1. Progress Report: Aviation Tourism Demand under Carbon Pricing Joint Transport and Tourism WG Project TPT 02/2009 Susan Jabs, Department of Resources and Energy 15 September 2009

2. Background Full title: Study of International Visitor Flows and Greenhouse Gas Emissions for a Template to Examine the Impact on APEC Economies of Future Market-based Measures Applying to International Transport Objectives: understand aviation flows and GHG emissions impact on APEC member economies of CO 2 pricing for flights develop a pilot economic model to assist in policy decisions; and inform APEC policy for international aviation emissions.

3. Project administration Project lead by Australia and overseen by Dept Resources, Energy & Tourism and Department of Infrastructure New Zealand, Thailand and Singapore are co-sponsors Project focus on sample of APEC member economies including: Australia, Brunei Darussalam, Indonesia, Malaysia, New Zealand, Papua New Guinea, Philippines, Singapore, Thailand and Viet Nam Project undertaken by Australian transport economics and policy consultancy GHD Meyrick, part of global infrastructure and policy company GHD Pty Ltd Core project team: Neil Aplin, Daniel Veryard, Steve Meyrick and Zarmina Nasir

4. Outline economic, social and tourism indicators stakeholder visits modelling future directions

5. Economic and social indicators

7. Tourism Indicators

9. Consultation Visits Purpose: 1.Gather data and information 2.Meet stakeholders and contacts for later assistance Economies visited New Zealand Indonesia Malaysia Thailand Australia

10. Consultation Visits - Information Gained Variable data availability – as anticipated Useful background context Some very useful insights e.g. international arrivals in Malaysia dominated by Singapore visitors (in numbers)  many are very short-term (shoppers and petrol)  useful for mode share assumptions when data unavailable Data sources, websites and agencies that we were unaware of

11. Modelling Approach Key challenges: How large is a CO 2 price likely to be? What proportion of air prices is this likely to account for? How will international tourist arrivals respond? Will this demand response vary across destinations based linearly on distance between origin and destination? How will this change in aviation-based tourism affect tourism income, GDP and the welfare of women in APEC economies?

12. Modelling Approach Price of CO 2  review policy status and forecasts in literature Distances between economies  Main airport in each economy  Great circle distance from airport to airport Tourism arrivals  review and ‘interpolate’ available data Relationship between distance and fuel cost as share of op. costs  review literature on fuel = f(distance) and op. cost = f(distance)  scenario-based with fuel prices able to be chosen by user Physical relationship between fuel use, distance and CO 2

13. Modelling Aproach cont. Demand response  review available elasticity estimates Assume that prices in aviation industry reflect long-term avg. costs Apply elasticities to % change in price from aviation  yields % change and ‘scenario’ level of tourism arrivals Apply shares of GDP accounted for by tourism  yields % impact on national incomes of APEC economies  flow-on impacts for women examined

14. Preliminary Results

16. For realistic carbon prices (less than US$50/Tonne) GDP cost from reduced international aviation tourism income is less than 1 percentage point (most countries less than 0.5 %pts) Does not model benefits from avoided climate change that will mitigate this figure to some extent Demand for long-haul tourism aviation not particularly responsive to prices  visitor numbers not expected to be much reduced Very high carbon prices (over $US100/Tonne) More significant tourism number reductions GDP costs more likely to exceed 1 %pt for some economies

17. Future Directions Case studies Impact of including stopovers and indirect routing International visitors for economies with significant land-border crossings (e.g. Malaysia-Singapore) Gender factors in the Indonesian tourism industry Draft/Final report Draft circulated early October 2009 for WP comment Feedback through Australian Dept Resources, Energy & Tourism Report will include full results, sensitivity analysis and suggestions for model extensions.