The Implications of Climate Change Mitigation Policy and Oil Price Volatility for Tourism Arrivals to the Caribbean

Abstract

Globally, tourism is a non-negligible contributor of greenhouse gas (GHG) emissions, primarily through tourist transport, and in particular rapidly increasing air travel. A number of policy proposals to reduce GHG emissions from domestic and international aviation have been introduced between 2005 and 2009. Oil price volatility, especially since 2008, has forced airlines to make adjustments to flight schedules and even to add fuel surcharges to plane tickets. Tourism destinations dependent on long-haul air travel have expressed concern about the potential impact of change mitigation policies and high oil prices on tourist mobility and arrivals to their countries. A tourist arrivals model was constructed to examine whether aviation sector mitigation policy introduced in the major market regions of the European Union and North America, coupled with a return to recent oil price market volatility might adversely affect tourist arrivals to the Caribbean region. A sensitivity analysis that included 18 scenarios with different combinations of three GHG mitigation policy scenarios for aviation (represented by varied carbon prices), two oil price projections, and three price elasticity estimates, representing the range in the air travel economics literature, was conducted to examine the impact on air travel arrivals from eight outbound market nations to the Caribbean region. Results indicate that under proposed aviation sector mitigation policies and the range of oil price projections currently available, growth in visitor numbers through to 2020 would decrease only slightly (−1.3% to −4.3%) relative to a reference scenario based on recent growth trends. A detailed case study of Jamaica further revealed the different sensitivity of market segments (package vacations) to climate policy and oil price related increases in air travel costs and the economic implications of reduced growth in tourist arrivals. As the international policy framework for managing GHG emissions from bunker fuels (air and marine transport) solidifies, further research will be required to understand the implications for tourist mobility, tour operator routing and the longer-term risks to tourism development in the Caribbean.