Emma writes*
The specular 2021 Formula 1 season has resulted in skyrocketing popularity. The final race of the season in Abu Dhabi had 29 percent more viewers than the year before (Ruiz, 2022). Many cities want to benefit from F1 popularity by hosting a Grand Prix, which, local stakeholders claim, will boost their economies (Storm, 2019).
Hosting a Grand Prix costs a lot of public money (All Things F1, 2022). Is that spending worth it, in terms of boosting the local economy? A Formula 1 Grand Prix takes at least three days involving practice sessions, a qualifying session and many media events. The city also needs a suitable circuit, either a street circuit or permanent circuit. A permanent circuit costs $270 million on average but Abu Dhabi’s Yas Marina Circuit cost $1 billion. Street circuits are cheaper and quicker to construct, but their annual costs for converting back and forth are higher (Prydderch, 2022). A 2017 study by Forbes listed other costs for staffing, grandstands, barriers, buildings, insurance, and the hosting fee. In all, Forbes estimates that hosting a Grand Prix costs $1 billion per year.
The race promotor (often is the local government) pays these costs (All Things F1, 2022). Local governments argue that an F1 event will boost tourism, promote the city and boost the local economy (Storm et al., 2020). Ticket sales of (up to) $33 million only cover a fraction of costs. A Grand Prix also generates revenue for local businesses as local and foreign spectators spend money on hotels, food, drinks, and transportation (Remenyik & Molnar, 2017). The Grand Prix in Austin, Texas, increased local receipts by a three-year total $2.8 billion from 2012 to 2015 (Storm et al., 2020), which didn’t cover estimated annual costs of $1 billion. Perhaps a “multiplier effect” added to benefits by that’s hard to measure.
Bottom line: Formula 1 Races can benefit the local economy in terms of monetary costs and benefits, but maybe not.
* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).
Hi Emma!
What might be interesting to look into are the costs of CO2/nitrogen compensation, which is often not compensated at all. Not just the CO2 of the races themselves, but flying the competitors and their teams all over the world have a big CO2 impact as well (https://flowracers.com/blog/is-f1-bad-for-environment/#:~:text=In%202019%20Formula%201%20released,of%20the%20sport's%20total%20emissions). Moreover, some of these races are organized in protected nature areas, and disturb the area immensly. Why do these races get permission while e.g. concerts or other events are not even considered?
I know that the environmental organisation ‘Mobilisation for the Environment’ (MOB) tried to have the F1 in Zandvoort last year to be forbidden, but (sadly) they failed (https://mobilisation.nl/nl/). Courts did order for a re-evaluation of the environmental advisors of the F1 in Zandvoort (https://stab.nl/2022/05/17/wnb-vergunning-noord-holland/).
Hope this helps and goodluck!
Hi Marthe,
Thank you for your comment!
Formula 1 definitely is very environmentally unfriendly. The emissions caused by this sport are incredibly high indeed, especially when including all the transport. I will definitely mention this in my paper, the link you provided will help me. Thank you!
Why such polluting events get permits is also a bit unclear to me. I think the large sums of money involved and the high profile of the sport could explain this a little bit. In the case of the Dutch Grand Prix, I suspect that the involvement of Prince Bernhard jr. helped the event to get permission. However, this is all speculation of course.