Financing climate change adaptation in the tourism sector in Costa Rica

A case for small and medium sized enterprises

Aim of the presentation

This presentation aims to propose some possible financing sources to support the adaptation to climate

change in small and medium sized enterprises (SMEs) in Costa Rica.

The Problem

It has been recognized that globally, the tourism sector has a low level of preparedness in relation to its risks to climate change.

Source: KPMG, 2008.

The Problem

• Central America is one of the most exposed regions to the impacts of climate change (CEPAL and CCAD, 2012).

• Only in 2013, tourism commercial activities represented 4,6% of Costa Rica’s GDP. This sector is also responsible for 95.000 jobs in the country (El Financiero, 2015).

The Problem

During the period of 2010-2012, the tourists’ main motivation to travel to Costa Rica was for “vacation and recreation” (76% on average) (SITCA, 2013). This is directly linked to beach tourism and mountain tourism, which are vulnerable areas to the impacts of climate change:

o Sea level riseo Temperature riseo Decrease of precipitationso Increase of evaporation

The Problem

According to statistical data from 2011, more than 90% of the hotels in Costa Rica had less than 50 rooms (some hotel associations classify as a small or medium hotel those with 50 or less rooms), and most of them are located at the coasts.

Source: ICT, 2011.

Why financing is needed?

• “Take urgent action to combat climate change and its impacts” is the 13th Goal of the Sustainable Development Goals (SDGs).

• Though Costa Rica is an upper-middle income country, it is currently facing an urgent need to re-order its national finances to be able to support its own development projects in the future.

• Though there are not clear estimations of the national financial needs to adapt to climate change, the global estimations are enormous.

What options do we have?

1. ODA (Official Development Assistance)

These graphics show the distribution of ODA for Costa Rica in 2014, related to climate change. Most of it was directed to mitigation related activities.

There is an opportunity to increase the percentage of finance directed to adaptation needs.

Source: OECD’s website.

What options do we have?

2. DRM (Domestic Resource Mobilization)

• This should be the most important source of finance. • Structural changes are needed to overcome a current issue on

efficiency of public spending. • Currently there is an initiative that is being discussed for

implementing the VAT (value-added tax).• The National Plan for Sustainable Tourism of Costa Rica

(sustainable tourism policy) should contemplate measures to support financing to climate change adaptation.

What options do we have?

3. Private sources• Though this initiative is focused on SMEs in the tourism sector, some part

of the financing should come (where possible) from these companies, basically because the adaptation to climate change is of its own interest.

• In this process bigger companies could get involved, providing more financial resources and obtaining the benefit of the investment as well. For example, the construction of a dike at the shore of the ocean could protect all the hotels of the area, whether they are small or big companies.

What options do we have?

4. UNFCCC Mechanism“Developed countries under the UNFCCC have obligations to transfer resources to developing countries to support climate action through different channels” (World Bank, 2015). Those channels could be:• The Green Climate Fund• MDBs (Multilateral Development Banks)• Bilateral Development Agencies

References• CEPAL and CCAD (2012).La Economía del Cambio Climático en Centroamérica: Síntesis 2012.

Available in http://www.cepal.org/mexico/cambioclimatico/documentos/sintesis_2012baja.pdf

• El Financiero (2015). Turismo genera el 4,6% del PIB en Costa Rica. Available in http://www.elfinancierocr.com/negocios/Turismo-Costa-Rica-genera-PIB_0_484151588.html

• ICT (2011).Cifras Turísticas. 4th Edition. November 2011. Available inhttp://www.visitcostarica.com/ict/paginas/cifras_turisticas/Noviembre_2011/CifrasTuristicas.pdf

• KPMG (2008). Climate Changes Your Business. Available in http://www.kpmg.com/EU/en/Documents/Climate_Changes_Your_Business.pdf

• SITCA (2013). Boletín de Estadísticas Turísticas de Centroamérica 2012. Consejo Centroamericano de Turismo. Available inhttp://www.camaradeturismodelaceiba.com/wp-content/uploads/2013/09/boletn_de_estadsticas_tursticas_de_ca_20121.pdf

• World Bank Group (2015). Climate Finance Video. Speaker Rachel Kyte. MOOC Financing for Development.