APPENDIX 7
Memorandum submitted by the Environment
Agency
SUMMARY
1. Road transport is a major contributor
to poor air quality and to climate change. The Agency is concerned
that these vital issues are reflected in future policy on motor
fuel taxation.
2. The indications are that future gains
in both air quality and climate change would be made a lesser
cost to society if more were achieved by changes in motor transport.
3. We accept the very valid concerns of
groups affected by motor fuel taxation, and are happy to work
with them and others to improve their situation.
4. However, we are of the view that motor
fuel taxation has an important part to play in these changes,
as part of a package of measures. The main objectives will be:
— support for alternative forms of
mobility, including changed working and consumption patterns and
increased public transport; and
— encouragement for a transition to
lower, and ultimately "zero" emission vehicles.
INTRODUCTION
The principal aim of the Environment Agency
is to contribute to the national goal of sustainable development
in England and Wales, which it does through working for a better
environment for present and future generations. Its aim of sustainable
development means it is aware of the need to balance environmental
needs with social and economic concerns. One of the major themes
of the Agency's environmental strategy is to achieve major and
continuous improvement to air quality.
MOTOR FUEL
AND THE
ENVIRONMENT
The use of motor fuel has a direct detrimental
impact upon the environment, caused by the emission of combustion
products. Road transport is a major contributor to a reduction
in air quality. This is shown in graph 1, which compares the contribution
of road transport and that of other sources to the emissions of
a range of serious pollutants. Road transport has also been identified
by the DETR's draft climate change strategy as the fastest growing
source of greenhouse gas emissions[8].
Motor fuel causes an increase in human mortality
and morbidity, as many of these pollutants are toxic. The precise
impacts of road transport on the total effects of air pollution
are difficult to quantify. However the overall impacts of air
pollution, from all sources, have been recently quantified as
12-24,000 premature deaths and 14-24,000 hospital visits every
year[9].
Although these results are uncertain they do give an indication
of the effect of motor fuel use on human health.
Much work has been done to provide estimates
of the monetary value of the impact of road transport to society
and the environment, including a recent report for the EC.[10].
The 1996 estimates from Maddison, Pearce, et al are still
much quoted and respected. They estimated that the annual cost
of the impact of road transport on air quality was of the order
of £19 billion, and that on climate change, £0.1 billion.[11]
This does not include the substantial additional external costs
of motoring due to accidents or congestion, which the authors
estimated to be of the same order of magnitude as the strictly
environmental ones. These estimates are largely based on 1993
data, and therefore are in need of updating. However, they give
a credible estimate of the scale of the impact. More work needs
to be done to update these estimates and make them more robust
and transparent.
Improvements in air quality to meet the government's
National Air Quality Strategy will be met through a combined reduction
of emissions through stationary sources and transport. In order
to spread the burden fairly and cost-effectively across all sectors
of the economy, the Agency believes that emissions from road transport
must be reduced as much as possible.
The Agency welcomes both past efforts to improve
the quality of the emissions of road transport, and the Government's
proposed measures to achieve lower emissions through transport
plans such as Transport 2010[12],
which is expected to cut rising CO2 emissions by 1.6M tonnes Carbon
and voluntary schemes such as the EU "CO2 from cars"
strategy, which asks for a 25 per cent reduction in CO2 emitted
per km[13].
The Agency would wish to see these measures
being reinforced through future policy on motor fuel taxation.
ISSUES IN
MOTOR FUEL
TAXATION
Motor fuel taxation has clearly become a controversial
issue. In part this is a recognition of the fact that road transport
is a major contributor to the economy and to society, and it will
remain so. Recent changes in fuel prices, which have been caused
in part, but not by any means exclusively, by taxation, have particularly
affected the haulage sector and those in rural areas.
However the picture is a complex one, and is
certainly not a simple case of "paying too much for fuel".
In addition to the considerable evidence of the external costs
of motoring which we have presented above, the Agency notes the
more complex picture that experts in transport economics have
presented. Some of the key findings that illustrate the broader
picture are:
— The total cost of private transport,
relative to public, has actually fallen compared to incomes and
to public transport since 1974;[14]
— On balance the total cost of motoring,
including both the cost of fuel and the cost of cars, has remained
remarkably stale in the last 30 years;[15]
and
— There are substantial external costs
to the economy caused by congestion, which are undermining the
benefits that transport brings to the economy—Maddison &
Pearce estimated the costs of congestion to be over £19 billion.
However, that is not to say that some people
are not suffering relative to others. The Institute for Fiscal
Studies, for example, does conclude that increases in fuel duty
does impose a higher burden on some, including rural dwellers
and poorer car-owning households.[16]
Moreover, motor fuel taxation has not reduced
fuel use, although it has most certainly restrained the growth
in demand somewhat. The fact is that as incomes rise the demand
for private mobility increases. For example, Professor Glaister
has concluded that, to hold fuel consumption constant, the price
of fuel to consumers would have to rise by 4 per cent per annum,
in order to offset the effect of fuel use of the typical annual
real increase in income of 2.5 per cent. Therefore, on its own,
motor fuel taxation will not provide the complete answer.
