Linking tourism and the environment?

1. Linking tourism and the environment? TREES seminar on green tourism economics research, 27 September 2012 by Waldo Krugell School of Economics

2. Outline • Introduction • The literature: • Willingness to pay for climate change mitigation • South African research • My "green" tourism economics research manifesto!

3. 1) Introduction – tourism economics • Tourism is a key sector in the global economy that makes significant contributions to GDP and employment.

4. 1) Introduction – tourism economics • The sector is expected to grow by 4-5% in 2012, reaching one billion tourist arrivals.

5. 1) Introduction – tourism + environment • Travel and tourism is also responsible for approximately 5% of global carbon dioxide emissions. • By 2035, under a “business as usual” scenario, carbon dioxide emissions from global tourism are projected to increase by 130%.

6. 1) Introduction – tourism + environment • Environmentally and socially responsible leisure activities have become a key issue in the development of tourism. • See the cases of the environmental impact of the Olympics, or the dispute over carbon taxes on flights into and out of the E.U. • Mango in SA… • There is a large literature on the environment, climate change and tourism.

7. 2) The literature • The environment as a common pool resource: • The earth’s atmosphere and the climate that sustains life as we know it, is commonly owned by everyone and utilised by all – no-one has to pay to live on earth! • As a consequence, the environment suffers the effects of negative externalities, specifically the pollution that occurs during all our production and consumption activities. • The externality is the difference between the private and social costs. • The market fails to account for the social costs since no-one owns their share of a sustainable environment to sell to polluters and as such no market or price exists.

8. 2) The literature • Are there any solutions? • We cannot stop tourism to reduce the related pollution to zero. • There may solutions in cooperation of coercion. • Cooperation: • Everyone could work together and cooperate to reduce our consumption and the consequent pollution. • This is an unlikely global solution as cooperation will be undermined by the “prisoners’ dilemma”… • Similarly, a user-pays approach may be possible, but will be limited to voluntary contributions. • Since on-one owns the environment it is not clear to whom payments should be made when you pollute.

9. 2) The literature • Coercion: • Government may sell pollution rights in a cap-and-trade system and fine those that do not cooperate. • Or they may levy carbon taxes on polluters. • The airline industry is an example…Mango in SA • In both cases success will depend on the ability of government to measure the pollution, link it to the polluters, set the tax rate and enforce it. • These solutions also suffer from a cooperation problem, but at a country level: • If all governments believe that all the others will allow pollution they will not create carbon markets or set carbon taxes.

10. 2) The literature + tourism • Practically speaking, the effects of human activity on the environment, also our tourism activities, will have to be mitigated by a combination of voluntary contributions and compulsory taxes. • Research into tourism and climate change has focussed on four aspects: • The impact of tourism on climate change. • The impact of climate change on tourism. • Adaptation to climate change. • Mitigation of climate change.

11. 2) The literature + tourism

12. 2.1 The impact of tourism on climate change • It would be difficult to quantify impact, but it can be interesting to link travel behaviour and impact on the environment. • Measure travel behaviour, link to environmental impact. • Fuel, energy, water use, recycling on holiday? • Measure perceptions of the links between travel behaviour and climate change. • Many people think that because they go to a park, they are green tourists – do they think about the impact of their 4x4, waste products? • Can we explain differences between perceptions and impacts – i.e. what are the characteristics of the tourists that care about their impact?

13. 2.2 The impact of climate change on tourism • Measure how the climate change has influenced travel behaviour… • This would be difficult at an aggregate level: • Would need a case study of an attraction that has been influenced by some environmental change and whether this has caused a change in tourism. • Requires longitudinal data. • Ski resorts, coral reefs are possible examples.

14. 2.3 Adaptation to climate change • You would try to measure: • How travel behaviour has changed in response to climate change. • How the accommodation sector has changed in response to climate change. • How the transport sector has changed in response to climate change. • The accommodation sector is the easier one to consider: • Survey accommodation sector on the steps that they have taken to reduce energy and water use, reduce / recycle waste. • And what it has meant for the bottom line (or triple bottom line) • Real numbers or perceptions? • There are problems about asking them to think back. It would be better to make a case study of a new programme. • In transport, Mango might be a cool case study??

