Sustainable Tourism
Lecture 8

Environmental Damage

1. Gross Domestic Product (GDP) - does not include environmental damage

• GDP does not include pollution costs
• GDP does not include the exploitation of resources
• Example - A country cuts down its forests to supply the lumber market
  • GDP is higher from the lumber activities
  • Society loses its forests

2. Thomas Mathus - population is growing geometrically but food production is growing arithmetically

• Malthus was a priest and economist
• Wrote - Essay on the Principle of Population as It Affects the Future Improvement of Society (1798)
• Land is a fixed, scarce resource and food production is limited
• If the population exceeded its food production, then some people would "die off."
• Economics is called the abysmal science
• Problem - Malthus ignored the impact of technology
• Technology increases the production from scarce resources

3. Resources are defined as two types

• Renewable resources - the resources can be replenished
  • Bio-energy and bio-fuels
  • Water - tourists use fresh water, so government or companies process or purify water
• Nonrenewable resources - once the resource is gone, it is no longer available to society
  • Petroleum and coal
  • Historic buildings
  • A beautiful, scenic area, forest, or beach
• Open access property - property or resource owned by society or the absence of ownership.
  • Also called Tragedy of the Commons (Hardin 1968)
  • Property rights are not well defined
  • Outsiders cannot be excluded from using the property
  • Outsiders can consume the resource, leaving nothing behind
  • People have less incentive to develop, improve, or maintain land, if others cannot be excluded from consuming it.
  • Examples
    • Fishermen catch too many fish in public waters
    • Fish populations decrease to low levels that it hurts future fish catching.
    • Companies dump wastes onto public lands or waters.
    • Air can be an open access resource, and some firms pollute and send pollution into the air
    • Tourists
      • Hike, swim, or visit pristine natural areas
      • Generate trash and sewage
      • Scuba divers, boats, and jet skis damage coral reefs that supports hundreds of sea life
  • Correcting this market failure
    • Allow one firm to control the resource
    • The firm acts like a monopoly and develops the best plan to utilize that resource
    • Monopoly may abuse a resource too
    • Example - monopolist - owns rights to common land with a forest
    • Monopolist cuts down all the trees if lumber prices are high

4. Externalities - the consumption or production of one individual or firm affects another person's utility or production without their consent.

• The externality influences profits and utility, but does not impact market prices.
  • The externality is not incorporated into the market price
  • Therefore, an externality is not efficient
• Positive externality - an individual's or firm's actions generate benefits for nonparticipating parties
  • The private market may not supply enough
  • Supply function understates the true value of output
  • S is regular supply function and D is for demand
  • Society would desire a higher supply
  • Social Marginal Costs (SMC) - the marginal cost function that is beneficial for the whole society
  • Note - if there were no externality, then S and SMC would be the same.

• Examples
  • Inoculation for diseases - each person who is inoculated prevents the spread of a disease
  • Scientific knowledge or technological know-how
  • Bee keepers - bees pollinate farmers' crops, so they yield more fruits and vegetables
  • Tourism - gov. builds a new road to a beautiful natural site
• Fixing positive externality
  • Government subsidizes the producers, or directly supplies the product, such as vaccines
  • Government is the lead developer in a tourist destination
• Negative externality - an individual's or firm's choice or action negatively harms others without their consent
  • Property rights are not defined well
  • Not all costs are registered, therefore supply function understates the true cost of production
  • Example: A firm emitting pollution will typically not take into account the costs that its pollution imposes on others.
    • Market price is too low
    • Market quantity is too high
    • The goal is to have firms pay for pollution
    • The goal is not to set the pollution to zero!
    • The pollution is in excess of the 'socially efficient' level.
  • Note - if there was no externality, then MSC and S would coincide
• Note - tourism creates sewage and trash, and strains resources such as fresh water
  • Tourists visiting natural environments can damage it through vehicle and foot traffic

Sustainable Tourism

1. Sustainable Tourism - sustainable development is applied to tourism

• Sustainability - "development that meets the needs of the present without compromising the needs of the future generations"
  • Intergenerational equity
• WTO recommends tourism needs to satisfy three broad principles
  • To improve the quality of life of the host community
  • To provide a high-quality experience for visitors
  • To maintain the quality of environment on which both the host community and the visitors depend
• Make optimal use of environmental resources
  • Maintain ecological processes
  • Biodiversity
• Conserve cultural heritage and traditional values
• Ensure viable long-term economic operations
  • Balance among local community, tourists, and environment
• Sustainable and mass tourism are polar opposites
  • Sustainable tourism is a niche market
    • Attract a low number of high-paying tourists
    • Means
      • Reduce wastes
      • Use biodegradable washing powders
      • Conserve energy
      • Recycling
    • Types
      • Ecotourism
      • Green tourism
      • Sustainable tourism
      • Nature tourism
      • Soft tourism
      • Adventure tourism
  • Sustainable tourism is hard to achieve
    • Too many theories and experts
    • Increase in tourism demand
    • Hedonistic philosophy - indulgence in pleasure rather than responsibility
    • Small-scale planned preservation
    • Local development
    • Money stays locally
• Mass tourism - detrimental to the environment
  • Most common form of tourism
  • Consumes resources
  • Low spending and high volume
  • Large, unplanned, uncontrolled, and scattered development

