Back to the speakers'list
Back to the program

  Opportunities for waste - and pollution - free tourism growth and itd limitations : is zero growth possible ?

Egon SMERAL - Economist, Institut WIFO, Vienna, Austria

 

 

Introduction

Tourism demand affects many goods and services as well as natural resources. In most cases, meeting tourism demand and demand for related leisure-time activities requires environmental factors as an input. As a consequence, quantitative growth of tourism demand, capacity limits of environmental goods, the inflexibilities of our leisure and working time structures and of the socio-economic system as a whole results in an excessive strain on the environmental goods used.

Many tourism areas in Europe (Alps, Mediterranean) have already approached the limits of quantitative growth to an extent that affects the state of their environment (Green, 1990; May, 1991 ; Romeril, 1989 ; Smeral, 1992 and 1994A). This situation is the result of long-term overdevelopment on the supply side in certain areas as well as the strong regional and seasonal concentration of tourism. Additional factors to burden the environment are the weather dependency of specific outdoor activities and the effects of mega-events such as world expositions or Olympic Games (May, 1995). Another major reason for the environmental harm caused by tourism is the fact that the public resources exploited by the tourism industry can be used at cut-rate prices or even for free as society is not yet ready to bear the full external costs of leisure activities. The market prices paid by the tourist are based on the internal or private costs incurred when firms use their own factor inputs in the production of their outputs (Smeral, 1994A and 1994C). Distortions arise when private and social costs are not identical, as is the case with regard to pollution, overcrowding or nature damaged by consumption or production activities (Neher, 1990): these external costs are not borne by the market participants, but by other consumers or producers, as the price system is not able to co-ordinate the different influences with pareto efficiency.

Considering the causative principle ("polluter must pay"), one way to rectify the market failures resulting from the divergence of private and social costs would be to charge a fee or tax. This concept is referred to in the literature as the Pigou tax. Pigou and many other economists saw in the existence of external effects a reason for government intervention in order to internalise social costs (Pigou, 1923).

Excessive demand for a natural resource over large parts of a year as a result of incorrect price policies lowers the quality (including the consumers' holiday value) of the environmental good and could even - in extreme cases - lead to its destruction. Unless action is taken to internalise these negative external effects, market failures could cause the state of the environment to deteriorate (Smeral, 1994B).

Collection of an entrance fee - reflecting at least part of the true social costs - would reduce demand for an endangered area and help to maintain the quality of the environment - or possibly even prevent its destruction.

The work of Ronald Coase can be understood in response to A.C. Pigou (Coase, 1960). R. Coase, a member of the Chicago School, wished to show that the existence of external effects does not automatically make government intervention necessary, as market participants are able to find efficient solutions on their own.

The limits of quantitative growth

The answer to the central question of opportunities for waste- and pollution-free tourism growth is narrowly linked to the sustainability of tourism development.

Sustainable development should integrate environmental, social, cultural and economic sustainability and use these four dimensions in order to start to make development sustainable (Goodland, 1997). Sustainability has subsequently emerged as an umbrella term under which different aspects are subsumed, placing the natural environment and its conservation at centre stage.

Sustainable development, essentially representing an updated version of concepts known as limits to growth (Meadows et al., 1972), materials balance (Ayres - Kneese, 1989) and small is beautiful (Schumacher, 1973), has emerged as a goal which the global economies should strive to achieve. Sustainability is perceived as a fundamental part of the ideology of the New World Order and of all trends and tendencies associated with it.

Many definitions have been suggested for sustainable development so that the prevalent degree of confusion should not come as a surprise. As a result (which became known as the Rio Declaration of 1992), sustainable development has developed into something of a set of principles for actions and agreements on the environment in which biodiversity, climate change, forest management and conservation are accorded prominence (Sinclair - Stabler, 1998). The essence ofsustainable development is to manage world economies so as to achieve intra- and inter-generational equity. This means that present needs should be met without impairing the capacity to meet future needs.

However, there are two major and differing interpretations for sustainable development :

The weak approach to sustainable development accepts that as long as the overall stock of capital, i.e., the natural environment plus human-made resources, is not depleted in its totality, substitution of the latter for the former is permissible. This implies that the natural environment may be degraded. The strong approach opposes this by insisting that no substitution should be allowed. Indeed, the extreme approach goes further by asserting that current degradation is already unacceptable and that steps should be taken to improve the quality of the environment.

Sustainable development is a very specific concept. It is possible to conceive of various types of sustainability, for instance sustainable agriculture, sustainable cities, sustainable ecological systems and sustainable tourism. These are sectoral variants of sustainability, which is the ability of systems to perpetuate themselves in the very long run. This does not necessarily suggest a steady state because in the very long run change is inevitable.

