Memorandum from the Aviation Environment
Federation
The AEF welcomes the Committee's timely investigation
into the issue of aviation's environmental costs and we also submit
some background documents the Committee might find useful. These
are referred to in the text. We have tried to answer the Committee's
specific questions as briefly and factually as possible.
1. Can the full environmental costs of aviation
be identified? What are the main issues of principle and methodological
difficulties in attempting to do so? Can remote but potentially
catastrophic risks be properly reflected in such an approach?
The range of aviation's environmental impacts
can be identified. These are: climate change; local air quality
and noise; health impacts; safety (accidents/third party risk);
land take; habitat (bio-diversity), heritage and tranquillity
losses; property devaluation; congestion; and an element of up/downstream
processes. It is possible to arrive at reasonable cost estimates
of these impacts. The best study we have found that tries to comprehensively
assess these factors and apportion costs accordingly is the INFRAS/IWW
study "External Costs of Transport", March 2000. This
can be located at www.infras.ch. See also the CE Delft study "Economic
incentives to mitigate greenhouse gas emissions from air transport
in Europe" at www.cedelft.nl
The INFRAS/IWW estimate for the external costs
of UK air transport presently unaccounted for and unpaid, is about
44 euros (£28.39) per 1,000 passenger kilometres. So, for
instance, on a return flight from Luton to Glasgow each passenger
should pay an additional £28 for the external costs of their
environmental impacts. We believe these figures may be on the
low side.
This study also ranks the external costs of
different modes of transport and provides an important contextual
framework for sustainable mobility policy development, ie the
transfer of short haul air to rail. The main practical issue is
reaching agreement on the real costs of each impact.
We feel that an assessment of catastrophic risk
can reasonably be made—take for instance, DEFRA's long term
assessments of climate change. Over this coming summer, we will
be asking re-insurance companies for their views on catastrophic
climate change risk/cost factors and also whether transport companies
using fossil fuels might face increased insurance premiums and
possible legal liability claims in the future because of their
easily identified contribution to climate change.
2. How comprehensive and accurate are the
environmental costs included in Aviation and the Environment:
Using Economic Instruments, and in the Department for Transport's
consultation The Future Development of Air Transport in the United
Kingdom.
Not very, but they are an acceptable start.
We find it somewhat confusing that both Ministries seem to believe
that the costs of air transport in the UK will continue to keep
falling over the next 30 years and that they appear to dismiss
the impact of internalising the sector's costs on demand. The
DfT states that in its view, external costs will add 10% to ticket
prices over this period and that for every 1% increase in ticket
prices there will be a corresponding 1% fall in demand, with a
minimal effect on demand. This may be because the elasticity of
ticket prices means only a very high increase will affect demand.
Over 30 years, a 10% rise in ticket prices would unfortunately
in our view have precisely zero impact on growth.
3. Has the Government defined the correct
environmental policy objective for aviation—that, where
appropriate, the industry should pay for its environmental costs?
How does this relate to the Government's primary objective for
airports—to maximize the significant social and economic
benefits, whilst seeking to minimize the environmental impacts?
No. The correct environmental policy objective
for air transport is to set realistic targets to control and reduce
the sector's environmental impacts. An appropriate level of taxation,
whether internalising external costs and/or an alternative policy
of equitable tax treatment for aviation (see the AEF paper "The
Hidden Cost of Flying")[6]should
form part of such a policy.
The DfT's policy objectives are "predict
and provide", pure and simple. "Mitigating" aviation's
environmental impacts, is a million miles away from controlling
and reducing them.
We would like to point that if this sector pays
more tax, in whatever form, that income to the Treasury creates
and sustains economic activity and employment elsewhere in the
economy. Similarly, if the UK population finds its future consumption
of air transport limited by demand management, then those very
same consumers will spend that slice of their disposable income
previously allocated to flying elsewhere in the economy too, also
adding to economic activity and sustaining the UK economy. And
because air transport is highly capital intensive, money spent
elsewhere in the wider economy might create even more jobs!
Whilst we welcome the joint DfT/HMT consultation
and policy development exercise, it must not be used as an excuse
to add a very small sum to ticket prices, then claim externalities
have been met, allowing and indeed facilitating "business
as usual".
We would also like to state that the current
Air Passenger Duty is emphatically NOT an environmental
tax in any way, size, shape or form. It is simply a tax placed
on a severely under-taxed sector of the economy as a revenue raiser.
4. Would the incorporation of environmental
costs be sufficient to achieve sustainability in the air transport
sector? What additional measures, if any, would need to be taken
if this were to have little impact on rates of growth? To what
extent is there a tension between the policy of incorporating
environmental costs (especially of carbon) and the Government's
long-term objective of a 60% reduction in CO2 by 2050?
Probably not. Our recent submission to the UK
Parliamentary Transport Committee outlined our comprehensive views
on how best to reduce and control aviation's impacts. Sadly, we
are of the view that this sector is already environmentally unsustainable.
