Climate Change Challenges for Aviation and Tourism

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Climate Change Challenges for Aviation and Tourism

• Peter Forsyth
• Monash University
• ABARE Climate Change Workshop
• Canberra February 5, 2008

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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

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Research 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)

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Outline

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

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Climate Change Impacts on Tourism

• 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

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Adaptation

• 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?)

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Assessing 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

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Tourism Impacts on Climate Change

• 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

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Production and Expenditure Based 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

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Carbon Footprints of International Visitors
(tonnes)
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Notes

• Ground component includes direct and indirect
• Aviation includes direct only
• Based on Lundie, Dwyer and Forsyth (2007) BA
  carbon calculator

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Aviation

• 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

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Impacts of Climate Change Mitigation 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

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Impacts on Trip Costs- Low Scenario

• 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

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Impacts on Trip Costs- High Scenario

• 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

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Implications 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

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Issues- 1 Policy Revenues and Adaptation 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?

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Issues-2Tourism as a 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

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Issues-3Aviation Cost Pass Through

• 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

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Issues-4 Aviation-Special 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

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Conclusions

• 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

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References

• CTEPR/STCRC Climate Change Policies and
  Australian Tourism (2007)
• www.crctourism.com.au
• Lundie, Dwyer and Forsyth, Journal of Sustainable
  Tourism, 2007

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• Thank You!
• peter.forsyth_at_buseco.monash.edu.au