IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group II: Impacts, Adaptation and Vulnerability

16.4.6 Economic, financial and socio-cultural impacts

Small island states have special economic characteristics which have been documented in several reports (Atkins et al., 2000; ADB, 2004; Briguglio and Kisanga, 2004; Grynberg and Remy, 2004). Small economies are generally more exposed to external shocks, such as extreme events and climate change, than larger countries, because many of them rely on one or a few economic activities such as tourism or fisheries. Recent conflicts in the Gulf region have, for example, affected tourism arrivals in the Maldives and the Seychelles; while internal conflicts associated with coups have had similar effects on the tourism industry in Fiji (Becken, 2004). In the Caribbean, hurricanes cause loss of life, property damage and destruction, and economic losses running into millions of dollars (ECLAC, 2002; OECS, 2004). The reality of island vulnerability is powerfully demonstrated by the near-total devastation experienced on the Caribbean island of Grenada when Hurricane Ivan made landfall in September 2004. Damage assessments indicate that, in real terms, the country’s socio-economic development has been set back at least a decade by this single event that lasted for only a few hours (see Box 16.3).

Box 16.3. Grenada and Hurricane Ivan

Hurricane Ivan struck Grenada on 7 September 2004, as a category 4 system on the Saffir-Simpson scale. Sustained winds reached 140 mph, with gusts exceeding 160 mph. An official OECS/UN-ECLAC Assessment reported the following:

  • 28 people killed,
  • overall damages calculated at twice the current GDP,
  • 90% of housing stock damaged,
  • 90% of guest rooms in the tourism sector damaged or destroyed, equivalent to approximately 29% GDP,
  • losses in telecommunications equivalent to 13% GDP,
  • damage to schools and education infrastructure equivalent to 20% GDP,
  • losses in agricultural sector equivalent to 10% GDP. The two main crops, nutmeg and cocoa, which have
  • long gestation periods, will not contribute to GDP or earn foreign exchange for the next 10 years,
  • damage to electricity installations totalling 9% GDP,
  • heavy damage to eco-tourism and cultural heritage sites, resulting in 60% job losses in the sub-sector,
  • prior to Hurricane Ivan, Grenada was on course to experience an economic growth rate of approximately 5.7% per annum but negative growth of around -1.4% per annum is now forecast.

Source: OECS (2004).

Tourism is a major economic sector in many small islands, and its importance is increasing. Since their economies depend so highly on tourism, the impacts of climate change on tourism resources in small islands will have significant effects, both direct and indirect (Bigano et al., 2005; Viner, 2006). Sea-level rise and increased sea water temperatures are projected to accelerate beach erosion, cause degradation of natural coastal defences such as mangroves and coral reefs, and result in the loss of cultural heritage on coasts affected by inundation and flooding. These impacts will in turn reduce attractions for coastal tourism. For example, the sustainability of island tourism resorts in Malaysia is expected to be compromised by rising sea level, beach erosion and saline contamination of coastal wells, a major source of water supply for island resorts (Tan and Teh, 2001). Shortage of water and increased risk of vector-borne diseases may steer tourists away from small islands, while warmer climates in the higher-latitude countries may also result in a reduction in the number of people who want to visit small islands in the tropical and sub-tropical regions.

Tourism in small island states is also vulnerable to climate change through extreme events and sea-level rise leading to transport and communication interruption. In a study of tourist resorts in Fiji, Becken (2005) suggested that many operators already prepare for climate-related events, and therefore are adapting to potential impacts from climate change. She also concludes that reducing greenhouse gas emissions from tourist facilities is not important to operators; however, decreasing energy costs is practised for economic reasons.

Climate change may also affect important environmental components of holiday destinations, which could have repercussions for tourism-dependent economies. The importance of environmental attributes in determining the choice and enjoyment of tourists visiting Bonaire and Barbados, two Caribbean islands with markedly different tourism markets and infrastructure, and possible changes resulting from climate change (coral bleaching and beach erosion) have been investigated by Uyarra et al. (2005). They concluded that such changes would have significant impacts on destination selection by visitors, and that island-specific strategies, such as focusing resources on the protection of key tourist assets, may provide a means of reducing the environmental impacts and economic costs of climate change. Equally, the attractions of ‘cold water islands’ (e.g., the Falklands, Prince Edward Island, Baffin, Banks and Lulea) could be compromised, as these destinations seek to expand their tourism sectors (Baldacchino, 2006).