• Executive summary - key points

1. Galapagos at risk
2. Galapagos is undergoing constant change
3. Changing tourism markets
4. Changing tour operators
5. Local benefits
6. Financing in Galapagos
7. Fishing and differences among the Islands
8. New local operators in tourism
9. Impacts of tourism
10. Leadership and governance
11. Subsidies and incentives in Galapagos
12. Conclusion

• References

11．Subsidies and incentives in Galapagos

　A number of subsidies and incentives that were applied historically in Galapagos and continue today tend to generate individual benefits or benefits for companies, instead of collective benefits (Kerr, 2004; Taylor, 2002). These include subsidies on air travel, energy and fuel, and public services. There are also price distortions in the form of inadequate regulation and fiscal policies in tourism and fishing. These incentives and subsidies result in economic inefficiencies, hide externalities^*4and distort markets.

　Subsidies were initially applied to ensure a minimum standard of living for a relatively small population and to compensate residents for the isolation and restrictions inherent with living in a protected area. Costs of public services are higher in remote areas due to higher transportation costs and because it is difficult to establish economies of scale. Continuing to promote and apply these historical subsidies makes Galapagos more attractive to potential immigrants and means that the cost of living is lower than the real cost of services provided.

　Few studies have estimated the levels of existing subsidies. Kerr, Cardenas et al. (2004) estimate that, in 2000, the full value of subsidies (air travel, transportation of fuel, electricity and public services) was $14.4M. Jacome (2007) estimates that in 2005 annual subsidies to the electricity sector totaled $4.83M and those for fossil fuels totaled $13M. A complete study of the levels and impacts of subsidies and incentives is needed in order to establish more effective fiscal policies.

　*4)Externalities are understood as a negative consequences of actions or individual decisions on collective benefits over the long term