COSTA RICA

Costa Rica generates nearly 100 percent of its electricity consumption from renewable energy sources. The country is also considered a leader in nature conservation. More than 25 percent of Costa Rica’s land is devoted today to nature conservation areas. With its Decarbonisation Plan, adopted in 2018 with an implementation deadline of 2050, the country is setting important standards and leading the way both regionally and internationally. Currently, the Environmental Commission of the Costa Rican Parliament is working on a bill that would officially ban oil and gas exploration and extractionAlthough the development and exploitation of these mineral resources is prohibited by presidential decree until 2050, the President could revoke this provision. in the country. Against this backdrop, Costa Rica can undoubtedly be considered a major player when it comes to safeguarding significant resources and protecting the climate. 

For Germany, the country can play a particularly important role as a supplier of green hydrogen. The past decade has seen an increasing number of initiatives for producing and utilising green hydrogen. A bill promoting a green hydrogen economy is currently before the Costa Rican Parliament. The opportunity for developing additional, relatively inexpensive renewable energy sources, coupled with the fact that the country has sufficient water reserves, indicates considerable potential for the production of green hydrogen here.

Germany has set itself the goal of becoming an international pioneer in green hydrogen and, in the longer term, the world market leader in hydrogen technologies. To achieve this goal, it must rely on partner countries. Costa Rica would be an ideal candidate for close cooperation in the hydrogen sector. The aforementioned unique energy policy features and the country’s geostrategic location with access to the Atlantic Ocean – the location of Central America’s only deep-water port – as well as the Pacific Ocean are interesting criteria for further cooperation. 

At the same time, Costa Rica faces greater challenges in the area of environmental and climate protection than might initially be expected. The use of renewable energies has indeed come a long way here, but electricity represents only a small share of total energy consumption in Costa Rica. Much of the energy is used in the transport and heating sectors. A poorly functioning public transport system, lack of investment in traffic infrastructure and an outdated vehicle fleet – the average age of vehicles in Costa Rica is 16 years, compared to nine years in Germany – lead to comparatively high CO² emissions in the traffic sector and constant congestion on the streets of the capital of San José. There is an urgent need to take action to expand and modernise the traffic infrastructure, especially with regard to public transport Furthermore, the cultivation of bananas and pineapples in huge monocultures and with massive use of pesticides has disastrous effects on the environment – a fact that is often overlooked in public promotion of the country. 

Costa Rica takes a pronounced interest in promoting climate protection and safeguarding important resources. The country is proud of its trailblazing role in sustainability – a self-image that is deeply rooted among the population. Moreover, this policy approach is conducive to attracting international donor funds and generating revenue in the economically vital tourism sector.

Costa Rica is committed to multilateralism, international free trade and human rights. This makes the OECD member an ideal partner for joint initiatives to promote sustainability and climate protection in multilateral forums. At the last UN Climate Change Conference (COP26) in Glasgow, in 2021, Costa Rica underscored its strong engagement in climate and environmental issues. Co-chaired by Costa Rica and Denmark, 11 governments launched the Beyond Oil and Gas Alliance (BOGA) with the aim of reducing global dependence on fossil fuels. 

As part of this initiative, Costa Rica maintains alliances with numerous stakeholders that are committed to this goal at the international and regional levels, including Germany as a prominent partner. Germany enjoys an excellent reputation in Costa Rica, especially in the field of energy and environmental technology.

Germany has been supporting Costa Rica’s climate policy for years, in particular through projects fostering a sustainable economy and infrastructure and the protection of biodiversity. The Gesellschaft für Internationale Zusammenarbeit (GIZ), for example, is carrying out numerous projects on behalf of the Federal Ministry for the Environment (BMU) geared toward promoting sustainability and combatting climate change. In 2021, Germany donated 10,000 trees to support Costa Rica’s ongoing reforestation projects and financed three electric buses to collect relevant data that will eventually enable the model to be applied to the entire public transport system. In addition, Germany lends the country support within the framework of the “Green Development Fund for the SICA Region”. 

The private sector in particular is in a good starting position: Numerous German companies based in Costa Rica have discovered investment potential in recent years in backing Costa Rican aspirations for sustainable and energy-efficient policies.

There is great potential for bilateral cooperation between Germany and Costa Rica in the field of resources and climate protection. Costa Rica is on a constant quest for international partners and remains an interesting location for direct investment due to its solid economic development and stable democracy. As a business location, the country benefits from high social and ecological standards, which in turn guarantee adherence to German and European legal norms. This is significant not least given the adoption of the German SupplyHempel, Sofia 2022: Costa Rica ragt heraus, GTAI Germany Trade & Invest, 16 February 2022, https://www.gtai.de/gtai-de/trade/costa-rica/wirtschaftsumfeld1/costa-rica-ragt-heraus-760328 (28 February 2022). Chain Act.

Costa Rican climate policy undoubtedly includes the development of hydrogen as fuel, offering potential for stepping up cooperation with Germany. As a sales market, the focus is mainly on the export of green end products from and for transport, traffic and agriculture. Cooperation between the two countries in the field of hydrogen could therefore provide important incentives for economic recovery and strengthen the future viability and competitiveness of both countries. Through the TransformaBMU 2019: Country-specific selection procedure as applied to Costa Rica: https://www.international-climate-initiative.com/de/projektfoerderung/informationen-fuer-antragsteller/laenderspezifisches-auswahlverfahren/costa-rica (23 March 2022). project, €12.5 million is already being invested in transforming production systems into low-carbon, climate-resilient pathways over the next few years.

At an event organised in 2021 by the Konrad Adenauer Stiftung and the German-Costa Rican Chamber of Industry and Commerce, economic and political leaders from both countries once again expressed their interest in a possible energy partnership.

Costa Rica is the ideal partner in terms of German foreign policy, as the two countries share a wide range of interests and values. The country is committed to promoting multilateralism and the liberal democratic world order. It has also recently emerged as a regional clean energy player. Germany should take these factors into account when selecting its international partners, choosing to support beacons of stability and democracy. Particularly in view of the current geopolitical situation, Germany will be increasingly dependent on diversifying its energy sources. Costa Rica offers political and economic stability and should therefore seriously be considered as a partner – especially in the hydrogen sector. 

Other countries such as China, Australia and the United Arab Emirates seem to have already discovered Costa Rica’s potential. In February 2022, Australia announced that it would invest US$3.3 billion in developing a hydrogen project. In late 2021, Costa Rican President Carlos Alvarado held talks in the United Arab Emirates regarding collaboration on green hydrogen production. And China is emerging as a market winner here, particularly in the area of technology supply for photovoltaic systems and energy storage systems. 

In the long run, Germany’s good reputation alone cannot compete with what other countries have to offer. An energy or hydrogen partnership would therefore be an important step towards strengthening lasting cooperation with the Central American country – and thus promoting the future viability and competitiveness of both countries.

Nicole Stopfer is head of the KAS Regional Programme Energy Security and Climate Change in Latin America, which is based in Peru.

Evelyn Gaiser heads the KAS office in Costa Rica.