Valuation of Environmental Resources for Tourism: The Case of Jamaica
by
Elizabeth Thomas-Hope and Adonna Jardine-Comrie
Introduction
A fundamental consideration of sustainable development is that natural capital (that is
environmental resources and ecosystem services) is as necessary to any economic sector as other
forms of capital. The contribution of natural capital to the tourism sector is both direct and
indirect and like other forms of capital in the production process is subject to deterioration and
degradation in both quantity and quality. In the case of tourism the activities of the industry can
have a direct impact on the natural resource base through its potential to degrade the
environmental amenities on which the industry is based. It also has negative indirect effects on
such capital if it disrupts the natural functioning of ecosystem services to the extent that the
quality of services they provide, and which supports economic production, declines. The
degradation of either the required amenities or the environmental services would lead to the
collapse of the industry if the process were not arrested.
While the economic sustainability of the tourism industry is widely agreed to be dependent upon
the conservation of those natural resources that are directly used by the tourist industry while the
indirect services provided by the environment are commonly regarded as ‘free’ and neither in
need of protection or replenishment. They do not therefore enter into evaluations of the real cost
of the industry, which raises questions of whether the economic contribution of the industry to
the national economy is commensurate with the use of and therefore the preservation and/or
replenishment of comparable reserves for future use.
1
This paper addresses these questions through the environmental valuation of resources and
ecosystem services used in the tourism industry in the case of Jamaica. A first approximation is
made of the value of a selection of natural resources and ecosystem services used in the tourism
industry and this is compared with the sector’s contribution to the country’s Gross Domestic
Product.
Tourism in Caribbean Economies
Tourism has become one of the most important economic sectors for many countries in the
Caribbean as it has for other small island developing states (SIDS). The relative success of the
industry has led a number of islands to invest heavily in the sector. With reference to the
independent Caribbean island states, income from tourism services comprises over fifty percent
of the total exports in some, namely Antigua and Barbuda, the Bahamas, Barbados, St Kitts and
Nevis and St. Lucia over most or all of the period 1985 to 2000, and for many other states it
accounted for over twenty-five percent. Besides, those Caribbean countries that have done best
economically since the 1990s, namely Bahamas, Antigua and Barbados are those that have
invested heavily in the tourism industry. The Tourism Master Plan for Jamaica, a document
prepared to guide the development of the industry, includes plans to aggressively accelerate
expansion over the period 2000 to 2010.
Environmental Costs of Tourism
Despite the apparent economic successes of the industry, it is important to note that promoting
tourism as the way forward for Jamaica, as for other small island developing states, brings to the
fore the challenge of balancing the increased use of natural resources and the resulting
environmental degradation with the goals of sustainable development. Tourism expansion has
2
major implications for natural resources that include water and ecological services such as waste
assimilation and neutralization.
The environmental repercussions of tourism development have already begun to negatively
impact Jamaica. This is demonstrated by the strong positive correlations of tourist arrivals with
carbon dioxide (CO2) emissions and water pollution (BOD). It has been established that tourists
produce 3.79 Kg of solid waste per person per day as compared with 1 Kg produced by the
average local resident (calculated from data in STATIN and NEPA, 2001). As the figures for
waste produced per tourist is calculated per bed night of hotel stay, they do not include the
additional amount produced by cruise ship day visitors. Furthermore, those hotels that have
sewage treatment plants treat the effluent only up to the secondary level and even then, some of
these plants have been deemed unsatisfactory by the Ministry of Health when assessed according
to the National Environment and Planning Agency guidelines for secondary treated sewage
effluent.
Much greater amounts of water per persons are used on average by tourists than is used by
residents. In the case of Jamaica, the use of fresh water by tourists is approximately one and a
quarter times the amount used by local residents. It has been estimated that tourists use 227.5
liters (50 gallons) of water per day (World Tourist Organization, 2002), as compared to 180 liters
per person in the local population (STATIN and NEPA, 2001).
Therefore, before the impressive expansion plans for Jamaica’s tourist industry are implemented,
there needs to be an integrated approach taking the direct and indirect economic, social and
ecological implications into account. This approach should involve continuous assessment and
3
monitoring of the sector to ensure that it operates within the carrying capacity of the island’s
environment. The establishment of appropriate sustainability indicators then becomes important.
