Trade, climate change and tourism: Responding to ecological and regulatory challenges

15 December 2009

The challenge of climate change is particularly significant for the developing world in the context of the tourism and travel industry; the sector is both a victim (i.e. increased health and natural disaster risks) and vector of climate change through the contribution of the airline and cruise ship industry to greenhouse gas emissions (GGE). It is critical, therefore, to look at both the ecological impact of climate change as well as the effects of mitigation policies on the tourism sector.

The impact of climate change on tourism

Tourism is one of the main drivers of growth in many developing economies. It is also particularly reliant on ecological assets and the built environment, both of which are vulnerable to the impacts of climate changes, such as rise in temperature, rainfall changes, sea level rises, coral bleaching and increased storm intensity.

The costs of adapting to climate change will likely be substantial. For example, estimates for the Caribbean suggest that the costs of inaction will amount to 22 percent of GDP for the region as a whole by 2100 and that revenue loss to the tourism industry is a major element of the problem.

However, funding the adaptation process is often difficult for developing countries. Many of them are dependent upon a narrow range of agricultural and mineral extraction industries, which have declining terms of trade, and therefore face financial and capacity constraints. Indeed, tourism and its associated services have been the main means by which these economies have diversified in the last few decades, as shown by their contribution to GDP, employment and exports.

The impact of climate-change policies

The climate-change challenge, however, goes a step further, given the high dependence of many developing economies on the visitor traffic generated by the airline and cruise ship industries, which are major emitters of greenhouse gases. As a result, the tourism industry in developing countries is vulnerable to climate regulation on international aviation, as well as the shift in consumer preferences towards short-haul destinations.

International aviation and shipping are excluded from the Kyoto Protocol because of the difficulties in allocating emissions to specific countries; however, these industries are now under the spotlight and will likely form an important element of the post-Kyoto talks. Already, the European Commission plans to include international aviation in the European Union Emissions Trading Scheme (ETS) from 1 January 2012. The implementation and potential impact of this scheme is of grave concern to tourism stakeholders as well as airlines originating in the developing world.

An example of the challenges of such emission mitigation schemes for developing countries is the UK airline passenger duty, which taxes carbon emissions on flights out of the UK. The Air Passenger Duty (APD) was first introduced in 1994 as a flat-rate tax. However, since November 2009 it operates with four distance-related bands based on the distance between London and the capital city of the destination country. In the new APD scheme flights to the Caribbean incur 25 percent and 87 percent more in taxes in 2009 and 2010, respectively. The Caribbean also falls into band "C" while all of the US, including Hawaii, is in category "B".

Schemes like the APD could make the tourism product in developing country regions less competitive relative to destinations in Europe and North America. Emission mitigation schemes may also penalize airline operators from developing countries, by concentrating the market on routes that are of key interest to the major carriers and their strategic partners. Many developing countries may, as a result, fall prey to oligopolistic practices that reduce consumer welfare.


Most developing countries are not large contributors to the problem of climate change; however, it is forecasted that these countries are vulnerable to increased ecological, health and natural disaster risks and that tourism will be heavily impacted. While adaptation is the key issue for these countries, some mitigation efforts can be achieved through pursuing green tourism to counter the shift in consumer preferences away from long-haul travel. From this perspective, developing countries could utilize the climate-change agenda as the basis for building a low-carbon tourism strategy. This could become a driver for economic transformation considering the possibilities of restructuring current production and consumption modes in order to cope with the challenge of climate change.

However, since developing countries lack the technologies required to make the shift towards a low-carbon economy, they require the transfer of efficient and clean energy technologies from developed countries. They should also pursue innovation policies to facilitate more rapid adaptation responses. The liberalization of trade in energy efficient goods is needed in areas where there is no competitive local production. Such trade-policy measures can include tax incentives or zero-tariff measures for environmentally friendly products. Last but not least, developing countries should support a global sectoral approach for aviation once funding is allocated for technology transfer and financing for developing country airlines.

Author: Keith Nurse is the Director of the Shridath Ramphal Centre  for international Trade Law, Policy and Services, University of the West Indies, Cave Hill, Barbados.

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