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Research Questions

  1. How has COVID-19 affected Costa Rica's economy?
  2. Can decarbonization investments accelerate Costa Rica's economic recovery and address historical inequities?
  3. Are Costa Rica's planned decarbonization investments aligned with broader sustainable development goals?

The coronavirus disease 2019 (COVID-19) pandemic has profoundly affected Costa Rica, especially its most vulnerable population groups. Prior to the onset of the pandemic, Costa Rica had been taking a leading role in addressing the global climate crisis through investments in adaptation and decarbonization. The pandemic, however, led to a sharp increase in unemployment; the number of unemployed workers increased by over 240,000 people between February and June 2020, and the unemployment rate peaked at over 24 percent, exacerbating prepandemic inequities.

In this follow-on analysis to their 2020 study on the benefits and costs of Costa Rica's National Decarbonization Plan (NDP), the authors evaluate how investment in decarbonization through the NDP could improve employment and economic growth in the near term as Costa Rica recovers from COVID-19. Using a computable general equilibrium model, the authors estimate that five years of decarbonization investments would offset the lingering impacts that COVID-19 would have on employment and economic activity.

The authors also describe how decarbonization could help Costa Rica make progress in achieving the United Nations Sustainable Development Goals (SDGs)—a key tenet in Costa Rica's decarbonization vision. The authors conclude with recommendations for how decarbonization investments could be best targeted to provide additional near-term economic benefits, how these investments should be deployed and coordinated to generate long-lasting positive benefits across the different sectors of the economy, and how these investments could be prioritized to meet different SDGs over time, considering the progress the country has made on each one of them.

Key Findings

  • Simulations of three COVID-19 recovery pathways suggest that employment and value added may not fully recover to the levels that would have prevailed without COVID-19; the slower the recovery, the larger the suppression of employment and value added will be in 2025.
  • Decarbonization-related capital investments through 2025 could offset the lingering impacts that COVID-19 would have on employment and economic activity.
  • COVID-19 led to larger proportional job losses for women and low-wage earners. Investments in decarbonization could reverse this inequity.
  • Implementation of the 107 investments described in the NDP could advance the SDGs.
  • Quantitative modeling in this study and in the 2020 Benefits and Costs of Decarbonization study suggest tangible positive effects of decarbonization investments on ten of the 17 SDGs.

Recommendations

  • Employment outcomes across sectors should be carefully monitored to understand how the NDP investments are modifying the labor market.
  • Costa Rica should consider developing and implementing additional policies to facilitate the hiring and training of vulnerable groups (lower skilled, minority groups, and women) when meeting the employment requirement of decarbonization.
  • Costa Rica should continue to develop an analytical framework for identifying, measuring, and managing transformational change across the economy.
  • Funders of new research should continue to require that research not only integrates environmental and economic dimensions of decarbonization but also addresses the socioeconomic effects of and opportunities from decarbonization.

Research conducted by

This study was commissioned by the United Nations Development Programme, Costa Rica, and conducted by the Community Health and Environmental Policy Program within RAND Social and Economic Well-Being.

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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