Climate change, tourism and water resources in the Mediterranean: A general equilibrium analysis

This paper aims to present and discuss some quantitative results obtained in assessing the economic impact of variations in tourism flows, induced by climate change, for some Mediterranean countries.

Estimates by a regional climate model are used to build a tourism climate index, which indicates the suitability of climate, in certain locations, for general outdoor activities. As climate change is expected to affect a number of variables like temperature, wind and precipitation, it will have consequences on the degree of attractiveness of touristic destinations. The authors estimate the macroeconomic consequences of changing tourism flows by means of a computable general equilibrium model.

The authors found that more incoming tourists will increase income and welfare, but this phenomenon will also induce a change in the productive structure, with a decline in agriculture and manufacturing, partially compensated by an expansion of service industries. The authors found that, in most countries, the decline in agriculture entails a lower demand for water, counteracting the additional demand for water coming from tourists and bringing about a lower water consumption overall.

A great deal of uncertainty affects, in particular: estimates of future climate conditions, especially for variables different from temperature, the relationship between climate and tourist demand, and its interaction with socio-economic variables. This also depends on the reliability of the TCI index as an indicator of climate suitability for tourism, on its application to spatially and temporally aggregated data, on the degree of responsiveness of tourism demand to variations in the TCI. Furthermore, as the authors followed here a single region approach, the authors were not able to consider in the estimates the impact of climate change on the global tourism industry. Nonetheless, the authors believe that a quantitative analysis like the one presented here is not without scope. First, it provides an order of magnitude for the impact of climate change on tourism and the national economy. Second, it allows to assess systemic and second-order effects, which are especially relevant in this context and, moreover, appear to be sufficiently robust to alternative model specifications. In other words, the value added of this study does not lie in the specific figures obtained by numerical computations, but on the broader picture emerging from the overall exercise.

To the authors' knowledge, this is the first study in which, by assessing higher tourism attractiveness into a general equilibrium framework, the effect described above is detected and highlighted.