The economics of climate change

This paper focuses on several key economic issues relevant to climate change. Given the fact that changes in climate are projections using the best available data, it examines the economic principles of uncertainty and the precautionary approach, and then continues to address the key drivers of climate change. Climate change is expected to result in negative impacts and, in this regard, the consequences of anticipated rising temperatures and sea levels as well as changes in precipitation that may result in flooding and/or drought are addressed. However, the situation is not all negative and, as such, the opportunities that are likely to arise through adaptation and mitigation are discussed especially with respect to the Caribbean. In this regard and recognizing that it would be useful to Caribbean policymakers to utilize these opportunities and to address the negative impacts, the Economic Commission for Latin America and the Caribbean (ECLAC), through its subregional headquarters for the Caribbean, is spearheading a review of the economics of climate change in the Caribbean with a view to providing quantitative information to stakeholders in dealing with climate change. The paper makes recommendations for the Caribbean to address climate change at the national level. These include macroplanning; promotion of energy efficiency; creation of incentives to obtain support for implementation of alternative energy technologies; maintaining the will among stakeholders on a sustained basis for addressing climate change; and the conduct of relevant research into varieties of plants and animals that could adapt to changing climatic conditions. Finally, it must be recognized that to successfully combat climate change, the threats and opportunities must be properly assessed as part of an ongoing region-wide system of risk management, which should not be incidental, but integral, to national and regional planning and forecasting for the future.

Tourism life cycle, tourism competitiveness and upgrading strategies in the Caribbean

In the 1980s Butler adapted the life cycle product model to the tourism industry and created the “Tourism Area Life Cycle (TALC) model”. The model recognizes six stages in the tourism product life cycle: exploration, investment, development, consolidation, stagnation and followed, after stagnation, by decline or revitalization of the product. These six stages can in turn be regrouped into four main stages. The Butler model has been applied to more than 30 country cases with a wide degree of success. De Albuquerque and Mc Elroy (1992) applied the TALC model to 23 small Caribbean island States in the 1990s. Following De Albuquerque and Mc Elroy, the TALC is applied to the 32 member countries of the Caribbean Tourism Organization (CTO) (except for Cancun and Cozumel) to locate their positions along their tourism life-cycle in 2007. This is done using the following indicators: the evolution of the level, market share and growth rate of stay-over arrivals; the growth rate and market share of visitor expenditures per arrival and the tourism styles of the destinations, differentiating between ongoing mass tourism and niche marketing strategies and among upscale, mid-scale and low-scale destinations. Countries have pursued three broad classes of strategies over the last 15 years in order to move upward in their tourism life cycle and enhance their tourism competitiveness. There is first a strategy that continues to rely on mass-tourism to build on the comparative advantages of “sun, sand and sea”, scale economies, all-inclusive packages and large amounts of investment to move along in Stage 2 or Stage 3 (Cuba, Dominican Republic, Puerto Rico). There is a second strategy pursued mainly by very small islands that relies on developing specific niche markets to maintain tourism competitiveness through upgrading (Anguilla, Antigua and Barbuda, British Virgin Islands and Turks and Caicos), allowing them to move from Stage 2 to Stage 3 or Stage 3 to a rejuvenation stage. There is a third strategy that uses a mix of mass-tourism, niche marketing and quality upgrading either to emerge onto the intermediate stage (Trinidad and Tobago); avoid decline (Aruba, The Bahamas) or rejuvenate (Barbados, Jamaica and the United States Virgin Islands). There have been many success stories in Caribbean tourism competitiveness and further research should aim at empirically testing the determinants of tourism competitiveness for the region as a whole.