15. 2.4 Mitigation of climate change • Measure the willingness to pay to mitigate climate change. • (Determine the economic value of environmental goods). • This can be related to transport, accommodation, events. • Policies / strategies emphasise the polluter-pays-principle.  • This is what we have been doing at TREES. • The questions now become, how can we do it better, or take it forward?

16. 3) The literature + willingness to pay • There are three approaches to determine how much people are willing to pay to mitigate the environmental impact of travel and tourism activities: • The travel cost method. Try to deduce what people • The hedonic pricing method. are willing to pay • The contingent valuation method – ask them WTP

17. 3.1 Travel cost method • Some of the WTP for a "green" experience is captured by people's travel cost. • Approach: • Survey visitors at different attractions, determine their travel cost. • See how much of the variation in travel cost can be explained by "green" characteristics of the attraction (controlling for everything else). • Best SA example is du Preez, Lee & Hosking on the Recreational value of beaches in Nelson Mandela Bay. • For this to work: • The attractions need to be close substitutes, close to one another. • While you ask about travel cost, you might as well as about WTP too. Should make for an interesting comparison.

18. 3.2 The hedonic pricing method • Some of the WTP for a "green" experience is captured by other prices that people pay. • Approach: • Survey attractions / destinations and determine their characteristics (including "green" characteristics) as well as the prices people pay e.g. entrance fees or price of accommodation. • See how much of the variation in pricing can be explained by "green" characteristics. • No SA example that I know of (e.g. pollution and house prices in international studies). • For this to work: • You need a lot of info on the characteristics of the park/lodge/hotel and the prices that people pay. • This could be a different way to look at the WTP for Big-5.

19. 3.3 WTP, CV method • Payment is hypothetical • Valuation is contingent on the scenario presented. • Examples: • General approach to WTP and climate change mitigation – Johnson & Nemet (2010). • McKercheret al. (2010) examine the attitudes of Hong Kong residents towards tourism and the environment, and the willingness of residents to change their behaviours in response to climate change. • For focus specifically on air travelers' willingness to pay to offset their CO2 emissions, see Brouweret al. (2007). • For tourists' willingness to pay for specific environmental goods, see Casey et al. (2010) who examined WTP additional fees to protect the coral reefs tourists were visiting in Mexico.

20. 3.3 WTP, CV method • Cannot just go out and ask: how much are you willing to pay for… • Proper CV method: • There are NOAA guidelines • WTP questions can be: open-ended, dichotomous choice, or bidding games. • The type of question determines the empirical analysis. • You have to be careful in presenting the scenario. • You have to try to limit cheap talk. • You have to also ask the reasons why people are not willing to pay.

21. 4) SA research • Work at the NWU's research area: Tourism Research in Economics, Environs and Society (TREES) has examined three cases: • WTP for carbon offsets at a sport event. • WTP for green accommodation, wine and food at a tourist venue. • WTP to view the Big-5 in a national park.

22. 4.1 WTP for a green race • For our first paper TREES went to the Two Oceans Marathon and asked runners whether they are willing to pay for a green race • Our analysis showed that the carbon footprint of the average participant is approximately 480kg of CO2, which can be offset by planting 2.2 trees. • We asked if they were willing to pay a higher race fee that can be used to mitigate this impact on the environment. • 502 athletes participated in the 2011 survey.

23. 4.1 WTP for a green race • Description of the data: • Males 65%, females 35%. • Average age 38 years. • 57% English speaking, 26% Afrikaans. • 32% holds a diploma or degree. • 23% post-grad qualification. • 27% professional occupations, 13% self-employed.

24. 4.1 WTP for a green race • The scenario and WTP questions: • 11% skipped the WTP questions • 27% indicated that they were not willing to pay. • 62% said they would. • Of those that were willing to pay: • 62% said that they would pay R10 • 12% were willing to pay R30 • 19% were willing to pay R50

25. 4.1 WTP for a green race

26. 4.1 WTP for a green race

27. 4.1 WTP for a green race

28. 4.1 WTP for a green race

29. 4.1 WTP for a green race • Conclusions: • We have identified some of the predictors of willingness to pay for a green race. • Spending may be a proxy for income, but did not yield significant results. • Differences between married and non-married people and between the self-employed and other occupations may reflect differences in discretionary income. • Education did not have the expected positive relationship. • The reasons why people said they were willing to pay, were important.

