Vincente Paniagua doesn't run an ordinary Costa Rican farm. On several acres, tropical jungle thrives, a rare sight amid the deforested holdings of the eastern Atlantic lowlands. On others, planted in neat rows with room to allow his cattle to graze, grow 18 species of trees.
Ask Mr. Paniagua about international bond markets, and a blank look descends upon him. But he will be among the first farmers to receive funds from $300 million worth of "carbon bonds" being issued by the Costa Rican government.
Industrialized nations will purchase the bonds from developing nations as a way of encouraging them to protect forests. The developing nations will then distribute the bonds, Known as Certified Tradable Offsets (CTOs), to nongovernmental organizations and farmers like Paniagua. The bonds are being trumpeted as a means for industrialized nations to "offset" their carbon dioxide (CO2) emissions by promoting conservation of tropical forests - labeled by scientists as the planet's "carbon sinks."
"This alone will not correct the problems of climate change, but it goes a long way in correcting the problems of developing countries," says Franz Tattenbach, national coordinator of the Joint Implementation Office (OCIC) in San Jose. Mr. Tattenbach says that cash from the bonds will be used by the government and distributed to nongovernmental organizations to pay for the upkeep of 20 national parks, another 80 protected sites, and thousands of acres of marginal farmland.
To date, $4 million in CTOs have been sold - with $2 million going to Norway, Tattenbach said. Farmers like Paniagua will receive a subsidy of $10 to 40 per 2-1/2 acres each year, to preserve and expand natural forests, aid commercial forest plantations, and remove the financial pressures that lead farmers to environmentally destructive practices. Rain forest currently in private hands will be bought up using CTOs.
Environmentalists see the benefit of such a program, but doubt it will have the desired impact. A recent Costa Rican Cercopia Foundation report branded CTOs a "vigorous and misleading campaign" by the Environment Ministry.
Brazil and Costa Rica campaigned for the inclusion of CTOs in the Kyoto Protocol and were active in promoting Article 12 of the agreement, which establishes a clean development mechanism (CDM) as a way to "offset" carbon pollution from industrialized nations.
"There is a major risk that the CDMs, far from transferring clean technology to developing countries and fulfilling the promise implied in its name, will simply be a mechanism for allowing continued growth in pollution in [industrialized] countries," says Bill Hare of Greenpeace International in Amsterdam.
"Under this program, we have achieved direct investment of some $50 million in just four years... the indirect investment is around $130 million, and the potential is much larger," former President Jose Figueres said at the International Meeting on Climate Change held here in March.
If CTOs do prove a feasible means of conservation, they will come too late for much of Costa Rica's forest. Almost 70 percent of Costa Rica has been deforested, and US academics say the country is expected to have wood shortages in the next few decades. Several other Latin American countries - like Panama and Brazil - are currently studying the Costa Rican initiative. The pro-CTO camp is also selling the plan as way to reduce forest burning, which is estimated to contribute up to 20 percent of global carbon emissions.
In the worst case scenario, Tattenbach says, the bonds would at least prevent deforestation for several years, as contracts for CTOs all have horizons of five years.
He does agree with fellow environmentalists on one thing: "Western countries need to reduce their emissions, too."