Nexus Between Tourism and Environment in Bhutan

Tourism is one of the largest foreign exchange earning industries in the Bhutan now. The number of foreign tourist inflow in the country has increased significantly in recent years, and is expected to increase more in the coming years as well, as the government gives more priority on the sector. However, its rapid expansion tends to have some detrimental effects on environment. To balance the two conflicting issues, the tourism industry is controlled by a pricing policy- High Value Low Volume (HVLV). With the help of primary data collected from 61 foreign tourists and secondary data of 26 years, using OLS in the first step, elasticity of tourism revenue with respect to tourist flow is measured and in the second step, using semi-log model, growth rate of tourism revenue and three environmental variables (CO2, PM10 and NRR) are measured. Compared to the stock of environment, tourist inflow in the country has not reached threshold level till now, and the policy of HVLV is found to be effective in balancing revenue and environment in the country.