In tourism, sustainability should be the cornerstone of development tendencies, since the natural environment constitutes the largest part of its primary resource base. However, there is evidence that in developed countries tourism businesses, in common with those in other commercial sectors, prefer to interpret sustainable development in a weak sense. This implies a continuing deterioration of the natural resource base. Most tourism practitioners understand sustainable tourism as "viable tourism" in the commercial sense, i.e. that businesses are profitable and will survive. This attitude and this approach to sustainable tourism tend to be reinforced by central and local governments and tourism bodies, which often view tourism as a vehicle for diversifying and developing their economies and for raising their revenues.

Being seen to be green enhances the image of a business and may present market opportunities to boost demand. Indeed, firms have taken up consumers' concerns that tourism should be environmentally responsible and turned it to commercial advantage by promoting ecological and green holidays. Within the industry, the touristic use of protected areas and pristine wilderness is one of the most rapidly growing sectors. In this connection, jet aircraft emission became a significant issue in the eco-tourism segment (Mowforth - Munt, 1998).

Given the fact that none of the definitions for sustainability is really satisfying and all-encompassing, an approach more frequently taken is to examine and assess tourist activities according to whether they satisfy a number of sustainability criteria.

Basically, there are four different dimensions of sustainability: ecological, social, cultural and economic perspectives.

The ecological dimension focuses on avoiding or minimising the environmental impact of tourism activities. Calculation of the ecological carrying capacity is an important method to assess environmental impact and sustainability. In most cases, the ecological capacity is clearly lower than the physical capacity. The physical capacity is determined by the availability of space, the shape of the landscape and the carrying capacity of the land (Williams, 1994 ; Saleem, 1994).

When we take the ecological carrying capacity of an specific area on the other hand, quantitative tourism growth (i.e., more visitors) could be understood as an ecologically sustainable development for as long as tourism development does not exceed ecological limits and especially the environmental assimilation capacity.

Social sustainability refers to the ability of a community, whether local or national, to absorb input, such as extra people, over short or long periods of time, and to continue functioning either without spawning social disharmony as a result of these inputs or by adapting its functions and relationships so that the disharmony can be alleviated or mitigated.

One of the most important sources of disharmony can appear in the form of increasing differences between the beneficiaries of tourism and those who are marginalised by it, or through the creation of geographical ghettos, either of the tourists themselves or of those excluded from tourism. If we accept the premise that tourism creates an intrinsically false and fabricated social division between the server and the served in the first place, it is of course inevitable that all touristic developments will create such a division. The tools of sustainability, such as carrying capacity calculations, environmental impact assessments and sustainability indicators, aim to minimise the effects of these divisions up to a point at which they can be excused. In this sense it has been often suggested that the social carrying capacity should be calculated.

As to cultural sustainability, societies may be able to continue functioning in social harmony despite the effect of changes brought about by some new input such as tourism. But the relationships within that society, the modes of interaction, lifestyles, customs and traditions are all subject to change through the introduction of visitors with different habits, styles, customs and means of exchange. Even if the society survives, its culture may be irreversibly altered. Culture of course is as dynamic a feature of human life as are society or economy; so the process of cultural adaptation and change is not assumed by all in all cases to be negative. But cultural sustainability refers to the ability of people to retain or adapt elements of their culture which distinguish them from other people.

Cultural influences from even a small influx of tourists are inevitable and may be insidious; but controlling the most harmful effects, emphasising responsible behaviour on the part of visitors, and preventing distortion of local culture might be assumed to be essential elements of sustainable tourism. Cultural impacts are more easily seen over the long term and are therefore more difficult to measure, although the cultural subversion of many local communities has been well documented.

Economic sustainability is no less important a condition than all the others in any tourism development. Sustainability in these terms refers to a level of economic gain from the activity which is sufficient either to cover the cost of any special measures taken to cater to the tourists and to mitigate the effects of the tourists' presence or to offer an income appropriate to the inconvenience caused to the local community visited - without violating any of the other conditions - or both.

Ideally, the allowed/realised quantities of all sustainability dimensions are equal, yet if one should be lower, it would act as a quantity constraint for all the others. In most cases the ecological carrying capacity, and especially the environmental assimilation capacity, limits quantitative growth. Once quantitative growth has reached a limit at which the environment begins to be degraded by an excessive burden, only sustainable policies that take into account ecological limits can stimulate tourism development.

