Tourism Economics
Over the last several years, the issue of climate change has been continually brought to the forefront. This is because a variety of scientific evidence is highlighting the damage that CO2 emissions are causing to the environment. In the case of Australia's tourism industry these challenges are more severe. As they want to protect the various natural resources that are adversely being impacted by these transformations (i.e. The Great Barrier Reef, the Australian Alps and Outback). Yet, the introduction of a carbon tax will have an adverse impact on the sector with tourism operators expected to see a decrease in revenues from -.7% to -1.2% annually. This is challenging, as it is creating divisions about how this will affect the economy and job creation. To fully understand the short- and long-term implications requires focusing on a number of areas to include: examining why the government is implementing these measures, assessing the economic impacts as well as studying how these transformations will affect the tourism industry. Together, these elements will highlight the underlying benefits and drawbacks of the carbon tax on the sector. This is when everyone will see the short- and long-term implications of this program. ("Carbon Tax and Tourism," 2011)
Section 1: Why the government decided to introduce a carbon tax (e.g., the environmental issues prompting the introduction and the economic impacts this will have)?
To fully understand why the government is introducing a carbon tax requires examining various pieces of research on the subject in the form of a literature review. This will provide more specific insights as to what factors influenced the opinions of government officials. When this takes place, there will be a greater understanding as to the primary reasons behind these policy decisions.
In the article titled Australia Introduces Controversial Carbon Tax (2012), it discusses how the nation has an international obligation to reduce the total amounts of greenhouse gases (based on the Kyoto Protocol). Moreover, Australia accounts for 1.5% of the world's carbon emissions. Yet, given the size of the country, it is the largest polluter on a per capita basis. These factors forced the Gillard government to impose a tax on various polluters (to ensure that they are in compliance with the Kyoto Agreement). ("Australia Introduces Controversial Carbon Tax," 2012)
While Hoque (2005) determined that tourist related activities are some of the largest producers of CO2. The sector is accounting for a total of 21.6 million carbon tons every single year. At the same time, international aviation (associated with tourism) reported emitting 7.9 million tons of emissions into the atmosphere. This is beyond the provisions inside the Kyoto Protocol. These issues prompted the government to introduce the carbon tax as a way to curb the total amounts of pollution and to ensure that Australia is in compliance with the agreement. (Hoque, 2005)
In the short to medium term, the carbon tax will have a negative impact on the tourism industry by directly raising costs. According to Reid (2012), this will result in firms passing these expenses on their customers. When this happens, there will be a decrease in domestic and international demand. For example, under the new structure, airfare will rise by an average of $3.00 per person on all national and regional flights. While this does not seem like a lot of money, everyone will be imposing these additional costs on cliental. This will negatively affect tourism and the kinds of activities that they choose. Once this takes place, is the point that the industry will go through a period of contraction from the introduction of these taxes. (Reid, 2012)
Section 2: Assessing the Economic Impacts
The significance of the carbon tax is to create a long-term shift in the practices that are utilized by the sector. This will reduce Australia's dependency on fossil fuels and it will create a change in the mindset of tourism officials. Over the short to medium term, this will result in a contraction of: -.7% to -1.2% (for the industry). However, from a longer term perspective this will create shifts in the practices that are utilized by forcing firms to reduce their carbon footprint. When this happens, there will be an increase in productivity and a reduction in costs. ("Program Overview," 2012) ("Carbon Tax and Tourism," 2011)
In the short to medium term, the carbon tax will lead to an increase in unemployment, whole sale / retail costs (for delivering various products / services to customers) and a decrease in demand for tourist related services. However, over the long-term this will lead to more job...
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