Global externalities from avoided emissions in the Costa Rican cattle sector: opportunities for more efficient mitigation policies

Abstract

Abstract The livestock sector has had an important contribution to global greenhouse gas (GHG) emissions. In Costa Rica, more than 20% of emissions come from beef and milk production. This paper performs a cost–benefit analysis of a climate policy in the Costa Rican cattle sector, and tries to innovate by including the positive global externality of emissions reduction into the analysis; to assess the extent to which it affects the attractivity of the referred policy. National sectorial policies for climate change mitigation generate global benefits, such as avoided GHG emissions into the atmosphere—a global public good. However, such global positive externalities, which represented 13% to 31% of the policy’s benefits in the widest scenario of our study, are usually not included in national climate planning, which may lead efficient policies to be dismissed. This paper shows that taking externalities into account makes sectorial climate mitigation policies more efficient, i.e., more appealing for investments. Benefit–cost ratios varied between 0.27 and 7.31 and break-even points average around the third and fourth years. Moreover, the results under different economic assumptions varied in terms of net benefits, but viability balance (viable vs. unviable scenarios) remained stable for different settings. The crucial question remains on how to best balance such global positive externalities to be advantageous to both funders and beneficiaries, enabling an efficient global climate mitigation strategy.