In practice, a range of approaches are required
to develop an effective strategy to reduce aviation's environmental
impact, although an emphasis on regulatory control will always
be required. Voluntary measures can often be introduced quickly
and can encourage companies to go beyond any legal requirements,
but ultimately it is not in their shareholders interest to voluntarily
impose measures that will restrict their business.
Experience also suggests that many voluntary,
and even same statutory, agreements only remain in force while
an airport is able to comply with them. As soon as an agreement
starts to hinder the day-to-day operation of an airport, or requires
any significant growth restricting action, many agreements are
amended, renegotiated or ignored.
Economic instruments are important for several
reasons: in addition to being used as a demand management tool,
they may be applied, as already discussed, to internalise the
external environmental and social costs of aviation; create an
incentive to operate clean and quiet aircraft; help other modes
of transport such as high speed rail to compete more effectively;
and to stimulate R&D projects. As noted in the Arthur D Little
report for the current DfT consultation process, although new
technologies are a possibility, they may require economic or regulatory
measures to create the necessary "market" that makes
it commercially viable for manufacturers to go from the design
stage to production. Without these measures acting as a driver,
there is no incentive for airlines to go beyond minimum environmental
standards—a cynic might say undoubtedly so, as Transport
Ministries, Civil Aviation Authorities, regulatory bodies such
as ICAO and airlines and airports regularly collude to prevent
the industry "suffer" what in their collective view
might be "unnecessary" cost burdens.
However, since it is often difficult to predict
how the market will react to the introduction of environmental
levies, there is no guarantee that economic instruments will deliver
a given target. For this reason, the Government will always need
to provide regulatory safeguards to protect residents and the
global environment from unacceptable levels of noise, air pollution
and so on.
Hence, regulation should establish limits, while
other measures should be used to encourage best practice. Without
local or global limits, the industry will probably continue to
become more efficient through some supply-side improvements but
its cumulative environmental impacts will continue to grow.
In our 10-page submission to your sister Committee
we also covered the obvious tension that exists around climate
change scenarios. We are not big fans of emissions trading schemes
as currently envisaged for this sector. We include the relevant
section of our Transport Committee submission below to complete
our answer to Question 4.
Climate change studies, and commentaries on
the effects of air transport emissions on the global atmosphere,
stem from the seminal 1999 UNIPCC Special Report, "Aviation
and the Global Atmosphere". There is no doubt that the entire
range of emissions and consequent greenhouse effects from flight
operations are a major and growing source of climate change. We
would make three observations at this point:
— The climate change contribution from
aircraft emissions is more than CO2 alone and all impacts should
be considered when developing control strategies.
— The present enthusiasm from industry
and policymakers for emissions trading solutions is speculative
and misplaced.
— The industry is unfortunately still
engaged in wilful attempts to "deny, minimise and delay"
the science of climate change.
The DfT, to its credit, has realised that these
global impacts are a significant problem. The regional study documents
forecast the likely range of both internal and international CO2
emission increases but unfortunately omitted a base case for comparisons
to be made. We are glad that following our prompting, DfT did
commission its consultants, Halcrow, to identify and publish this
baseline.
The table below puts all the UK aviation CO2
emission forecasts in the context of current national reduction
targets for this gas.
The UK CO2 and Aviation CO2 Emissions Scenario
Total UK CO2 emissions in 1990
| 603 million tonnes (mt) |
| (source: Netcen) | |
| Reduction required to meet Kyoto target by 2012 (5.2% below 1990 levels)
| 31.4 mt |
Reduction required to meet UK voluntary target under "Kyoto Plus"
by 2012 (12% below 1990 levels)
| 72.4 mt |
UK Aviation
(a) 1990
| |
Total UK aviation CO2 emissions in 1990 from bunker fuels
(source: Netcen)
| 14.8 mt |
Estimated total UK aviation CO2 emissions including domestic in 1990
(approximately 4%)
| 15.4 mt |
(b) 2000 |
|
Total UK aviation CO2 emissions including domestic in 2000
| 33.4 mt |
| (source: Halcrow. Netcen is 31.8 mt) |
|
| (c) 2030 | |
Total UK aviation CO2 emissions including domestic in 2030
| 66.99 mt—low traffic growth |
| (source: Halcrow) | 76.5 mt—high traffic growth
|
| |
Between 1990 and 2030, UK CO2 aviation emissions are
forecast to increase by up to 60.1 million tonnes. This nearly
offsets (83%) the total reduction in CO2 emissions required
to meet the Government's commitment, treaty plus voluntary, under
the Kyoto Protocol.
This level of emissions growth is unsustainable. Any workable
emissions trading scheme would have to identify savings elsewhere
in our economy, or further afield, at least in the region of the
60mtc UK "aviation excess", which would be allocated
to and then purchased at an appropriate cost within any trading
scheme. And an "open" scheme would pit aviation against
other industrial sectors that may also want to buy growth through
this mechanism. Environmental taxation in whatever form should,
in our view, aim to achieve a significant reduction in air transport's
forecast contribution to climate change, not be a means of paying
a low price to ensure "business as usual".
