Recently, President Carlos Alvarado together with the first lady, Claudia Dobles, publicly presented the Decarbonization Plan of Costa Rica. The plan is based on the Paris Agreement that seeks to limit the increase in global temperature well below 2 ° C above pre-industrial levels. Climate science is clear; to get there we need to reduce net greenhouse gas emissions to zero between 2050 and 2085 worldwide. The plan recognizes this goal and establishes the strategic actions of short (2018-2022), medium (2023-2030) and long-term (2031-2050) necessary to achieve a decarbonized economy. However, what does it mean?
Decarbonizing the economy is not a simple task. To achieve this, a profound transformation of the country’s development model is necessary. That’s why the leadership of the head of state is so outstanding.
Specifically, the document covers ten measures of decarbonization and eight cross-cutting strategies in the five economic areas most emitting greenhouse gases in the country: transport, industry, waste, agriculture, forestry, and other land use. For example, the plan proposes, among other measures, that by 2050, 85% of the public transport fleet will be zero emissions; 95% of the private transport fleet is electric; and that the entire Costa Rican territory has solutions for solid waste management.
How much will all this cost? Who will pay for it? Or perhaps more importantly, what benefits will decarbonization bring to Costa Rican citizens and businesses? These are hard questions to answer for a plan in 2050. There are many uncertainties to consider, such as the price of gasoline, electricity, or natural gas; the cost of technologies such as electric or hydrogen vehicles; or the cost of the infrastructure required to implement the plan. How can we answer those questions then without resorting to a crystal ball?
At the IDB, we are applying a new way of doing a cost-benefit analysis to analyze long-term plans with multiple objectives and high uncertainty. We focus for the moment on the first three axes of the Decarbonization Plan: public transport, private transport, and cargo transport. In February we met with various public institutions related to the future implementation of the Plan, energy sector, planning, transportation, among others, to discuss and incorporate into the sectoral analysis elements of relevance to the transport axes of the Plan. With each of the interested parties we talked about their vision around four themes: the objectives and metrics associated with the plan, the relevant uncertainties in this context, the alternatives available to materialize the goals of the plan and the data and models available in multiple ministries to perform this analysis.
From these discussions, we managed to identify the main concerns of these institutions. Although each one analyzed the transport axes of the Plan under its sector prism, several common areas emerged from the discussions in these meetings. Among the recurring themes, is the need to evaluate the effectiveness of the integration of the public transport system and the cost of electrification for users. For operators and the government, the future power supply of the electrical system, the reform of the tariff structure; and the appetite of companies and ticos for green technologies and their future reactivity to incentive systems.
It was also relevant to consider the time that Costa Ricans lose in dams, the energy savings that would be possible with electric vehicles, the impact of gasoline on local pollution and health, and the cost of importing gas for the country’s trade balance.
With this information, with the modeling capacity of the University of Costa Rica, and the experience of international experts in studies of this type, we will structure an analytical strategy that explores the implications of thousands of possible futures, considering several different angles of the plan. Instead of evaluating the strategy in the future recognized as more feasible, we will try to estimate under what conditions the plan has more costs than benefits (under what price of gasoline, cost of batteries for electric vehicles, the success of the reform of buses, etc.). With this information, the government will be able to design implementation strategies that reduce this potential vulnerability, and that can adequately respond to changes in the environment.
The methodology we use is called Robust Decision Making (RDM). RDM is based on a simple concept: instead of using models and data to evaluate policies under a single set of assumptions, RDM runs computational experiments considering hundreds or thousands of different sets of assumptions to describe how the plans perform under many plausible defined conditions by the decision makers. By adopting a multifaceted and diverse vision of the future, RDM helps design strategies that reduce excess confidence and the adverse effects of surprises in the decision-making environment. In essence, RDM helps you plan for the future without the need to trust or choose a specific prediction about the future.
The IDB is proud to support Costa Rica on its path to decarbonization. This analysis will help Costa Rica implement the Decarbonization Plan in an informed and transparent manner, minimizing its cost to the government, users and operators, and maximizing the benefits of the plan for Costa Rica. We hope to be able to give you news about the results soon.
Photo Credit: Government of Costa Rica – Decarbonization Plan
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