CLIMATE CHANGE POLICIES AND AUSTRALIAN TOURISM: A SCOPING STUDY OF THE ECONOMIC ASPECTS ABSTRACT Ray Spurr STCRC Senior Research Fellow School of Marketing University of New South Wales Sydney NSW 2052 E-Mail: r.spurr@unsw.edu.au Prof. Peter Forsyth Department of Economics Clayton Campus PO Box 11E Monash University, Victoria 3800 E-Mail: peter.forsyth@buseco.monash.edu.au Prof. Larry Dwyer Qantas Professor of Travel and Tourism Economics University of New South Wales Sydney, NSW 2052 E-Mail: l.dwyer@unsw.edu.au This paper is a report of a scoping study on climate change and its economic impacts on tourism. The study addresses the direct and indirect costs of climate change for the Australian tourism industry including the costs of adaptation to climate change, the impacts of tourism on the production of greenhouse gas emissions (GGE) and the impact on tourism of climate change policies, such as the proposed Australian emissions trading scheme (ETS). The study concludes that since Australia relies heavily on nature based tourism, which is most at risk from direct climate change impacts, Australia is likely to be a net loser from changing international patterns of tourism as a result of climate change. Key words: Climate Change; greenhouse emissions; carbon footprint INTRODUCTION This paper is a report of a Scoping Study on climate change and its economic impacts on tourism. The study considers climate change and the economic costs it poses for the tourism industry directly, such as through rendering some attractions no longer viable. It also considers the related question of adaptation to climate change and the costs associated with this. The study analyses how tourism, and the economic activity connected to it, impacts on the direct and indirect production of greenhouse gas emissions (GGE). Finally, the impact on tourism of climate change policies, such as the proposed Australian emissions trading scheme (ETS), is assessed. The focus is on the economics of climate change and tourism the study does not provide a complete coverage of other effects that climate change may have on tourism. For the purposes of this study the science of climate change have been taken as given. 1
The Study was intended to: Highlight key connections between climate change and tourism Outline costs to tourism of climate change and the costs of adaptation Outline tourism s carbon footprint and how this can be measured Indicate how tourism will be affected by climate change mitigation policies and how the costs of these might be estimated Explore impacts on key affected sectors such as land transport and aviation Identify policy issues for the tourism industry Indicate priorities for further research METHOD The study examines the issues involved in developing a measure of tourism s impact on GGE Tourism s carbon footprint. These include measurement of the carbon intensity of Tourism activity and indirect production of GGE through industry interactive or feedback effects on other industries and the handling of GGE generated outside Australia by international tourists. Tourism s carbon footprint can be measured using economic models which link economic activity to fuel use and GGEs from industries that supply products and services to tourists directly and indirectly. To measure the carbon impact of tourism, however, requires a model to project how changes in tourism, whether domestic or inbound, impact on other industries in Australia, and ultimately change GGEs in the economy as a whole. To do this for international tourism a model which can project how changes in international tourism flows affect other export industries and also GGEs outside Australia, e.g. through aviation, is needed. A Tourism Computable General Equilibrium (CGE) model developed by STCRC was been used to carry out preliminary modelling. The study also examines government policies in response to Climate change and their possible implications for tourism. FINDINGS Tourists will incur higher transport costs as well as higher prices of products associated with GGEs. The extent to which this results in more or less tourism related expenditure in the economy depends on the relative price rises in tourism as compared with price rises of the products and services of non tourism industries. Tourism operators will incur higher costs of production as a result of climate change policies but so will operators in non tourism industries. The effect on the competitive advantage of operators will depend on their relative efficiency of production compared to firms both within and outside tourism. Destinations will become more or less price competitive depending upon the overall impact of climate change policies on operator costs and their affect on prices and visitor flows. 2
