The chapter discusses the Payments for Environmental Services (PES) program in Costa Rica, focusing on its implementation and effectiveness. Key points include: 1. **Forest Law No. 7575 (1996)**: The main income for the PES program comes from a 3.5% fuel tax, generating approximately US$3-4 million annually. 2. **Components of the PSA Program**: - **Water Services**: Payments by water users, with a proposed new water tariff. - **Carbon Services**: Payments to participating land users. - **Biodiversity Services**: Payments for biodiversity conservation. 3. **Monitoring Results**: - Forest cover improved significantly since 2003. - Enrolled areas inside biodiversity conservation priority areas increased. - Socially undesirable practices were adopted but have improved since 2003. 4. **Non-Incrementality**: - 230,000 ha contracted by the end of 2004, with 94% for forest conservation. - Over 800,000 ha applications pending. - The program does not require incrementality. 5. **Efficiency Issues**: - Lack of early targeting. - Undifferentiated modalities across the country. - Lack of information on the actual impact of different land uses. 6. **Improvements**: - Collaboration on retrospective assessments. - Design of an improved impact monitoring system. 7. **Conclusions**: - PES is an important part of a package of measures, complementing legal restrictions on forest clearing. - Mistakes are inevitable due to the program's pioneering nature and earlier timber subsidy program. - Strong focus on innovation and adaptation. 8. **Challenges**: - Improving monitoring to better target, select modalities, and set payment levels.The chapter discusses the Payments for Environmental Services (PES) program in Costa Rica, focusing on its implementation and effectiveness. Key points include: 1. **Forest Law No. 7575 (1996)**: The main income for the PES program comes from a 3.5% fuel tax, generating approximately US$3-4 million annually. 2. **Components of the PSA Program**: - **Water Services**: Payments by water users, with a proposed new water tariff. - **Carbon Services**: Payments to participating land users. - **Biodiversity Services**: Payments for biodiversity conservation. 3. **Monitoring Results**: - Forest cover improved significantly since 2003. - Enrolled areas inside biodiversity conservation priority areas increased. - Socially undesirable practices were adopted but have improved since 2003. 4. **Non-Incrementality**: - 230,000 ha contracted by the end of 2004, with 94% for forest conservation. - Over 800,000 ha applications pending. - The program does not require incrementality. 5. **Efficiency Issues**: - Lack of early targeting. - Undifferentiated modalities across the country. - Lack of information on the actual impact of different land uses. 6. **Improvements**: - Collaboration on retrospective assessments. - Design of an improved impact monitoring system. 7. **Conclusions**: - PES is an important part of a package of measures, complementing legal restrictions on forest clearing. - Mistakes are inevitable due to the program's pioneering nature and earlier timber subsidy program. - Strong focus on innovation and adaptation. 8. **Challenges**: - Improving monitoring to better target, select modalities, and set payment levels.