A new bank opened in Costa Rica Thursday afternoon. BANCO2, the first "environmental bank" of its kind in the world, doesn't trade or lend money, but it could have big economic implications for improving energy efficiency and reducing carbon emissions here and around the world.
BANCO2 provides commercialization and brokerage services for carbon dioxide credits, as well as promotion, monitoring, reporting and verification of national CO2 mitigation and reduction projects. The bank is the latest in a series of programs and investments by the Costa Rican government to reach its goal of carbon neutrality by 2021.
Only time will tell if businesses flock to the nascent voluntary carbon exchange as a way to mitigate their emissions footprint; but many have already been taking steps to reduce their CO2 and organizers remain bully on the market’s future.
Costa Rica, along with many other Latin American countries, has already been involved in carbon mitigation and sequestration efforts, most notably through the issue of forest credits via the National Forest Financing Fund, FONAFIFO.
Under the carbon market, participants who reduce their verified carbon footprint can sell those reductions on the exchange to someone else seeking to offset their own carbon dioxide emissions.
Environment Minister René Castro told The Tico Times that people already can take advantage of the new environmental bank. For example, if someone wants to buy a hybrid vehicle from China, South Korea or Japan, they can get a lower interest rate from Banco de Costa Rica and, eventually, Banco Nacional. If the owner of the new hybrid car agrees to forfeit their carbon offsets from driving a more efficient vehicle, the bank will provide them with a one-year QuikPass good for Costa Rica’s toll roads.
Similarly, small households can apply for energy and water efficiency improvements for reduced interest rates up to $5,000, the minister added.
But the market’s ability to help Costa Rica reach its carbon neutrality goal has an “Achilles' heel,” according to Castro: Costa Rica is rushing toward a 1:1 car-to-person ratio. Congestion on Costa Rica’s roads is already contributing to increasing air pollution, and more cars will only expand the country’s carbon footprint.
FONAFIFO authorized 1.2 million tons of carbon dioxide worth of UCCs, the Costa Rican carbon credit, for sale on the exchange.
BANCO2 set the exchange’s price of carbon at $5 per ton.
But is there enough demand?
Several businesses already have expressed interest in offsetting their carbon footprints, including Bridgestone, Daewoo, the bus line Reyna del Campo, the Coopesantos cooperative, and Banco de Costa Rica, according to a statement from the Environment Ministry (MINAE).
Unlike other carbon markets that use a cap-and-trade approach, which sets a carbon ceiling that forces businesses to either reduce their emissions or trade for the right to pollute, Costa Rica’s market is voluntary.
"The challenge for the market is to see if there is enough demand,” said Ana María Majano, director for sustainable development at the Central American Institute of Business Administration (INCAE) in Costa Rica, reflecting on the fact that no business or other organization is required to reduce their CO2 footprint under the current law.
FONAFIFO Director José Mario Rodríguez told The Tico Times that he thought businesses would start to use carbon neutrality as a way to differentiate themselves in a competitive market.
"When we first started discussing this idea there were some businesses that said it would raise their costs but there were others who saw carbon neutrality as a competitive advantage. People are going to prefer the business with the 'cleaner' carbon footprint," Rodríguez said.
Manfred Kopper, environmental coordinator with the Business Association for Development, said that the carbon exchange would offer a one-stop-shop approach that would help many businesses overcome the initial hurdle of knowing how to go about offsetting their emissions.
Castro said that he sees the new environmental bank as a way to prepare Costa Rica and other countries for the day when limits on carbon emissions are mandatory, not just here but around the world.
Said Majano: "Costa Rica decided to make reductions not out of a legal obligation but out of a responsibility to global society and to be a sustainable country.”