“Costa Rica discovered its own oil five years ago but decided to ban drilling — so as not to pollute its politics or environment! What country bans oil drilling?” So writes Tom Friedman in the NY Times about Costa’s Rica’s bold environmentalism.
What country would ban oil drilling, indeed, and still grow?
Costa Rica was able to do so because it made another key decision: recognizing the “external” costs of certain economic activities and putting a price on them. Protect a rain forest and you would get paid. Burn carbon and you would end up paying.
… In 1997 Costa Rica imposed a tax on carbon emissions — 3.5 percent of the market value of fossil fuels — which goes into a national forest fund to pay indigenous communities for protecting the forests around them. And the country imposed a water tax whereby major water users — hydro-electric dams, farmers and drinking water providers — had to pay villagers upstream to keep their rivers pristine.
Nations are grappling with the design of incentives to achieve broader environmental and social goals. With such a regime in place, Costa Rica doubled its forests in two decades. But could such a comprehensive approach work in the US? I’m doubtful.