In summarising the effects of touristic activities, such as visiting a natural resource (e.g., a lakeside resort), the following example is given (Smeral, 1994B and 1996) :

The demand curve D is also the marginal benefit curve MB (D=MB). It tells us how much consumers value different levels of visits. The MPC curve measures the marginal private cost of producing the service. The resort is at the end of a long valley and can only be reached by car on a single-lane road which passes through some villages, creating external costs from traffic congestion and environmental pollution (noise, smell). Furthermore, one person's decision to use the road imposes congestion costs on others. When all the external costs are added to the private costs, we obtain the marginal social costs (MSC) of visiting the resort.

In this context, social costs should be understood as the total costs to the relevant society or community.

Let us assume that the market for visiting the lakeside resort is competitive and unregulated. People will balance the marginal private costs against the marginal benefit (i.e., Q0 visits per day at an average price P0: P0 could be an entrance fee, which includes parking and the use of infrastructure). At this scale of visits, a large amount of external costs will be created. The marginal costs are SC0.

Suppose that the local government charges a tax equal to the external marginal social costs. By imposing such a tax, the government raises the marginal private costs - the original marginal private costs plus the tax - to the level of the marginal social costs. The MSC curve is now the relevant marginal cost curve for each visitor's decision, as a visitor incurs a marginal cost of visiting equal to its marginal social costs. The market supply curve shifts upward to become the MSC curve. The price rises to P1 and the amount of visits per day falls to Q1. In other words, the activity level of the social optimum is lower than that of the private optimum. The marginal cost of the resources used in producing services for Q1 visits is C1, but the marginal external cost generated is P1 minus C1. The situation depicted at a price P1 and Q1 visits is allocatively efficient : external costs have become internalised and the market failure has disappeared through government regulation.

The situation described above could be understood as sustainable if the social optimum Q1 is identical with the ecological optimum. For a lower environmental assimilation capacity (i.e., at the level of C1) the activity level Q2 reflects the ecological optimum and also the scope for sustainable development. In this case the ecological carrying capacity limits quantitative tourism growth even though the social limits would allow a higher potential for quantitative growth. Activity levels higher than Q2 would lead to environmental degradation.

Is zero growth possible ?

The question "Is zero growth possible?" could be answered by looking at the non-quantitative options available to keep at least the (market) share in money terms in a dynamic macroeconomic framework when the quantitative limits of a specific tourism area have already been reached.(1) Or in other words, to what extent and with what measures could tourism contribute to regional income growth when the quantitative expansion potential of a given area has already been exploited in terms of sustainability, i.e., when arrivals, duration of stay and geographical and seasonal distribution have already been optimised, as have been technical, organisational and traffic measures.

What is left then are measures to improve the supply quality, so as to attract tourists with greater spending power per overnight stay. An important factor of higher quality is greater product differentiation. Yet this strategy is limited, as a greater offer of activities (to the same number of tourists) has an impact on the environment and could, by way of feedback, also lower the quantitative carrying capacity of the region.

The idea of keeping the environmental impact of the supply ofleisure-time activities constant and changing only the structure ofthe supply with a view to attracting tourist with greater spending power similarly has its restrictions. One such restriction is that an annual increase in spending per overnight stay requires, at least in the long run, more product differentiation as tourists will raise their quality requirements. Another is that in actual practice the structure cannot be changed permanently, as the special character of the area/region limits the range of feasible activities. High adaptation costs need also to be taken into account.

Furthermore, product differentiation, improvements of the infra- and superstructure and greater service quality as a rule require more and better qualified labour, which once again has an environmental impact in the long run, since bottlenecks will appear and qualified labour will need to be imported.

(1)Another (not very realistic) interpretation of "zero growth" could be that after reaching the quantitative limits in a specific area or region no new measures would be taken to raise tourism income. In this case the region in question would, in a dynamic setting, rapidly lose its competitiveness, with the consequence of a lower visitor level as well as a lower potential for income and employment generation which might lead to migration in other areas.

On the other hand, the development potential for a given area such as described above could also be affected by the stage achieved after the quantitative limits have been reached, as lower development levels might promise better opportunities for a greater income growth potential (Smeral, 1999).

Also, when development is (temporarily) restricted in terms of value added growth through quality strategies, there will be problems of physically or financially controlling the number of tourists, which is likely to result in inefficiency and inequity. Economies of scale in providing travel, accommodation, facilities and services may be lost on the supply side, while costs are raised and passed on or charged directly to the tourists, so that lower income groups could be priced out of the market. Moreover, those working in the tourism sector in host communities could suffer if the level of activity is reduced.

There are also other factors which may create significant costs, e.g., how to apply the requisite control instruments or even whether they are actually cost-effective.