These indicators would need to be of both a qualitative and quantitative nature, and would
require the monetary valuation of environmental resources and services (even un-priced ones)
used in the tourism industry. This would allow for comparisons to be made between the
economic benefits of the sector and its natural resource use, while providing the information that
would allow environmental use to be measured in terms of monetary cost, since it is on the basis
of such criteria that most policy decisions are made.
These monetary values can then be used as the basis for: 1) providing a first approximation of
the value of some of the natural resources and ecosystem services used in the tourism industry in
Jamaica; and 2) setting up a framework for their further analysis and use in the assessment of
sustainability in respect of the tourism and other industries in SIDS.
Measuring Environmental Cost
Constanza et al (1997) observed that policy decisions have not ascribed sufficient weight to
ecosystem services because of the failure of commercial markets to include them in their
transactions and the lack of quantification and comparable expressions with economic services.
Smith et al (2001) further pointed out that when natural capital is included by economists in the
production function it is usually because of their discovery and extraction cost while uses for
which there are no costs, though critical to the production process, are completely left out. The
current ‘prices’ placed on some ecosystem services were identified as being responsible for their
overuse which threatens the ability of the ecosystem to provide all its functions simultaneously
and indefinitely (Constanza et. al., 1997).
4
Some would argue against the inclusion of un-priced inputs in the tourism production process,
but as was pointed out by Smith et al (2001), this position is only defensible when profit
maximization is the goal, since the stock of all three types of capital, man-made, human and
natural capital is what determines the possibility of production in the future. Other scholars argue
that it is impossible and unwise to value the intangible resources and services offered by the
environment while still others claim that environmental valuation is unnecessary, since people
should be required to preserve the environment purely on commonsense and ethical grounds. In
defense of environmental valuation, Constanza et al (1997) pointed to widespread valuation of
intangible assets (for example, in highway construction and insurance policy determination) and
hence the inconsistency and deliberate evasion of such valuation with respect to environmental
resources. The fact that ethical positions cannot be relied upon to provide effective
implementation of strategies for environmental preservation also makes the economic valuation
of natural amenities a necessary condition for their commercial use.
Nevertheless, any attempt to value ecosystem services will encounter many conceptual and
empirical challenges. Here, the lack of comprehensive data necessitated the use of the hotel
sector as a proxy for the tourism industry; only limited numbers of years could be used to
calculate water-use, waste generation and electricity use in the tourism sector, which meant that
extrapolations had to be made from point estimates; many categories of ecosystem services used
in the sector were omitted as were the value of tourism implications for biodiversity loss and
landscape change/ecosystem destruction. In spite of these limitations, valuation estimates were
calculated if only to determine a crude initial measure of the magnitude of the cost of
environmental resources and services with respect to some of the demands of the industry –
5
namely potable water used as well as the solid, liquid and gaseous waste assimilation functions
provided by the environment.
The methodology involved the collection of estimates of water use, production of sewage
effluent, CO2 emissions, and solid waste generation. Water-use data were obtained from the
Tourism Master Plan for Jamaica which collected data on tourism water use in the year 1985 and
estimated demand up to the year 2015. For the calculation of sewage effluent produced, the
assumption was made that the volume of water used would be equivalent to the volume of
sewage effluent produced. Solid waste data were obtained from the report of a study done of
waste generation in the hotel sector carried by the consultancy firm, Norconsult, in 1996. From
these data, waste generation per tourist bed night was calculated and on the assumption that no
changes in the rate of waste generation had occurred, extrapolations were made up to the year
2003. Carbon dioxide emission both from direct electricity use and for the production of water
by the hotel sector was calculated from data obtained from the Jamaica Public Service Company
(JPSCO Ltd.) and from the National water Commission.
The replacement cost valuation technique was used for the valuation of the three resources
selected - potable water used in the tourism industry as well as the use of the ecosystem service
of waste assimilation for sewage effluent and carbon dioxide sequestration. This technique has
been identified as a useful form of valuation where limitations would prevent the application of
contingent valuation methods. It involves the estimation of the value of the resource or damage
to the resource, based on the cost to restore, rehabilitate or replace the resource or ecosystem
service (Ulibarri and Wellman, 1997). The result is a surrogate measure of value that is as
consistent as possible with the economic concept of ‘use value’.
6
Environmental Goods and Services for the Tourism Industry in Jamaica
Water
In the case of water, the replacement source used was desalination of sea water. The most recent
cost of desalination of water in the Caribbean was for Antigua, at $US$ 4.70 / m3 of water
(Cooper and Bowen 2001) (or US$ 4,700,000 per million cubic meters). This was used as the
basis of calculating replacement costs in the Jamaica case.
