Tourism and the Environment in the Caribbean
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0 1 - ~2 274 0 E N VI R O N M E N T : - w6XX s D- E P A R T-M E N T PA-PERS .U E . - :NO. - .PAPER80 TOWARD ENVIRONMENTALLYAND SOCIALLYSUSTAINABLE DEVELOPMENT ENVIRO.NMENTAL ECONOMICS SERIES Tourism and the Environment in the Carnbbean An Economic Framework John Dixon Kirk Hamilton -Stefano Pagiola Lisa Segnestam March 2001 TheWorld Bcink THE WORLDBANK ENVIRONMENT DEPARTMENT Tourism and the Environment in the Caribbean An Economic Framework John Dixon Kirk Hamilton Stefano Pagiola Lisa Segnestam March 2001 Papers in this series are not formal publications of the World Bank. They are circulated to encourage thought and discussion. The use and citation of this paper should take this into account. The views expressed are those of the authors and should not be attributed to the World Bank. Copies are available from the Environment Department, The World Bank, Room MC-5-126. Table of Contents Preface..................................................... v List of Acronyms.................................................... vii The Caribbean Area Map .................................................... ix Executive Summary.................................................... xi I. Introduction..................................................... 1 II. Links Between Tourism and Environment..................................................... 5 Environmental Threats and Tourism ..................................................... 6 Threats to Specific Resources..................................................... 7 Relative Importance of Threats from Different Sources..................................................... 8 Magnitude of Environmental Threats..................................................... 9 The Role of Information.................................................... 10 Understanding Incentives..................................................... 11 Incentives for the Tourism Sector .................................................... 12 Incentives Within the Tourism Sector.................................................... 14 The Special Case of Greenfield Sites .................................................... 17 III. Capturing "Rents"from Tourism.................................................... 19 Economic Rent From Tourism Assets .................................................... 20 User Fees - Capturing Rents at the Source.................................................... 20 Taxation and Investment Incentives - Or, Who Should Pay Whom?........................................ 22 Capturing Resource Rents - Opportunities and Constraints..................................................... 25 Dividing the Pie - Or, Who Keeps the Rents.................................................... 28 Using Rents to Maintain the Rents.................................................... 29 IV. Conclusions and Policy Options .................................................... 31 Conclusions.................................................... 32 Policy Options .................................................... 32 Future Research Agenda.................................................... 34 Annex 1. Economic and Environmental Indicators for the Caribbean................................... 35 Economic Indicators .................................................... 35 Tourism Indicators.................................................... 37 Additional Indicators .................................................... 39 Annex 2. Links Between Tourism and Environment in the Caribbean.................................. 43 Impact of Tourism on the Environment.................................................... 43 Threats to Specific Resources.................................................... 44 References.................................................... 47 EnvironmentalEconomics Series iii Preface This paper was written by John Dixon, Kirk Hamilton, Stefano Pagiola, and Lisa Segnestam of the Environment Department of the World Bank, in collaboration with the European Commission. The development of the paper benefited greatly from comments and written suggestions from many people, both in the Caribbean and in other parts of the world. The authors also benefited from comments from governnent representatives, the tourism/ travel industry, and various bilateral and multilateral agencies working on this issue. The authors would like to thank Julia Peck (World Bank Consultant) for her research assistance, and Maria Donoso Clark, Dan Gross, Richard Huber, Raj Nallari, and John Panzer (World Bank.) We would also like to thank, Richard Beales (DFID), Carolyn Cain (IFC), Felix Finisterre (St Lucia National Heritage Project), Douglas Frechtling (George Washington University), George