GREEN TOURISM-ECONOMICSCARBON FOOTPRINTS AND WILLINGNESS TO PAY FOR CLIMATE CHANGE MITIGATION

Guest lecture at the Beijing Foreign Studies UniversityApril 2012

byWaldo Krugell

School of Economics

Outline

1. Introduction

2. The literature:• The environment as a common pool resource• Tourism and climate change• Mitigation of climate change and willingness to pay

3. South African research:• Tourism research in SA – only a few green shoots• WTP at a sports event• WTP at a tourist destination / venue• WTP to see the Big-5 at the Kruger National Park

4. My "green" tourism economics research manifesto!

5. Conclusions

1) Introduction – tourism economics

• Tourism is a key sector in the global economy that makes significant contributions to GDP and employment.

1) Introduction – tourism economics

• The sector is expected to grow by 4-5% in 2012, reaching one billion tourist arrivals.

• One of the most significant recent changes is the rise of China to the third place in the international arrivals ranking.

1) Introduction – tourism economics

• South Africa:• Received 8 million visitors in 2010.• That is 16% of visitors to Africa.• And we received US$ 9,070 million in tourist receipts.• Tourism arrivals grew by 15% between 2009 and 2010.

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%.

• Environmentally and socially responsible leisure activities have become a key issue in the development of tourism.• See the cases of the "low carbon" Olympic flame, or the current

debate over carbon taxes on flights into and out of the E.U.

• There is a large literature on the environment, climate change and tourism.

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.

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.

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.

• 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.

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.

2) The literature + tourismThe impact of tourism on climate change:Measure travel behaviour, linked to drivers of climate change.Measure perceptions of the links between travel behaviour and climate change.Explain differences between perceptions and impacts.  

The impact of climate change on tourism:Measure how the climate change has influenced travel behaviour   

Adaptation to climate change:Measure how travel behaviour has changed in response to climate change.Measure how the accommodation sector has changed in response to climate change.Measure how the transport sector has changed in response to climate change.  

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 emphasise the polluter-pays-principle.  

2) The literature + willingness to pay

• There are three approaches to determine how much people are willing to pay to mitigate the environmental impact of the travel and tourism activities:• The travel cost method.• The hedonic pricing method.• The contingent valuation method.

2) The literature + 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).

• McKercher et 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 Brouwer et 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.

3) SA research• Despite the fact that South African tourism is very much

nature based, there has been very little research into valuation of the environment or mitigation of climate change.

• Our work at the NWU's research area: Tourism Research in Economics, Environs and Society (TREES) has taken three approaches:• 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.

3.1) WTP for a green race• For our first paper we 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.

3.1) 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.

3.1) 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 (7.8 CNY)• 12% were willing to pay R30 (23.6 CNY)• 19% were willing to pay R50 (39.3 CNY)

3.1) WTP for a green raceVariable Cross-tab with WTP

Gender 58% of men WTP and 68% of women

Age group 18-50 years: 62-64% WTP, 51-60 years only 53% and those 60 years and older 71% WTP

Marital status Single or divorced more WTP compared to married

Language Greater % of Afrikaans speakers WTP

Education More athletes with degree/ diploma (69%) or with post-grad qualification (66%) were willing to pay

Occupation 72% of self-employed were willing to pay

3.1) WTP for a green race

3.1) WTP for a green raceWTP categories in Ordered Probit regression

Gender Females (+) WTP, compared to males

Marital status Not married (+) WTP**, compared to married

Language English (-) WTP, compared to Afrikaans

Education All coefficients (-) WTP compared to no schooling

Occupation Self-employed**, Admin**, Students* (+) WTP, compared to professionals

Province of residence WC, KZN, MP, LP (-) WTP, compared to internationals

Nights in Cape Town (+) WTP

Age (+) WTP**

Total spending (+) WTP

3.1) WTP for a green raceMultinomial logistic regression (compared to not willing to pay)

WTP R10 (+) WTP: Being married, from EC, feeling responsible(-) WTP: all categories of education, compared to no schooling

WTP R30 Only the reasons for paying were significantEducation coefficients are positive, but insignificant

WTP R50 (+) WTP: Self-employed**, Admin*, Civil servants * were willing to pay, compared to professionals(+) WTP: Age

3.1) 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.

3.2) WTP at a tourist venue• In another round of research, we 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.

3.2) 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.

3.2) 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 (92.6 CNY) for green accommodation• R27 (21.2 CNY) for an organic meal• R16 (12.5 CNY) for an organic bottle of wine

3.2) WTP at a tourist venue• Next we used exploratory factor analysis to identify types

of tourists based on their reported green behaviour at home.

3.2) WTP at a tourist venue• Next we used exploratory factor analysis to identify types

of tourists based on their reported green behaviour at home.

3.2) WTP at a tourist venueWTP green accommodation – logistic regression model

Gender Females (+) WTP, compared to males

Language English speakers (+) WTP, compared to Afrikaans

Province Visitors from Western Cape (+) WTP compared to others

Occupation All occupations (+) WTP

Type of green tourist + WTP Green shoppers, green gardeners, green misers

3.1) 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.

3.2) 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?

3.2) 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.

3.2) 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 (433 800 CNY)• Average spending per visit R10 300 (8127 CNY) 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.

3.2) WTP for the Big-5WTP amount of spending allocated, OLS regression model

Language English speakers (+) WTP, compared to Afrikaans

Age (+) WTP

Marital status Not married (+) WTP, Living together (-) WTP

Education Higher levels of education (+) WTP

Income Higher income (+) WTP

Number of visits More visits to the Park (-) WTP

Role of the Big-5 If they indicated that the Big-5 is an important consideration in visiting the Park (+) WTP

3.2) 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.

4) My "green" tourism economics research manifesto!

4) My "green" tourism economics research manifesto!

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.