This natural resource that is so essential to and heavily used by the tourism sector, is grossly
undervalued. This is reflected in the considerable difference between the amounts paid for water
as a utility by the hotel industry and the ‘real’ cost of water measured in terms of replacement
value. This difference could be referred to as the environmental service provided to the hotel
industry for which payment is not made. (Table 1). As the tourism industry expands and water
demands rise, and should Jamaica’s water resources dwindle as a result of ground water
contamination and the competition from other users, it would be important for the tourism sector
to compensate the country adequately for the use of this commodity.
Table 1
Water Usage of Jamaican Hotels and Water Replacement Costs (1996-2004)
Sewage Treatment
Secondary treatment has been found to remove only about 10 to 30 percent of the nitrogen and
phosphorus compounds present in sewage. Treated effluents, even from modern treatment plants
are sometimes found to contain about 20 ppm nitrogen and 9 ppm phosphorous. It is estimated
that excessive growth of algae occurs when total phosphorous levels exceed 0.l ppm (if
phosphorous is limiting) or when nitrogen levels (nitrate) exceed 0.3 ppm (if nitrogen is limiting)
(Mele, no date). To maintain the environmental integrity necessary for the continuation of
7
tourism activities the environment provides ecosystem services that assimilates and neutralizes
this secondary treated effluent. Should the status of the environment deteriorate to the point that
it were unable to function in this way, the equivalent service would have to be provided by
further technical intervention with the relevant costs.
The cost associated with the conversion of secondary treated sewage effluent to the stage of
being reusable irrigation water for agriculture, was used as a crude estimate of this service
provided by the environment in the waste assimilation of sewage effluent to tertiary level
treatment. It has been estimated that the cost of increasing the level of treatment of sewage
effluent from secondary to tertiary stage of purification alone was 0.15 US per m3 (Haruvy et.
al., 2001, cited in Gordon, 2001). Other estimates of the cost of producing recycled water from
effluents from various sources ranged from US$1.45 /m3 to $4.00/m3 (Hall 2003, Listowski
2003; Gutteridge, Hoskins and Davey (GHD), 2002; de Rooy & Engelbrecht 2003; de Rooy
2003). However, given the various criteria used for estimating these costs, that provided by
Haruvy et al was selected and on this basis, the cost of producing one million cubic meters of
tertiary treated effluent from secondary treated effluent was calculated to be US$150,000. This
figure was taken as the approximate value of the waste assimilation service provided by the
environment for every one million cubic meters of secondary treated sewage effluent released.
As demonstrated by the figures in Table 2, the current value of the waste assimilation and
neutralization services provided by the environment is considerable.
Table 2
Value of Waste Assimilation Services Related to Sewage Effluent (US $) of Jamaican Hotels
(1996-2004)
8
Sequestration of Carbon Dioxide
Trees and other plants are known to provide a major service in the sequestration of carbon
dioxide. Thus, the extent to which ground cover is removed by hotels in Jamaica (their
‘ecological footprint’ with respect to carbon dioxide) could be used as a basis for estimating the
value of the carbon dioxide sequestration services provided by the environment in respect of the
carbon dioxide emissions from hotels. Alternatively (as used in this paper), based on the carbon
dioxide emissions from the hotels, calculations were made of the biological productive area
(land) that would be needed to absorb these without causing an increase in atmospheric carbon
dioxide. The international estimate was used of 1 hectare of forest needed for every 5.2 tonnes of
carbon dioxide (Barret et al 2002). Land values were obtained by averaging the highest and the
lowest values of land for each area in Jamaica (based on data from the Government of Jamaica,
Land Valuation Division).
Data from the JPSCO Ltd. indicated that in the period January 2003 to December 2003 hotels in
Jamaica used a total of 15,423,999.43 Kilowatt of electricity (KWh). The total number of tourist
bed nights for the same period amounted to 5909223. Results from relevant calculations indicate
that 2.61 KWh of electricity is used per tourist bed night. Assuming no change from 1996, this
information was used to calculate the KWh usage of electricity by hotels for the period 1996 to
2003, both in direct electricity usage and also the use of electricity in the production of water
used by the hotel. Data from the National Water Commission indicated that in 2002 9034.24
KWh of electricity was needed to supply one megalitre of water which translates to 9024240 per
MCM. It was assumed that this energy requirement had remained constant over the period 1996
to 2003. From this the total electricity used in the hotel industry both directly and in the
production of water for the sector was calculated. (Table 3).