It is possible to assess the costs to Australia of climate change damage by identifying attractions which are at risk, projecting the impacts on visitor flows and adaptation costs, evaluating losses to domestic tourists, and modelling the costs to the economy from reduced inbound international tourism. An Emissions Trading System (ETS) such as that to be implemented by Australia will increase the cost base of domestic tourism. This can be modelled to determine by how much. More complex issues arise for international tourism depending on how international aviation is handled and on how other export industries are affected. Modelling can be done to determine how costs will be affected and what the impact on Australian tourism s international competitiveness will be. IMPLICATIONS Several issues emerge from this study that are important for Australia s tourism industry. Tourism as a footloose export industry. If the international price of tourism to Australia increases, tourism production may shift elsewhere at the expense of the Australian tourism industry and economy. This would reduce Australian GGE but not necessarily global GGE since the tourists will still travel. Should ETS permits be sold or given to firms? Except for aviation most tourism firms will not be included in an Australian ETS. Tourism firms will face additional costs - their input prices will rise but they will not qualify for permits - and they may receive little government assistance for adaptation. Inclusion of tourism in the ETS It is in the tourism industry s interests to ensure that tourism firms are included if permits are granted free or at concessional rates within the ETS. Promoting international action on climate change Of all industries, tourism is likely to be a clear loser from the direct effects of climate change. It has an interest in effective international implementation of climate change mitigation policies and thus perhaps in Australia taking a lead in international negotiations on mitigation. International systems and carbon trading The global economic cost of mitigation will be reduced if there is international trading of permits. This could result in a higher or lower carbon price in Australia which will be important for the Australian tourism industry. Target setting A tight ETS target will impose higher adaptation costs on industries such as tourism. Should international Aviation be excluded from the ETS? Including international aviation in the ETS for Australia will have a negative impact on its tourism industry if other competitor countries do not implement GGE reduction policies. Determining the Mix of General and Specific Policies 3
Governments may address climate change mitigation through comprehensive general policies, such as an ETS, or specific policies, such as aviation taxes or renewable energy targets. It will be in the industries interests to have a position on this. Handling of international aviation If international aviation is incorporated in the ETS Australia will need to take decisions on, for example, the issue of permits to foreign airlines, handling of long haul multi stage flights, whether to impose the ETS on both inbound as well as outbound flights, and coordination of policies internationally. Treatment of specific sectors With the exception of international aviation there is probably little scope for specific tourism sectors to be excluded from the ETS. If a broad ETS is adopted then additional measures targeting specific sectors such as aviation will be ineffective in reducing GGEs. CONCLUSIONS The Study sets out the key economic implications of climate change and climate change policies for tourism in Australia. Many of the more important aspects require further research to establish effects, measure them, and quantify how they will impact on tourism. Propositions that are reasonably well supported have been examined while some key areas for further research are identified. The study identifies key elements of the costs of climate change to tourism including from the loss or degradation of tourist attractions, the costs of adaptation and replacement costs for capital infrastructure. It concludes that since Australia relies heavily on nature based tourism, which is most at risk from direct climate change impacts, Australia is likely to be a net loser from changing international patterns of tourism as a result of climate change. ACKNOWLEDGEMENTS This Study described in this paper was developed with the support of Australia s Sustainable Tourism Cooperative Research Centre (STCRC). REFERENCES Australian Bureau of Agricultural and Resource Economics (ABARE) (2006) Economic Impact of Climate Change Policy: the Role of Technology and Economic Instruments ABARE Research Report 06.7, Canberra, ARARE Adams, P, M Horridge and G Wittwer (2003) MMRF-GREEN: A Dynamic Multi-Regional Applied General Equilibrium Model of the Australian Economy, based on MMR and MONASH Models, Centre of Policy Studies, Monash University, General Working Paper G140, October Australian Bureau of Statistics (1997) Tourism Satellite Account 2005-06, ABS Canberra Bureau of Transport and Regional Economics (2002a) Greenhouse Policy Options for Transport, Report 105, BTRE Canberra Bureau of Transport and Regional Economics (2002b) Greenhouse Gas Emissions from Transport Australian Trends to 2020, Report 107, BTRE Canberra 4
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