Mountains of trouble: Accounting for environmental costs in local benefit-driven tourism development

Tourism and recreational home developments generate much of the economic activity at mountain destinations in Norway. At the same time, resulting land use changes pose a severe threat to ecosystem services. Cost-benefit analysis (CBA) is suitable to examine the trade-offs at the heart of many management problems but has been relatively neglected in tourism economics. Other methods, such as local economic impact analysis, are much more common. This study combines stated preference, economic impact analysis, and geospatial analysis in a comprehensive CBA framework. The CBA is performed both at the local and regional levels for small (S), medium (M), and large (L) developments in the Norefjell-Reinsjøfjell mountain area in Norway. The L-development is the preferred tourism and land management locally as market benefits from property sales and construction outweigh the local nonmarket externalities. However, considering the additional market and nonmarket impacts outside the destination, the S-development generates higher total welfare benefits. We conclude that to achieve socially optimal tourism development, nonmarket externalities inside and outside of the destination should be accounted for. The geospatial analysis demonstrates the geographical distribution of externalities