9
Table 3
Value of Carbon dioxide Sequestration Services of the Environment for
Hotels in Jamaica (1996-2003)
Data on the carbon dioxide emissions per KWh of electricity generated from all power plants
were obtained from the JPSCO Ltd. The information received indicated that on average 1.11 Kg
of carbon dioxide is released per KWh of electricity produced. This meant that in the generation
of the electricity needed by the hotel sector for one year, from January 2003 to December 2003,
17120.6 tonnes of carbon dioxide would have been produced. As indicated in Table 5, the cost
of establishing or re-establishing forest is greatest in the first three years (taking 1996 as the base
line year for the purpose of this paper) and progressively less thereafter, with slight annual
increases commensurate with the increased amount of carbon dioxide emissions from the
industry. Thus the sequestration services provided by the environment based on the amount of
carbon dioxide produced annually over the period 1996 to 2003, is calculated to be at an average
of US$ 37,301,146.16 per year.
Value of Tourism Environmental Services Relative to Contribution to GDP
The value of environmental services is considerably higher than the contribution that the tourism
industry makes to GDP, reflecting the fact that while environmental resources are paid for as
utilities, the additional functions of the environment that maintain the ability of water, sewage
treatment and carbon dioxide sequestration to take place are effectively treated as ‘free’. Taking
into consideration the direct payments made for utilities and adjusting for annual inflation,
calculations show that the contribution of the tourism industry to GDP falls short of the
economic value of the environmental services that the tourism industry receives. (Table 4).
Furthermore, these calculations are conservative given the fact that only the environmental
services used by hotels were included (thus underestimating the environmental costs of the
10
industry), whereas the economic benefits of the overall industry is reflected in the contribution to
GDP.
Table 4
Value of Environmental Inputs to Jamaican Hotels with respect to Water Usage, Waste
Absorption and Carbon Dioxide Sequestration (in Million US dollars)
Where the carrying capacity of an industry is assessed on the basis of direct resource use and
excludes indirect use through services provided by the environment, then only short- term and
localized effects are taken into account. However, where national sustainable development is the
objective of assessing carrying capacity, both direct and indirect uses of the environment in
goods and services need to be included and calculations made in terms of the long-term capacity.
Only then would the resource used for development in the present be managed so that it ensures
that the environment will continue to provide the required services for future generations. Taking
water, for example, a resource that is currently being placed under severe pressure by tourism
and other competing uses in the Caribbean and elsewhere, should the present cost of water
simply reflect the current usage, then it is future generations that will have to pay the price of
replacing the depleted resource. Within the context of the goals of sustainable development,
therefore, the economic cost of replacement or replenishment of both environmental goods and
services must be factored into the level of contribution that tourism, or any other industry should
make to the national economy in the present so that the future generations are not left to pay the
price.
Conclusion
Before tourism is further pursued as the major economic growth sector in SIDS, and before the
impressive expansion plans are implemented in the case of Jamaica as in other island states, there
needs to be an integrated approach across economic, social and ecological disciplines to provide
11
a holistic analysis of the long-term impact on environmental sustainability and ultimately on
sustainable development. Policies for tourism in the context of sustainable development need to
be based on holistic assessments of both the direct uses of natural resources and the replacement
costs of natural capital where natural replacement capacity is exceeded. To this end, there is the
need to establish appropriate sustainability indicators against which activities may be monitored.
These indicators would need to be of both a qualitative and quantitative nature, and would
require the monetary valuation of environmental resources and services (even un-priced ones)
used in the tourism industry. This would allow for comparisons between the economic benefits
of the sector and its natural resource use, while providing the information that would allow
environmental costs to be calculated in monetary terms and thus more readily built into the real
economic costs and benefits of the tourism industry. Not only should the tourism industry
operate within the immediate or current carrying capacity of SIDS but it should also compensate
economically for it’s use of ecosystem services so as to ensure their restoration and even
replacement in the long term development interest of the industry itself and the sustainable
development of the relevant country.
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Jamaica.
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the Jamaica Public Service Company Limited. Kingston, Jamaica.