When we say at least in the previous paragraph, this
is because of the complications involved in establishing an emissions
trading scheme for this, and indeed any other, sector:
— Any scheme would have to be on an agreed "cap
& trade" basis ie an absolute base level of emissions
is set and then the excess traded from verifiable sources but
— The emissions "bank" can only come from
reductions over and above Kyoto and any subsequent international
or voluntary targets to avoid double counting—it is extremely
difficult to avoid what is termed "hot air" (non-existent
savings) creeping into schemes which essentially are variants
on a "robbing Peter to pay Paul" scenario.
— As yet there is no agreement on how to allocate
international emissions from air transport.
— Aviation emissions are not exempt from the Kyoto
agreement: the sector's regulatory body ICAO, through its CAEP
entity, and the UNFCCC SBSTA (technical) and COP (negotiating)
bodies have been charged with developing an appropriate allocation
system for international emissions and an emissions trading scheme
as part of a range of market-based options to control and reduce
emissions from the sector—progress is painfully slow.
— Our research into the claims made for existing
emission trading schemes have left us very, very sceptical about
their real effectiveness,
And on this last point, the Committee might like to know
our views on the DEFRA-managed UK Emissions Trading scheme, which
began in March 2002.
The UK's flag carrier, British Airways, became the first
airline in the world to take part in an emissions trading scheme
with the aim of stabilising CO2 emissions. In doing so, it will
qualify for Government grants worth more than £6.5 million.
The airline has promised to reduce CO2 emissions from its domestic
flights and premises by 125,000 tonnes (out of a total of approximately
17 million tonnes that the company produces each year right
now!). BA has reduced its global CO2 emissions by over 500,000
tonnes in the past two years. But this has been achieved largely
through cutting loss-making flights and downsizing its workforce
to reduce operating costs. BA claims to be making savings by moving
to newer more fuel-efficient aircraft. The airline is also shifting
parts of its older, smaller regional fleet to be operated by other
airlines.
So the mix of CO2 emissions BA is currently trading comes
from some small energy efficiency gains but mainly from reduced
economic activity due to route cuts; transferring some emissions
to other airlines outside the scheme by giving them some of its
internal UK routes and planes; and loss of market share to low-cost
carriers who are outside the scheme as well.
Even if BA fails to reach its reduction targets, and assuming
a market price of £5/tCO2e (a high estimate) it would need
to buy emission credits worth about £1.9 million over the
scheme's five years. But this figure is dwarfed by the £6.67
million incentive BA will receive from the Government. It is plainly
wrong that less successful companies should be receiving payouts
of this magnitude largely for "virtual" savings. And
set against the future growth in UK air transport CO2 emissions,
of which BA will have its fair—and massively increased—share,
the short term nature of such schemes are exposed plainly and
simply as climate fraud. This is a most perverse reversal of the
"polluter pays" principle!
[The previous paragraphs are based on the article Hot
air blows gaping hole in emissions trading scheme from The
Ends Report, March 2002. www.endsreport.com ]
5. Given the international context, what practical
options for incorporating environmental costs are really available
to the Treasury and the Department for Transport, and how should
any revenues be used?
The Government should aim to internalise aviation's external
costs on all internal UK air transport in the 2004 Budget. The
forthcoming 2005 UK Presidency of the European Union provides
a real opportunity for the Government to aim for a Europe-wide
fair taxation policy for air transport. The Amsterdam Treaty commits
European Governments to internalise the external costs of transport
modes and recent Commission policy proposals commit Europe to
taking unilateral action if discussion at ICAO fails to produce
meaningful results on how best to deal with aviation's climate
change impacts. A UK-led Europe wide diplomatic and technical
initiative on fair taxation/internalising external costs should
be spelt out with targets and a timetable in this autumn's White
Paper.
Here at home, DEFRA and the Environment Agency should play
a larger statutory role in developing policies to control and
reduce the sector's impacts. The DfT should be made to respond
formally to the Royal Commission on Environmental Pollution's
various reports since 1994 concerning aviation.
The sums for the alternative "equal tax" route
are as follows:
Taxing aviation fuel at the same rate as motor fuel (45.8
p per litre); adding VAT at 17.5% to air travel; abolishing duty
free on all flights; and abolishing APD would amount to £9.2
billion at 2002 levels. These changes could be phased in from
2005-25 and would allow any Government to spend more money on
a range of public services as it sees fit.
Whether externalities are internalised or aviation is taxed
just like any other business, the most important starting point
is to set environmental limits within which the air transport
sector must operate and develop a menu of policy options to achieve
those targets. Large decreases in aviation's impacts can only
be achieved by a combination of methods including large increases
in ticket prices to dampen demand.
May 2003
6
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