ESPH Pago por Servicios Ambientales Hídricos — Municipal Water-Tariff PES (Heredia, Costa Rica)

ESPH S.A., the public utility jointly owned by the municipalities of Heredia, San Rafael and San Isidro, was empowered by Costa Rica's 1998 Law 7789 to fund watershed conservation through its water tariffs. On 8 March 2000, regulator ARESEP approved a dedicated 'tarifa hídrica' (initially ₡1.90/m³), making ESPH the first Costa Rican utility to price environmental costs into its water bill; direct payment contracts with upstream landowners began in 2002, alongside a parallel land-purchase programme. The scheme is independent of Costa Rica's national FONAFIFO programme and covers five to six micro-watersheds (Ciruelas, Segundo, Bermúdez, Tibás, Pará) feeding the city's supply, which serves over 200,000 people through more than 52,000 customer accounts.

Payment rates were raised in 2004 (tariff to ₡3.80/m³, conservation payments to about ₡47,720/ha/year) and the tariff has since risen further, to ₡10.71/m³ residential in the 2023 schedule. By 2006 the utility had 26 PES contracts covering 768 hectares plus purchased and agreement land, for roughly 1,173 ha conserved; by 2020, ESPH reported 42 active PES contracts covering close to 1,000 hectares within a 9,806-hectare priority zone, with cumulative PES investment of about ₡1,226 million (over US$2 million) between 2002 and 2020, plus roughly ₡443 million spent purchasing five properties (about 24.6 ha) for direct protection.

A 2007 World Bank technical review of the programme states explicitly that no quantitative evidence exists on the scheme's impact on water flow or water quality — monitoring has relied on GIS and field visits rather than measured hydrological outcomes. Independent case-study literature also flags a free-rider problem (downstream municipalities benefit without contributing to the tariff), chronic underfunding relative to identified priority areas, and an equity concern that participating landowners skew toward wealthier property owners in a watershed under mounting urban-development pressure (land values of US$60-100/m² compete directly with conservation incentives).

Read the full analysis: https://www.esph-sa.com/sobre-la-esph/gestion-ambiental/proteccion-del-recurso-hidrico