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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