Ecotourism and poverty

This is a hard problem to answer well, but its certainly an interesting question.

Quantifying causal mechanisms to determine how protected areas affect poverty through changes in ecosystem services and infrastructure
Paul J. Ferraroa and Merlin M. Hanauer

Abstract: To develop effective environmental policies, we must understand the mechanisms through which the policies affect social and envi- ronmental outcomes. Unfortunately, empirical evidence about these mechanisms is limited, and little guidance for quantifying them exists. We develop an approach to quantifying the mechanisms through which protected areas affect poverty. We focus on three mechanisms: changes in tourism and recreational services; changes in infrastructure in the form of road networks, health clinics, and schools; and changes in regulating and provisioning ecosystem services and foregone production activities that arise from land- use restrictions. The contributions of ecotourism and other ecosys- tem services to poverty alleviation in the context of a real environ- mental program have not yet been empirically estimated. Nearly two-thirds of the poverty reduction associated with the establish- ment of Costa Rican protected areas is causally attributable to opportunities afforded by tourism. Although protected areas reduced deforestation and increased regrowth, these land cover changes neither reduced nor exacerbated poverty, on average. Protected areas did not, on average, affect our measures of in- frastructure and thus did not contribute to poverty reduction through this mechanism. We attribute the remaining poverty reduction to unobserved dimensions of our mechanisms or to other mecha- nisms. Our study empirically estimates previously unidentified contributions of ecotourism and other ecosystem services to pov- erty alleviation in the context of a real environmental program. We demonstrate that, with existing data and appropriate empiri- cal methods, conservation scientists and policymakers can begin to elucidate the mechanisms through which ecosystem conservation programs affect human welfare.

"Adaptation and the envelope theorem"

Here's a simple, elegant and important point about the economics of climate change, but it applies to other environmental changes equally well. (I was recently at an entire conference dedicated to the economics of adaptation, and nobody mentioned this idea.)

William Nordhaus writes in a 2010 paper published in the journal Climate Change Economics (emphasis added):

Adaptation and the envelope theorem 

Including potential adaptation is beyond the scope of the current study. However, if changes in the means and higher moments of environmental parameters are small or gradual, and if agents make decisions on the basis of appropriate expectations, then omitting adaptation will have, to a first approximation, no effect on correctly measured damages. The reason is due to the “envelope theorem” of decision making. Under this result, the first-order cost of changing environmental conditions is equal to the first-order cost of adapting to those conditions. Of course, if environmental conditions change very rapidly, expectations are wildly inaccurate, or the cost of adapting is very non-linear, then second-order effects come into play. We would then need to consider adaptation costs explicitly.

What he's saying is that in the current equilibrium, individual's investment in adaptation to the current climate should be optimal (or close, given constraints/distortions).  And if it's optimal, this means the marginal benefits of additional adaptation are equal to the marginal costs.  So if we introduce a small change to the current climate such that it becomes optimal to adapt a little more, we will adapt slightly more at the current marginal cost and only reap exactly the same amount in marginal benefits (since the two are equal).  This means, we don't "win" by adapting. Instead, we just adapt slightly more at zero net benefit, so the overall social cost of the climatic shift remains unchanged.

Now, if only I could remember where I left my copy of MWG...