POLICY SOLUTIONS
On balance the Agency remains in favour of using
tax on road fuel as an integral part of transport and environmental
policy. It applies the polluter pays principle and has some influence
on behaviour. While it is not a perfect means of internalising
some of the external costs, as fuel consumption alone is not a
perfect guide to emissions, it is nevertheless simple and effective.
Moreover, and very importantly, it can also be used to fund some
of the other changes needed (hence the Chancellor has promised
that future real increases in duty will be ploughed back into
transport).
However, clearly there are improvements that
could be made, which would not only address the real environmental
issues identified above, but which could alleviate some of the
distributional problems caused. The Agency would be happy to contribute
to these measures.
There are two aims for such a policy that we
would particularly support:
— changing consumption patterns in
a way that made mobility more sustainable; and
— changing technology to move to lower
emission, or zero emission, vehicle (ZEVs).
By changing patterns of consumption, we mean
addressing issues such as the link between fuel use and income
described above, by giving people more incentives to develop a
range of alternative ways of deriving the benefits they currently
get from road transport in general and private mobility in particular.
This could be achieved by a range of carrots and sticks, including:
— Congestion charging: this will directly
address one of the largest externalities of road transport, make
haulage more efficient, and will tend to affect those in rural
areas less and it will also have a major influence on air quality,
which is often affected adversely by congestion.
— Support for public transport (including
rail-freight): the Government's increased support is welcome,
but much has to be done to offset the relative price disadvantage
it has suffered in the past. Moreover there is considerable scope
to use further investment or tax breaks, which could turn around
the public concerns regarding its cleanliness, safety and convenience.
— Support for specific changes in behaviour:
measures such as tax breaks for car sharing, purchase of season
tickets, working from home and changed consumer behaviour, including
home shopping, would help encourage these activities, which would
not only reduce pressure on parts of the transport infrastructure,
but would also improve air quality.
The Agency also believes that Government should
use some of the revenues from motor fuel taxation to actively
pursue the introduction of clean fuel technology. European drivers
already enjoy far better fuel efficiency than their US counterparts.
This is due in part to the way that fuel taxes have played an
important role in structuring Europe's transport system. As the
French environment minister Dominique Voynet puts it "the
fact that our cars consume two times less than American cars or
that a French person consumes five times less energy in travelling
than an inhabitant of Houston is not due to chance or geography."[17].
While there have been great increases in efficiency, it is nevertheless
worrying that there has been no real decrease in the consumption
of motor fuel per km by vehicles since 1984.[18]
Future advances in combustion engine technology must be translated
into an improvement on fuel efficiency rather than performance.
Alternative fuels, such as LPG and CNG are both
more efficient and less polluting. The Agency is increasing the
number of such vehicles in its fleet. They currently enjoy a substantial
differential in fuel duty, which is welcome, but the provisions
for reducing the large costs of converting new vehicles to take
these fuels could be extended to the purchase of new vehicles
and to converting older vehicles. It may also be possible to assist
the development of networks to supply such vehicles.
ZEVs also provide improved overall efficiency
and reduced emissions, even where there fuel is derived from fossil
fuel sources. Here the technology is at an earlier stage of evolution,
so effective support might be provided by incentivising manufacturers
to target the UK for product launches.
CONCLUSIONS
To conclude, the combined approach of alternatives
to private transport, coupled with a more effective method to
persuade the public against use of private transport, together
with the use of lower emissions vehicles will maintain the mobility
of the public whilst reducing emissions. Motor fuel taxation will
play an important role in helping to achieve this balance.
October 2000
8 Draft Climate Change Programme, DETR, 2000. Back
9
Committee on the Medical Effects of Air Pollutants, Quantification
of the Medical Effects of Air Pollution in the United Kingdom,
1998. Back
10
ExternE, External Costs of Energy Conversion-Improvement of the
ExternE Methodology and Assessment of Energy Related Transport
externalities, Bickel, Schmid et al 1999. Prepared by AEA
technology for the European Commission. Back
11
Maddison, Pearce et al, The True Cost of Road Transport,
1996. Back
12
Transport 2010: The Ten Year Plan, DETR, 2000. Back
13
Draft Climate Change Programme, DETR, 2000. Back
14
Page 235, Quality of Life Counts, DETR, 1999. Back
15
Stephen Glaister, Tax disc losers, Guardian, Monday, 16
October 2000. Back
16
IFS Briefing Note 8, The Petrol Tax Debate, Zoe£ Smith,
2000. Back
17
Speaking at the French Presidency's conference on economic instruments
in the EU, Paris, 11 October 2000. Back
18
See for example, the DETR's Climate Change Draft UK programme. Back
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