Select Committee on Environmental Audit Minutes of Evidence

Supplementary memorandum from the Air Transport—Greener By Design Group

  This submission seeks to clarify a few points arising from the evidence session on 4 May 2003:

  1.  It was suggested in the Committee's first question to us that GBD does not consider CO2 to be a significant factor. In fact, our main submission (paragraph 7) states that CO2 accounts for less than half of the contribution of aviation to climate change. We made this statement because regulatory policy has tended to concentrate on noise reduction and external cost calculations have focused on carbon, with less emphasis on the important contributors of NOx and water vapour. Given that these pollutants tend to trade off against each other (for example, as we mentioned in evidence, aero engines carry a weight, and therefore a fuel burn/CO2 penalty because of the performance penalties arising from the need to comply with noise limits, including use of fan diameters that are above optimum for efficiency, weight and reduced aerodynamic efficiency from noise attenuation materials and mixing devices and component weight and efficiency compromises to avoid resonant frequencies) we have concluded that, depending on the scientific evidence on the relative effects of NOx, CO2 and water vapour, it may be beneficial in terms of overall climate change impact to accept a small increase in CO2 emission if the operational and technological changes that cause this also result in an overall reduction in impact.

  2.  It is understandable that there may have been some confusion in the session over variance between witnesses' assessment of external costs and those recently produced by DfT/HMT. Our submission (paragraph 7) referred to aviation accounting for 0.5% of the UK's CO2 inventory "in line with the allocation of domestic aviation emissions to States" inventories by UNFCCC. This figure, sourced from official statistics, was sent to the Committee before the DfT/HMT's revision of its Pearce & Pearce external cost estimates was published. The 0.5% figure is based on all flights between airports in the UK. The UK Greenhouse Gas Inventory for 2000 shows domestic aviation CO2 emissions of 2.9 million tonnes (ie 0.5% of the UK total) and for international of 28.9 million tonnes. While this latter figure could be misinterpreted by some as accounting for around 5% of the national inventory, most of it is attributable to fuel burnt outside the UK.

  3.  There is some concern that because the DfT/HMT work has, on DfT's own admission, been based on very conservative assumptions, its conclusions may mislead. For example, the work did not have access to market forecasts for retirement of older aircraft, the impact of fuel saving programmes or improvements in air traffic control efficiency. As BA's submission has pointed out, making allowance for achieved and projected fuel efficiency gains may cut the estimated contribution of aviation to global warming in 2030 by a third. To a fair extent, therefore, the scope for a possible 42% improvement in fuel efficiency (34% through fleet replacement—Rolls Royce; 2-3% through "clean flying"—ICAO; and 6%+ through ATC improvement— IPCC) over the 1990-2012 Kyoto period has not been considered.

  4.  While we are clear that statements to the effect that aviation's projected environmental impact will be "massive" are exaggerated, we did not wish to give the Committee the impression that we have underplayed the likely climate change implications. While new technology may significantly mitigate those implications, we agree with other witnesses that demand growth will make it difficult to reduce gross emissions. For this reason, we have stressed the need for a policy decision to be taken (probably, for reasons of competitiveness, on an international basis) on the balance that needs to be struck between impacts and economic and social benefits—in other words, should a policy be pursued that reduces volume and therefore, in all probability, excludes certain sectors from access to air travel? We find the conclusion of the recent Royal Commission report that "by 2050 aviation will be contributing at least 6% of the total radiative forcing consistent with the necessary stabilisation of climate. A safer working hypothesis is that it will be in the range 6-10%", a reasonable basis for ongoing discussion. However, GBD believes that the IPCC report still provides the best estimate of future CO2 emissions and uncertainties: "For the reference scenario this emission (CO2) increases three fold by 2050 to 0.4GtC/year or 3% of the total anthropogenic carbon dioxide emissions relative to the mid range IPCC emission scenarios (IS92a). For the range of scenarios the range of increase in carbon dioxide emissions to 2050 would be 1.6 to 10 times the value in 1992". This means, to take a reasonable mid point, that the current 3% contribution of global aviation to global CO2 may rise to around 5% by 2050.

  5.  We pointed out that none of the estimates of growth has factored in potential supply side limitations such as availability of runway capacity, aircraft and fuel, or indeed of influences such as SARS and 11 September which have led to an 18.5% reduction in year on year traffic for IATA's member airlines. Nor does it take into account strategies that may be brought into place in the interim such as emissions trading, which is under active investigation by ICAO.

  6.  It is important that the Committee distinguishes between classical and applied economics in considering whether economic instruments will provide an incentive to improve environmental performance (the critical indicator, in our view, since the mere covering of external costs may not generate any benefit other than to the Exchequer). While textbook theory may suggest that fiscal or other economic penalties will encourage greater efficiency, the particular circumstances of the UK aviation sector indicate that taxes and charges are unlikely to provide an incentive unless set at penal levels. As we mentioned, the UK fleet, at just under eight years old on average, is one of the youngest in the world (the US average age is 12 years, for example). It already meets the age target proposed by the European Commission's consultants in considering charge-based incentives to accelerate replacement of older aircraft. Colin Beesley of Rolls-Royce stated that the projected UK fleet in 2012 will be near-optimal in its performance, and the reality of the market is that the cost of further acceleration in replacement to bridge the 1-2% gap (as assessed by Rolls) between projected and potential performance is always likely to be greater than any incentive-based charge that might be imposed. Similarly, as DfT's assessment appears to acknowledge, the scale of the tax-induced price increase required to trigger a level of demand reduction needed to force consolidation of services would be very high.

  7.  It was suggested by witnesses that the application of economic instruments could serve to discourage overseas travel and therefore reduce the gap between foreign visitors' expenditure in the UK and UK residents' expenditure overseas. However, evidence from the BTA in BATA's submission to the current Parliamentary Office of Science and Technology study on aviation and the environment should be noted: "Restricting capacity will have a greater impact on Britain's inbound tourism than on outbound tourism. This is because British travellers have a lower sensitivity (the elasticity is approximately -0.9) to increases in cost when travelling overseas than overseas visitors have for visiting Britain (elasticity of -1.3). As a result, if aviation capacity is restricted, British outbound travellers will out-compete inbound travellers for available seats. This effect will be exacerbated by overseas travellers being able to easily switch to lower cost destinations, whereas British travellers are a captive market who have to fly to reach all long-haul, and many short-haul, destinations. The net result of this will be a widening of the tourism deficit". The ONS statistics that suggest a deficit only cover expenditure by travellers and include travel other than by air. They do not include the economic contribution of airlines and the outbound travel industry in the UK (employment, taxes, payments to/employment generated by suppliers etc). The Transport Select Committee asked charter airlines to calculate this for their own sector and the result was contributions that more than balanced overseas expenditure attributable to charter passengers (it became a surplus of almost £500 million).

  8.  Finally, we must draw the Committee's attention to some of the points overlooked in the frequent claims made on all sides about "subsidies" paid to aviation:

    —  No commercial passenger transport mode is subject to VAT on fares.

    —  Total central and local government expenditure on transport over the last four years (to 2002) was £35,900 million, of which only £199 million was attributable to aviation (NATS and Highlands and Islands PSO services).

    —  Only aviation among UK commercial passenger transport modes is subject to a passenger tax.

    —  Rail pays only the 3p/litre red diesel rate and is exempt from the Climate Change Levy.

    —  Buses receive a Fuel Duty rebate.

June 2003

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