2. Tools to achieve sustainable tourism

• Government can use the instruments to reduce environmental damage
  • Command and control regulations
    • Example - water quality standards
    • Could have high regulatory and enforcement costs
    • Bureaucratic
  • Government protects a natural site or encourages development in specific locations
  • Taxes, subsidies, and grants
    • Government imposes a tax on the pollution emissions
    • Note - the tax has to be on the pollution itself
    • Example - government imposes a tax on pollution emissions from a coal electric plant
    • If government imposed a tax on coal, then firms could switch to a dirtier, cheaper coal
  • Tradeable rights and permits
    • Government creates a permit system for sulfur dioxide emissions from coal electric plants
    • Each permit allows a firm to emit one metric ton of pollution
    • Government sets the maximum pollution level and creates the maximum number of permits
    • Government gives the firms the permits
    • Some firms pollute more, and will buy permits
    • Other firms will use more technology to reduce emissions, and then sell their permits
  • Community programs - government encourages recycling
    • Create green consumers
  • Deposit fund schemes
    • Government puts a deposit fee on glass bottles
    • Example - Michigan has a $0.1 per bottle deposit
    • Most residents collect and return bottles
• Carrying capacity - how many tourists can a destination support
  • Restrict the number of tourists below the carrying capacity
  • Physical - the actual number of tourists a site can support
    • Roads, parking lots, number of hotel rooms, etc.
  • Perceptual - measure of the number of tourists before visitor experience is damaged
    • Example - Rome, Italy has way too many tourists around the famous sites
  • Economic - the number of tourists who are welcomed to a location before the economy is adversely affected
    • Example - Venice - many residents moved out, as the number of tourists surged in record numbers
  • Ecological - a measure of tourists to a site before damage occurs to the environment
    • Example - Tourists are attractive to a remote location with plenty of wildlife
    • Hotels, restaurants, and roads start popping up everywhere
• Environmental Impact Assessment (EIA) - project assessment of adverse and beneficial impacts of a new development
  • Examples
    • Large-scale resort
    • Dam
    • New highway
  • Used in the United State and Europe; not so much in other countries
  • Does not apply to small-scale development
  • Applies to new developments and not old ones
  • Projects may not be monitored for compliance
  • Opposition uses EIA to stop project
• Willingness to Pay - use surveys to estimate amount tourists are willing to protect the environment
  • Similar to Contingent Valuation
  • Hypothetical questions about a hypothetical market
  • Willingness to pay = consumers' surplus + consumer expenditures
  • Example - government uses a survey to ask consumers and tourists to protect a baboon wild life preserve in central Malaysia
  • Note - green area is consumers' surplus, while total revenue is blue area

• Companies have environment statements and policies
  • Create positive image of company
    • Brochures
    • Booklets
    • Annual Reports

Tourism in Costa Rica

1. Costa Rica means "Rich Coast"

• Christopher Columbus discovered it in 1501
• Important exports
  • Coffee - started in 1820s, and an important export until 1990s
  • Bananas
  • Eco-tourism - most tourists are from Canada and United States
    • 780,000 tourists in 1996
    • 2.1 million tourists in 2008
    • $2.1 billion in earnings in 2008
    • Tourism accounts for 8.1% of GDP, and accounts for 13.3% of direct and indirect employment
    • More revenue than coffee and bananas combined
  • Attracted direct foreign investment
    • Intel constructed a micro-processor plant in Costa Rica
    • Accounts for 20% of exports in 2006
    • Accounts for 4.9% of GDP in 2006
    • Rising class of software developers
• Tourism changed economy
  • Costa Rica can protect its forests and biodiversity
  • Can move away from cattle raising, logging, and banana plantations
    • Cattle raising requires pastures and reduction of forests
    • Logging cuts down the trees
    • Banana plantations use pesticides and chemicals
• Eco-tourism
  • Costa Rica is a small country (0.03% of the planet's surface), but has 5% of the world's wild life forms
  • Tortuguero - "Turtle area"
    • World renowned eco-tourism spot
    • Has two churches, three bars, and two souvenir shops
    • Not accessible by road
    • Protect the endangered sea turtles
    • Poachers hunt turtles for shells, meat, and eggs
      • Eggs is a rumored aphrodisiac
      • Aphrodite is the Greek goddess of love and sexuality
    • Villagers no longer hunt the turtles; their main income is from tourism
    • Lodges and hotels donate money to a fund, which helps fund schools and a water distribution system
  • Monteverde Reserve - set a 100 visitor-a-day ceiling
    • Preserve the ecology
    • Increased ticket prices

Terminology