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Table 1
Water Usage of Jamaican Hotels and Water Replacement Costs (1996-2004)
Year
Water Use
MCM /Year
1996
13.67
1997
Current Water
Cost NWC US $
Replacement Cost
US $
Value of Environmental
Service US $
1,076,715.29
64,233,333.33
63,156,618.04
14.00
1,120,292.30
65,800,000.00
64,679,707.70
1998
14.33
1,086,695.75
67,366,666.67
66,279,970.92
1999
14.67
1,215,611.49
68,933,333.33
67,717,721.84
2000
15.00
1,103,647.28
70,500,000.00
69,396,352.72
2001
15.53
1,037,318.29
73,006,666.67
71,969,348.38
2002
16.07
981,120.46
75,513,333.33
74,532,212.87
2003
16.60
820,913.46
78,020,000.00
77,199,086.54
2004
17.13
1,441,451.61
80,526,666.67
79,085,215.05
Source: Based on data from the National Water Commission, Jamaica
Table 2
Value of Waste Assimilation Services Related to Sewage Effluent (US $) of
Jamaican Hotels (1996-2004)
Year
Volume of Sewage
Effluent
(MCM /Year)
1996
1997
1998
1999
2000
2001
2002
2003
2004
13.67
14.00
14.33
14.67
15.00
15.53
16.07
16.60
17.13
Additional Cost
of Tertiary
Treatment
(US $150, 000 /
MCM)
2,050,000
2,100,000
2,150,000
2,200,000
2,250,000
2,330,000
2,410,000
2,490,000
2,570,000
Value of Environmental
Waste Assimilation
Services (US $)
2,050,000
2,100,000
2,150,000
2,200,000
2,250,000
2,330,000
2,410,000
2,490,000
2,570,000
Source: Based on data for hotel occupancy rates from the Jamaica Tourist Board.
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Table 3
Value of Carbon dioxide Sequestration Services of the Environment for
Hotels in Jamaica (1996-2003)
Year
Total KWh
Electricity
Used (Direct
Consumption)
CO2
produced in
metric
tonnes
Co2 Generated
from Water
production
(metric tonnes)
Total CO2
(metric
tonnes)
Hectares of
Forest
Needed
Cost of
Establishing
Forest US $
Cost in
US
Million
1996
1997
1998
1999
2000
2001
2002
2003
13,083,145.43
13,795,929.70
14,473,197.56
14,845,126.65
15,456,634.22
14,856,684.43
14,555,965.64
15,423,999.43
14,522.29
15,313.48
16,065.25
16,478.09
17,156.86
16,490.92
16,157.12
17,120.64
111,109.26
114,853.96
116,529.23
119,239.21
121,949.19
126,285.16
130,621.13
134,957.10
125,631.55
130,167.45
132,594.47
135,717.30
139,106.05
142,776.08
146,778.25
152,077.74
24,159.91
25,032.20
25,498.94
26,099.48
26,751.16
27,456.94
28,226.59
29,245.72
84,167,431.10
87,495,673.91
89,314,035.18
7,443,463.45
6,497,206.12
7,231,112.83
7,705,273.13
8,554,973.41
84.17
87.50
89.31
7.44
6.50
7.23
7.71
8.55
Source: Based on data from the Jamaica Public Service Company Ltd. and the National
Water Commission, Jamaica.
Table 4
Value of Environmental Inputs to Jamaican Hotels with respect to Water Usage, Waste
Absorption and Carbon Dioxide Sequestration (in Million US dollars)
1996
1997
1998
1999
2000
2001
2002
2003
Potable
Water
Million
Waste
Assimilation
Sewage
Effluents
Waste
Assimilation
CO2
Sequestration
Total Value
Tourism
Contribution
to GDP
63.16
64.68
66.28
67.72
69.40
71.97
74.53
77.20
2.05
2.10
2.15
2.20
2.25
2.33
2.41
2.49
18,664.52
18,665.15
18,946.66
737.38
1,192.03
1,638.69
1,911.67
2,184.82
18,729.73
18,731.93
19,015.09
807.29
1,263.68
1,712.99
1,988.61
2,264.51
332.96
375.23
376.12
389.77
393.87
376.73
375.07
379.64
Difference
-18,331.56
-18,289.92
-18,570.54
-347.61
-798.17
-1,261.97
-1,536.60
-1,805.18
Source: Based on authors’ calculations of value of environmental services and data from
the Government of Jamaica, National Accounts.
15