasingly implementing Green Growth (GG) as a strategy to protect the environment while simultaneously promoting low-carbon economic growth. Costa Rica is a country that is widely regarded as a green growth frontrunner and an environmental and economic success story. Costa Rica aims at becoming the first carbon neutral country by 2021. Yet, in 2014, things suddenly seemed different: due to the addition of a few new categories into the Environmental Performance Index (which ranks countries around the world by performance on high-priority environmental issues), Costa Rica’s rank suddenly dropped from 5th to 54th out of 178 countries. What the EPI picked up on, among other issues, was one of the country’s major gaps in environmental performance - wastewater treatment. This finding is supported by a recent green growth gap assessment in Costa Rica supported by GIZ, on behalf of German Development Cooperation (BMZ) and with generous support from the Climate and Development Knowledge Network (CDKN), which was carried out by the Overseas Development Institute (ODI). But our study looked deeper at the factors that drive Costa Rica’s environmental performance and state of green growth. What we found is that Costa Rica is also a victim of its own success: its macroeconomic choices in some areas may have blinded it to its green growth gaps, which threaten to undo its green growth achievements.

Our study analyses which macroeconomic choices need to be made by the Government of Costa Rica to reach its ambitious 2021-target of carbon neutrality and which would simultaneously  strengthen (green) economic growth and development in the future. Instead of listing Costa Rica’s many green growth policies and projects, the publication aims at exploring the close links between the economy and the environment by identifying weak outcomes of Costa Rica’s entire policy mix and tracing them back to their sources in policy gaps or structural weaknesses. The analysis thus explores the performance (and underperformance) of the country first in the economy and then in the environment and identifies strengths and weaknesses in both domains. It then analyses the roots of weaknesses by exploring the close links between the economy and the environment as well as opportunities to align Costa Rica’s economic and environmental policy objectives more closely in the future. The main findings are presented in the table below.

Looking at the close interfaces between economic and environmental strengths and weaknesses, two major findings emerge from the analysis which I would like to highlight: first, Costa Rica’s green growth is the result of historical choices made in the pursuit of economic growth. Two of the country’s biggest successes – biodiversity and tourism services – have been engines of economic growth. Second and more importantly, the biggest gaps in environmental performance – wastewater management and rising GHG emissions – stem from a lack of investments in sustainable public infrastructure. As a result of inadequate expenditure on public transportation, the country has seen a rapid expansion of private transport and, in turn, a rise in GHG emissions. Failure to invest in wastewater management is an equally important infrastructure gap. In the long run, higher levels of public spending, and therefore public revenue, are vital to provide the public infrastructure, planning and governance that are needed to manage economic and environmental performance.

Based on the analysis, the authors propose a mix of recommendations for long-term structural changes and short-term “quick wins”, which allows the Government to start closing green growth gaps by tackling concrete issues immediately. The study was presented to the Government of Costa Rica and the results have already found their way into the policy making process as one of the key documents for developing a new industrial policy. For GIZ, this experience illustrates the usefulness of the methodology that was followed in the study and which is transferrable to any country to assess green growth gaps. Emphasizing the close linkages between economic and environmental performance helps to make the case for green growth: by closing macroeconomic gaps (investing in infrastructure and wastewater management, most importantly), Costa Rica will significantly enhance both its economic and environmental performance by removing obstacles to business development and exports and improving the opportunity to expand the eco-tourism sector, for example. Such a line of argumentation can convince policymakers of the urgency and benefits of taking action to drive forward green growth. 

The full publication with information on further results of the gap assessment is available here. In case of questions and comments, please do not hesitate to get in touch with the Sector Project Sustainable Economic Development (

Tourism, Waste, Water
Costa Rica

The opinions expressed herein are solely those of the authors and do not necessarily reflect the official views of the GGKP or its Partners.