Gwyer and Simon Le Grand (EC), Juan Llado (CARICOM), Cecil Miller (CDB), Ralph Osterwoldt (Cida), Bruce Potter (Island Resources Foundation), Kelly Robinson (CAST), and Ronald Williams (Wider Caribbean Waste Reduction and Recycling Alliance). A special thanks is due to the participants at workshops in Grenada, the Dominican Republic and Brussels for helpful comments and discussions on this topic. Environmental Economics Series v List of Acronyms CARICOM Caribbean Community Secretariat CAST Caribbean Alliance for Sustainable Tourism CAC Command-and-Control CDB Caribbean Development Bank CEHI Caribbean Environmental Health Institute CTO Caribbean Tourism Organization DR Dominican Republic EPZ Export Processing Zones EC The European Commission EU The European Union FEEE Foundation for Environmental Education in Europe FIA Fiscal Incentive Act FIAS Foreign Investment Advisor Service GDP Gross Domestic Product GEF Global Environment Facility IFC International Finance Corporation MARPOL International Convention for the Prevention of Marine Pollution MBI Market-Based Instruments NCRPS Negril Coral Reef Preservation Society NGO Non-Governmental Organization PPP Purchasing Power Parity SGS Societe Generale de Surveillance SIMA Statistical Information Management Analysis lUNEP United Nations Environment Program UWI University of the West Indies WB The World Bank WDI World Development Indicators WTO World Tourism Organization WTTC World Tourism and Travel Council Environmental Economics Series vii UNITEDSTATES OF MERICA 2 A - -AT-LA,N-TIC'-'-..'..- - OCEAN 8> -t ..1.r/t ;Jp ~~~ffT 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1wdr A* ,> ' ~~ ~ ~ ~ ~ , ,.,,1 - - CUBA'< TI REPUBIC - JAMAICA- HOND C a r ib b e a n Se a St.A NICARAGUA -D J A -~ \''' ~~~~~~~-a4 -~ AM _ / / aSTf-MG 1-RICA VENEZUELA GUYANA' '8* t<St _ _- /- . -\ >"-'COLOMBIA/ $ .~< ,,,>,,- t7 :,,., t,, 6_ Executive Summary Tourism is one of the most important economic activities in the Caribbean, contributing a third to a half of GDP in most countries. Whether tourism is land-based, or via cruise ships, Caribbean countries rely on their natural environment as the main lure to visitors (as well as an important source of welfare for their own citizens).. The resource base upon which all of this economnicactivity is based is fragile, however. Sustaining the tourism sector and the economic benefits it brings thus requires ensuring that the environmental resources the sector relies upon are managed sustainably. This management should be seen as a shared responsibility by three main groups: the countries and peoples of the Caribbean, the tourism! travel industry, and the visitors themselves. Each group has a role to play, and each stands to benefit from a healthier and a more sustainable environment. I. Links Between Tourism and Environment The fundamental environmental resources used in Caribbean tourism are relatively basic - the so-called "three 'S's" of Sun, Sand, and Sea. Except for the sun, each of these resources, as well as supporting resources such as potable water, are subject to damage and depletion. Threats to environmental resources used by the tourism sector can arise both within and outside the sector. Establishing the relative impact of different threats is important, but often difficult. For example, in St Lucia tourists generate twice the amount of waste per day that residents generate. They contribute, however, only about 5% of total waste, because of the short length of their stay. The magnitude of the threats posed by environmental damage to tourism ranges from minor inconveniences to threats so severe that entire classes of resources become unusable. For example, disposal of waste and untreated wastewater and sewage into the sea in Negril, Jamaica, severely curtailed diving, leading to a substantial reduction in visitors. As tourists become both more environmentally aware and better informed of possible environmental problems, it is likely that the costs of inaction will rise. Information and Certification. The severity of the impact of environmental problems on the tourism sector depends crucially on what potential visitors know about the extent and nature of these problems. A particularly critical point in this regard is that it is easier to acquire a bad reputation for poor environmental quality than to establish a good reputation. A variety of certification schemes have emerged to provide potential visitors with information on environmental conditions; the 'Blue Flag' and 'Green Globe 21' initiatives are examples of such schemes. Incentives of Different Stakeholders. Understanding the pattern of incentives faced by actors within the system can help policymakers develop management systems that leverage incentives rather than working against them, thus helping increase their chance of success