Tourism

Tourism investment from government should focus on business motivations for sustainable management as key targets. Incentives should be consistent with both environmental protection and value added creation. Market trends and competitive advantages need to be mutually reinforced. In this regard, policy coherence is a necessary condition. From a national perspective, sustainable tourism policy should address market failures (including externalities) in a consistent manner, avoiding the creation of additional distortions through government interventions. Like markets, governments can fail. Selected interventions must promote a more efficient allocation of goods and resources than would occur in the absence of government action. Social policy should address compensation and benefits to workers, access to improved opportunities, human resource development, and value chain integration strategies. In the case of sustainable tourism policies, more coherence in terms of targets (location investments, development of specific areas for destination, national and local infrastructure investments), management (institutional coordination, impact analysis studies) and incentives (effectiveness, cost-benefit, and adequacy) is required to maintain sound competitive advantages. Where possible, the use of incentives should be based on market instruments rather than command and control measures. Some forms of market failures deserve special attention, particularly those that prevent learning how new sustainable tourism businesses can be produced profitably (self-discovery externalities), impede simultaneous and integrated investments which decentralised markets cannot coordinate (coordination externalities), and omit public inputs (legislation, accreditation, transport and other infrastructure, for instance).

Enabling conditions in fiscal and government investment policies 1. In the case of tourism, policy intervention towards investment sustainability can be justified as far as enabling conditions promote the sustainable use of natural resources and therefore create positive externalities for the society. Alternative, less productive uses of natural resources (i.e. unsustainable agriculture) or possible depletion activities (i.e. housing construction) could be compensated (for their opportunity cost) with policy instruments that increase profitability for sustainable tourism businesses and generate positive environmental externalities. Free- riding (non-compliance by companies) should be avoided with an effective performance monitoring and impact evaluation mechanism. There is a need to conduct periodical evaluations and impact analysis of tourism incentives, from an economic, social and environmental perspective.

2. Defining and committing to critical government investments

in the green enabling environment

plays a central role in determining private sector investment and direction. Government investments in protected areas, cultural assets, water, waste management, sanitation, transportation and energy infrastructure investments play a critical role in private sector investment decisions toward greener outcomes. Investments in public infrastructure related to tourism or investments in private tourism businesses should estimate their social and environmental impacts and adopt economic measures to compensate and offset unavoidable impacts.

3. Appropriate taxation and subsidy policies should be framed to encourage investment in sustainable tourism activities and discourage unsustainable tourism. Use of taxation is often resorted to for keeping developments in limits (for instance, taxes on use of resources and services at the destinations) and controlling the specific inputs and outputs (like effluent charges and waste services).

4. Tax concessions and subsidies can be used to encourage green investment at the destinations and facilities. Subsidies can be given on purchase of equipment or technology that reduces waste, encourages energy and water efficiency, or the conservation of biodiversity (payments for environmental services) and the strengthening of linkages with local businesses and community organisations.

5. Establish clear price signals to orient investment and consumption. The price for such public goods as water production and supply, electricity and waste management send important signals to the private sector. Governments frequently price these goods at very low levels (frequently even free) to encourage investment, only to find that low prices encourage waste, place a drain on communities and make it very costly (financially and politically) to raise prices.

4.4 Financing green tourism investments

Environmental and social investments are relatively new, and remain outside the mainstream of financial markets (particularly in developing countries). In many cases, barriers are based on misperceptions or lack of knowledge. For example, for many green investments, payback periods and amounts are not clearly established (due to limited experience with them), creating uncertainty for banks or other investors that can jeopardise financing. Also, the return on many green investments includes easily measurable components (such as energy savings), combined with more difficult

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