Caribbean & Central America - October 2021
COSTA RICA: Spearheading efforts to phase out oil and gas production
On 16 September Costa Rica’s environment minister Andrea Meza and her Danish counterpart, Dan Jorgensen, announced the formation of the Beyond Oil and Gas Alliance (BOGA), a diplomatic initiative bringing together countries and jurisdictions that have ended licensing for new oil and gas exploration and production and are setting an end date for their production. The announcement follows a legislative bill unveiled in July by Costa Rica’s President Carlos Alvarado which would eliminate the use of fossil fuels in Costa Rica and declares its national territory free of exploration and exploitation of oil and gas. Both developments once again underline the Costa Rican government’s commitment to its decarbonisation plan which aims to make the country completely carbon-free by 2050.
BOGA is the first diplomatic initiative acknowledging the need for governments to manage the phase-out of fossil fuel production as a key tool to address the climate crisis. On 25 August Meza retweeted an interview she gave to newswire Reuters which said it had seen the draft agreement which reports that it may be launched at the United Nations climate summit, COP26, in Glasgow this November. According to the Reuters article, countries must promise to end new licensing rounds for oil and gas production to be part of the alliance and phase out existing production. It may be possible to become a second-tier member for countries which have taken some steps to limit fossil fuel production, like ending public financing of it abroad or reforming fossil fuel subsidies.
The announcement of the BOGA followed President Alvarado’s unveiling of the bill to eliminate fossil fuels on 28 July which was welcomed by local environmental groups like Movimiento Costa Rica Libre de Perforación, which includes some 150 organisations. Former president Abel Pacheco (2002-2006) first issued an executive decree in 2002 establishing a moratorium on exploration and exploitation of hydrocarbons in Costa Rica, which has been extended under successive governments – most recently in 2019 by President Alvarado, until 2050. However, environmentalists welcome the stronger guarantees provided by the new legislative bill, given that executive decrees can be revoked. The latest initiative would make the moratorium permanent. It is in line with the government’s decarbonisation plan unveiled in February 2019, which includes an ambitious switch to electric-powered vehicles, energy saving measures, sustainable construction, integral waste management, and changes to agriculture and land use.
- Electric train
Costa Rica’s environmental preservation efforts have produced international financial support [SSR-21-01], including from the Green Climate Fund (GCF) – a fund established within the UN Framework Convention on Climate Change (UNFCCC). On 1 July the Central American development bank (BCIE), a direct access accredited entity since 2016 before the GCF, announced that the GCF had approved its proposal to finance the electric passenger train project for Costa Rica’s greater metropolitan area (GAM), for US$271.3m.
Describing it as a “flagship” project, BCIE executive president Dante Mossi said it represented a “paradigm shift” as it will be “the reference in the region towards a low-emission sustainable transportation transition and will become the backbone that will integrate all types of public transportation.” BCIE estimates that the project, which includes 85km of double tracking passing through 15 cantons, will benefit over 2.7m inhabitants, generating close to 1,200 direct jobs during its construction phase and 1,470 during its operation phase and will reduce CO2 emissions by 7.6m tonnes throughout its useful life (see sidebar).
- Electric train project
The total cost of the electric train project is US$1.55bn, of which BCIE approved US$550m in financing and the GFT; through this approval the BCIE will provide US$250m as a loan to the Costa Rican government and US$21.3m as a donation. The remaining amount will be mobilised by the private sector through a concessionaire awarded the project through a bidding process.