Climate Change Challenges for Climate Change Challenges for Aviation and TourismAviation and Tourism

Peter Forsyth

Monash University

ABARE Climate Change Workshop

Canberra February 5, 2008

Themes:Themes:

• How climate change impacts on tourism, and how tourism impacts on climate change

• Issues arising from the impact of climate change mitigation policies on tourism

Research TeamResearch Team

• Sustainable Tourism Cooperative Research Centre funded research

• Centre for Tourism Economics and Policy Research:

• Ray Spurr (UNSW)• Larry Dwyer (UNSW)• Thiep Van Ho (Monash)• Daniel Pambudi (Monash)• Serajul Hoque (Monash)• Peter Forsyth (Monash)

OutlineOutline

• Climate Change impacts on tourism• Tourism impacts on climate change• Aviation- specific aspects• Climate change policies and their

impacts on tourism• Issues• Conclusions

Climate Change Impacts on Climate Change Impacts on TourismTourism• Tourism relies heavily on the natural environment,

especially in Australia• Change will mean natural attractions will be

damaged, or even destroyed• Great Barrier Reef; Kakadu; ski fields; beach areas• Impacts mainly negative for Australian attractions- a

few could be positive• A matter for case by case assessment (STCRC study

proposed)• Other countries both more and less affected-

Australia likely to lose out in terms of visitor numbers, on balance

AdaptationAdaptation

• May be feasible to halt or minimise damage in several cases (not all)

• E.g. Snow making on ski fields; barrages to prevent flooding

• Case by case assessment needed- what is feasible, and cost effective?

• Adaptation is costly• Who will pay for it? Users? Earmarked funds (from

carbon permit sales?)

Assessing the CostAssessing the Cost

• Need physical projections of effects and damage• Factor in adaptation costs• Project loss of tourism visitation• Estimate loss of expenditure from inbound visitors

(to region, state, Australia)• Estimate the welfare losses (consumers surplus) to

Australian tourists• Model economic impacts of changed expenditure

patterns (using a computable general equilibrium model)

• All these to be done in projected STCRC study

Tourism Impacts on Climate Tourism Impacts on Climate ChangeChange

• Matter of measuring the “carbon footprint” of tourism- how much of GGEs does it produce?

• What is “tourism”? – not in the accounts• A combination of parts of several industries-

accommodation, aviation, etc• Direct emissions from tourism- e.g. from use of

aviation and motor vehicle fuel• Indirect emissions- e.g. From hotel use of electricity• Two alternative approaches- production and

expenditure based

Production and Expenditure Production and Expenditure Based FootprintsBased Footprints

• Production: emissions from production by the various components of the tourism industry, as defined in the Australian Tourism Satellite Account

• Expenditure: emissions from providing tourists will goods and services, including aviation to Australia

• Draft production based carbon footprint now prepared- for release soon

Carbon Footprints of Carbon Footprints of International Visitors (tonnes)International Visitors (tonnes)

Ground Component

Aviation Total

NZ 2.5 0.6 3.1

HK 3.6 1.7 5.3

UK 4.8 3.8 8.6

NotesNotes

• Ground component includes direct and indirect

• Aviation includes direct only• Based on Lundie, Dwyer and Forsyth

(2007); BA carbon calculator

AviationAviation

• Aviation attracts particular attention as a source of GGEs

• Around 2% of world total GGEs

• GGEs from aviation likely to be more damaging than surface emissions (suggested multiplier, 2.7) – but this issue is controversial

• Aviation becoming more fuel efficient, at about 1% PA

• Little scope for big shifts to alternative technologies in short/ medium term (next 15 years)

• Aviation demand growing quite rapidly

• Total GGEs from aviation will grow moderately rapidly, and share of total GGEs will grow over the medium term

• Hence, aviation is controversial

Impacts of Climate Change Impacts of Climate Change Mitigation PoliciesMitigation Policies

• Could have carbon tax, or tradable permits• Various carbon prices: Low $20/tonne; High,

$50 per tonne• Can allow for higher damage by aviation –

use factor of 2.5

Impacts on Trip Costs- Low Impacts on Trip Costs- Low ScenarioScenario

% increase in total trip cost

Low carbon price, low damage

GROUND Air Fare Total

NZ 4.1 2.4 3.6

HK 3.0 2.8 2.9

UK 3.7 3.4 3.5

Impacts on Trip Costs- High Impacts on Trip Costs- High ScenarioScenario

% increase in total trip cost

High carbon price, high damage

GROUND Air Fare Total

NZ 10.4 15.0 11.7

HK 7.6 17.4 10.9

UK 9.1 21.2 14.7

Implications for TourismImplications for Tourism

• Carbon pricing will affect outbound and inbound tourism (latter probably more)

• Impact quite significant under “bad” case scenario• Price increase over a period of years• Partial equilibrium results: General equilibrium

results would be less negative for tourism- other changes, such as lower exchange rate, would help tourism

• Of tourism industries, only aviation would be likely to be awarded many free tradable permits- most of tourism industries simply pay higher prices for inputs

Issues- 1: Policy Revenues and Issues- 1: Policy Revenues and Adaptation CostsAdaptation Costs• Major costs will be imposed on tourism by climate

change- loss of markets, adaptation costs• Tourists will pay more under climate change

mitigation policies, but other industries and governments gain higher revenues

• Who should pay for costs of adaptation?• Should revenues be earmarked?

Issues-2:Tourism as a Issues-2:Tourism as a “footloose” Export Industry“footloose” Export Industry• Special consideration may be given for “footloose”

export industries (which may shift offshore and produce GGEs there)

• Tourism and aviation are more footloose than most industries

• Could consider exemption of international aviation from climate change policy (e.g. ETS) (except where other partner country includes aviation)

• Cost: higher cost of meeting home targets• Benefit: less loss of tourism benefits• Benefit: lower GGEs in competitor countries• Balance of costs and benefits unclear

Issues-3:Aviation Cost Pass Issues-3:Aviation Cost Pass ThroughThrough• It has been assumed that airlines will pass through to

passengers the costs (value) of permits/taxes 100%• Passengers will respond- and reduce travel• Airlines may have difficulty in passing though the full

cost- especially in the short run• Impact of climate change policy will be less than

under full pass through• But what if airlines are given free permits?• Do they pass through the cost ($0) or the value (quite

high) of the permits?• Little impact on travel if the former is the case

Issues-4: Aviation-Special Issues-4: Aviation-Special Measures in Order?Measures in Order?• Aviation a growing source of GGEs, even with new

technology and climate change policies

• Many call for additional measures on aviation- restrictions on travel, extra taxes etc

• May be popular, but poor environmental economics

• Under the ETS, overall costs to the economy are minimised by facing all industries with the same carbon price- some adjust more than others

• Special measures on aviation add to costs

• But do not reduce GGEs in total (set by the ETS)

• In sum: special measures directed to aviation add to costs but achieve nothing by way of reductions of GGEs

ConclusionsConclusions

• Costs of climate change on tourism quite high for Australia

• Tourism contributes to GGEs through use of transport and indirectly, electricity

• Climate change policies will add to the cost of tourism, but the net impact needs further research to establish

• Aviation is a controversial area, and it poses a number of issues to be resolved

• Best handled thorough part of an overall climate change policy rather than by special measures

ReferencesReferences

• CTEPR/STCRC Climate Change Policies and Australian Tourism (2007)

• www.crctourism.com.au

• Lundie, Dwyer and Forsyth, Journal of Sustainable Tourism, 2007

• Thank You!

• peter.forsyth@buseco.monash.edu.au