Conclusion

The answer to the central question of opportunities for waste- and pollution-free tourism growth is closely connected to the issue of sustainable tourism development. In tourism, sustainability should be the cornerstone of all development, as the natural environment constitutes most of its primary resource base.

Given the fact that none of the sustainability definitions is really satisfying and all-encompassing, an approach more frequently taken is to examine and assess tourist activities according to whether they satisfy a number of criteria of sustainability. Basically, there are four different dimensions of sustainability: ecological, social, cultural and economic perspectives.

Ideally, the allowed/realised quantities of all dimensions of sustainability are equal, yet if one should be lower, it would then act as a quantity constraint for all the others. In most cases, the ecological carrying capacity, and especially the environmental assimilation capacity, limits quantitative growth. Once the quantitative growth limits have been reached, degradation of the environment will follow. While there are opportunities for value-added growth through quality strategies once the quantitative limits have been reached, these strategies have zero impact on the environment only in a certain range so that the potential for value-added growth at given quantitative limits for expansion is restricted. If the qualitative expansion potential is exhausted without easing the quantitative limits, it will trigger an economic decline of the tourism region, driven by migration as well as cost and quality disadvantages.

 

References

Ayres, R. U., Kneese, A. V., Externalities : Economies and Thermodynamics, in Archibugi, F., and Nijkamp, P., (Eds.), Economy and Ecology: Towards Sustainable Development, Kluwer, Dordrecht, 1989.

Coase, R.H., 'The Problem of Social Costs", in Journal of Law and Economics, 1960, 3, pp. 1-44.

Goodland, R., Biophysical and Objective Environmental Sustainability, in Dragun, A.K., Jacobsson, K.M., (Eds.), Sustainability and Global Environmental Policy, New Perspectives, London, 1997, pp. 63-95.

Green, H., et al., "Assessing the Environmentallmpact of Tourism Development", inTourism Management, June 1990,11(2), pp. 111-120.

May, V., 'Tourism, Environment and Development", in Tourism Management, June 1991,12(2), pp. 112-118.

May, V., "Environmentallmplications of the 1992 Winter Olympic Games", in Tourism Management, 1995, 16(4), pp. 269-275.

Meadows, D.H., et al., The Limits of Growth: A Report for the Club of Rome's Project on the Predicament of Mankind, London, 1972.

Mowforth, M., Munt, 1., Tourism and Sustainability, Routledge, London - New York, 1998.

Neher, A., Ph., Natural Resource Economics - Conservation and Exploitation, Cambridge University Press, Cambridge, 1990.

Pigou, A.C., The Economics of Welfare, London, 1923.

Romeril, M., 'Tourism and the Environment - Accord or Discord ?", in Tourism Management, September 1989, 10(3), pp. 204-208.

Saleem, N., 'The Destination Capacity Index: A Measure to Determine the Tourism Carrying Capacity", in Seaton, A.V., (Ed.), Tourism - The State of The Art, Jon Wiley&Sons, Chichester, 1994, pp. 144-151.

Schumacher, E. F., Small is Beautiful : A Study of Economics as if People Mattered, London, 1973.

Sinclair, M. T., Stabler, M., The Economics of Tourism, Routledge, London-New York, 1998.

Smeral, E., "Entrace Fee for Nature ?", Paper presented at the 42nd congress of International Association of Scientific Experts in Tourism (AIEST), Paris, France, 23-29 August 1992, in AIEST (Ed.), The Freedom of Travelling : Rights and Duties of the Tourists in the Year 2000, St. Gallen, 1992, pp. 139-148.

Smeral, E., (1994A), "Measuring and Managing Tourism Demand for Public Resources", in Witt, St., Mountinho, L., (Eds.), Tourism Marketing and Management Handbook, second Edition, Prentice Hall, 1994, pp. 510-515.

Smeral, E., (19946), "Evaluating Public Resources Used in Tourism", in Seaton, A.V., (Ed.), Tourism - The State of the Art, Jon Wiley&Sons, Chichester, 1994, pp. 136-140.

Smeral, E., (1994C), "Strategien zur Reduktion der Umwelteinflüsse des Tourismus: 6ewertung der verschiedenen Lësungsansatze", in AIEST (Ed.), Tourismusforschung : Erfolge, Fehlschlage, ungeloste Probleme, St. Gallen, 1994, pp. 187-213.

Smeral, E., "Policy Measures for Reducing the Environmentallmpact of Tourism", in ITourism Economics, 1996, 2(2).

Smeral, E., "Grundlagen einer querschnittsorientierten Freizeit- und Tourismuspolitik", in Keller, P., (Ed.), Zukunftsorien-tierte Tourismuspolitik, AIEST, St. Gallen, August 1999.