30. 4.2 WTP at a tourist venue • In another round of research, TREES surveyed day visitors at a tourist venue. • Spier wine estate and hotel has a very green and sustainable approach and we asked visitors about their green behaviour at home and their willingness to pay for green accommodation and organic food and wine. • 160 visitors participated.

31. 4.2 WTP at a tourist venue • Description of the data: • 60% female and 40% male. • Most are between the ages of 25 and 41 years. • 58% were from the Western Cape province and the rest were visitors from further afield – approximately 26% were foreigners (U.K., U.S., Germany). • 62% were English speaking, 31% Afrikaans and 7% spoke other home languages. • 47% professionals, 23% self-employed.

32. 4.2 WTP at a tourist venue • Most visitors were not aware of the green initiatives at Spier. • But say that they would visit a wine farm that recycles, encourages eco-friendly behaviour, makes use of energy-saving technology and supports green initiatives. • And their willingness to pay extra: • 63% indicated that they would be willing to pay extra. • R118 for green accommodation • R27 for an organic meal • R16 for an organic bottle of wine

33. 4.2 WTP at a tourist venue • Next we used exploratory factor analysis to identify types of tourists based on their reported green behaviour at home.

34. 4.2 WTP at a tourist venue • Next we used exploratory factor analysis to identify types of tourists based on their reported green behaviour at home.

35. 4.2 WTP at a tourist venue

36. 4.2 WTP at a tourist venue • Conclusions: • Again. we have identified some of the predictors of willingness to pay for a green tourism. • But demographic variables are not as significant as one finds in the international literature. • The type of tourist, classified by their green behaviour, is what matters for willingness to pay.

37. 4.3 WTP for the Big-5 • For our final effort we made the issue more specific. • In stead of focusing on climate change in general or green or sustainable tourism, we were specifically interested in tourists' valuation of the Big-5. • The the lion, African elephant, Cape buffalo, leopard and the rhinoceros are some of the biggest attractions in the national parks. • And the opportunities to view these species in their natural habitat is a public good. • But what monetary value do tourists place on the Big-5?

38. 4.3 WTP for the Big-5 • A survey was conducted in the northern part of the Kruger National Park at the Olifants, Letaba, Mopani and Punda Maria restcamps. • 289 tourists participated. • Respondents were asked what role the Big-5 plays in their decision to visit the Park. • And, what amount of their total spending per visit they would allocate to the opportunity to view the Big-5 in the Park.

39. 4.3 WTP for the Big-5 • Description of the data: • 69% Afrikaans speaking. • Average age 48 years. • 85% married. • 65% with accompanying children. • 48% from Gauteng province. • 35% with diploma / degree, 28% with post-grad qualification. • 37% earn gross annual income > R550 000 • Average spending per visit R10 300 for staying 6 nights. • Of the spending, on average, R3 500, or about a third is allocated to the opportunity to view the Big-5.

40. 4.3 WTP for the Big-5

41. 4.3 WTP for the Big-5 • Conclusions: • Education and income come out as clear predictors of willingness to pay. • Can Park management leverage this for the protection and conservation of for example Rhinos? • Four hundred and forty eight (448) rhinos were illegally killed across South Africa in 2011. • The poaching of rhinos in the Kruger National Park accounted for 252 of the 2011 total. • South Africa already lost 168 rhinos in 2012.

42. 5) A way forward? • Impact of tourism on climate change: • Examine travel behaviour, link to impact on environment. • Examine tourists' perceptions of their impact. • Identify types of green tourists. • Impact of climate change on tourism? • Adaptation to climate change: • Accommodation sector case studies. • Managers' perceptions? • Document the process, benefits, costs of going green? • WTP climate change mitigation: • Doing more of the same will not yield the high-impact publications. • My manifesto…

43. 5) My "green" tourism economics research manifesto!

44. 5) My "green" tourism economics research manifesto!

45. Conclusions • Tourism and the environment. • What can economists add? • Experiments and randomized control trials. • It is the type of tourist that matters. • The importance of awareness and education.