Select Committee on Environmental Audit Minutes of Evidence

Memorandum from British Airways plc


  1.  British Airways welcomes the opportunity to submit evidence to this Environmental Audit Committee inquiry. British Airways is the UK's largest airline, providing passenger and freight services from London and regional airports to destinations throughout the world. We operate a fleet of 330 aircraft to 157 destinations in 75 countries.

  2.  British Airways is the fifth largest airline in the world, measured in terms of passenger kilometres travelled, and the largest outside the United States on this measure. BA employs around 50,000 employees worldwide, 85% of whom are based in the UK, and generates annual revenues of £7.7 billion (2002-03).


  3.  British Airways seeks to promote and enhance aviation's role as a contributor to the sustainable development of global society, recognising that sustainability must strike a balance between economic, social and environmental objectives.

  4.  Aviation plays a fundamental role in global society, as it brings significant social and economic benefits. It is an important sector of the British economy, contributing 1.4% of GDP, or around £12.6 billion in 2002[1]and supporting 180,000 UK jobs directly and a further half a million indirectly. Air services to and from the UK also facilitate the export of a wide range of goods and services from all sectors of the economy, as well as encouraging inward investment. Aviation is an industry in which Britain still plays a world leading role.

  5.  British Airways has a strong record in addressing the social and environmental impacts of its operation. We have reported annually on our environmental performance since 1990 and have played an active part in national and international efforts to reduce the problems of aircraft noise and emissions—including involvement in the work of the UN International Civil Aviation Organisation (ICAO) Committee on Aviation and Environmental Protection (CAEP). British Airways has also taken a number of voluntary initiatives to improve its environmental performance, including commitment to a 30% fuel efficiency improvement between 1990 and 2010 and participation in the UK Emissions Trading Scheme.

  6.  British Airways is also contributing to the consultation currently being conducted by HM Treasury and the Department for Transport on the use of economic instruments[2]to address the environmental impact of aviation.


  7.  Economic instruments are part of a wide range of instruments available to address the environmental impact of aviation. Other instruments include various forms of regulation, aircraft certification, operating procedures at airports and voluntary measures. In deciding how to deploy these instruments, British Airways supports the ICAO principles that measures should be: environmentally beneficial, economically reasonable and technically feasible.

  8.  We also believe that any policy initiatives to deploy economic instruments need to reflect the following principles into account:

Recognise economic benefits as well as environmental costs

  9.  Aviation gives rise to external environmental costs but it also generates significant external economic and social benefits. When adressing externalities, it is important to ensure that both areas are taken into account. A policy of sustainable development needs to strike a balance between economic, social and environmental objectives.

Avoid damaging international competitiveness

  10.  Initiatives to tackle aviation emissions should be considered within a global framework. As agreed in the Kyoto Protocol, ICAO is the appropriate international body.

  11.  The impact on international competitiveness needs to be taken into account in any unilateral UK or regional EU initiatives. Measures, which disadvantage either the UK aviation industry or harm the competitiveness of the UK as a whole will generate significant economic losses which must be set against environmental benefits. Unilateral initiatives to tackle the global external costs of aviation risk damaging the international competitiveness of UK aviation, simply exporting emissions and jobs elsewhere.

  12.  As the Treasury has pointed out: "For global and transboundary problems, actions by individual countries will have little effect on their own, and may achieve nothing at all if the result is that polluters simply move to other countries which have not taken any action."[3]

Ensure measures are cost-effective

  13.  A key principle of any environmental economic measure is that it is designed to achieve environmental benefits in the most cost effective way. Article 3 of the UN Framework Convention on Climate Change (1992), which defines the "precautionary principle", states that "policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost."

Incentivise environmental performance improvement

  14.  Any measures targeting environmental impacts must be designed to incentivise improvements in environmental performance. We endorse the CBI view that Government should place more emphasis on incentives rather than on penalties.[4]


  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?

  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.

  15.  We believe that the three main areas identified by the two government papers—global warming emissions, aircraft noise and local air quality—include the main adverse environmental effects of aviation. However, there must be a great deal of uncertainty placed around the costings of these effects presented in the DfT/Treasury Aviation and the Environment paper, particularly those applied to global warming costs.

  16.  First, there is still significant scientific uncertainty, both in terms of the environmental impacts of greenhouse gas emissions, and the contribution of aviation to those emissions. An area of particular uncertainty is the "radiative forcing" effect of upper atmosphere emissions from aircraft, which is estimated to multiply the global warming effect of aviation carbon dioxide emissions by a factor of 2.7. This is a central estimate taken from the authoritative IPCC report[5]but that report highlights the range of uncertainty around it, pointing out that: "the total radiative forcing may be about two times larger or five times smaller than the best estimate" (page 8). In other words the top of the uncertainty range is ten times the lowest value!

  17.  Second, the £70/Tonne cost of carbon can only really be regarded as "illustrative", as the range of estimates is very wide. In 1996, the IPCC suggested that the range of estimates for the current decade (2000-10) could be as wide as $9 to $197 per tonne of carbon (at 2000 prices), which gives a range of around £6 to £130 per tonne in sterling. If this is a reasonable estimate of the range, the government figure could be 50% too low or more than 10 times too high!

  18.  Third, the forecasts of global warming emissions make no allowance for increased fuel efficiency, which the IPCC projected at around 1.3% per year until 2050 in its 1999 report. Making allowance for this trend would cut the estimated contribution of aviation to global warming in 2030 by a third.

  19.  Uncertainty in valuing external costs is not a reason for doing nothing to mitigate environmental effects. However, it does suggest that market mechanisms—rather than theoretical estimates—should be used if at all possible to establish costs and prices. This is one of the reasons why British Airways favours emissions trading as the approach to deal with global warming emissions—where the uncertainties are probably greatest. Under an emissions trading regime, the market decides the price necessary to achieve the environmental objective—a reduction in global warming emissions.

  20.  In general, we believe that the focus of environmental policy should be on using policy instruments to reduce or mitigate adverse environmental effects, rather than using a theoretical estimate of external costs as the basis for imposing additional financial burdens on the aviation industry.

  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?

  21.  We do not believe it is correct to characterise the government's environmental policy objective for aviation in such simple terms. In both section 1 and section 2 of the DfT/Treasury Aviation and the Environment paper, the notion of "paying for external or environmental costs" is referred to as an objective of government policy. But these statements of policy are set in the set in the context of a broader framework of sustainable development and subject to a wide range of qualifications.

  22.  In section 1 it is the second of six objectives, but is an objective to be pursued within a broader sustainability framework: "The development of aviation should be sustainable: that is to say, a proper balance should be struck and maintained between economic, environmental and social considerations. Policy for airports should aim to maximise the significant social and economic benefits, whilst seeking to minimise environmental impacts." (paragraph 1.3)

  23.  In section 2 of the paper, the notion of paying for environmental costs is qualified by a whole range of other factors the government will take into account in deciding where it is "appropriate" for an industry to pay its environmental costs. These include economic impacts, competitiveness effects, environmental effectiveness, trade-offs between objectives and the efficiency of the instruments being considered.

  24.  The government therefore makes clear that while environmental costs can be a useful reference point, many other considerations need to come into play in deciding the appropriate use of economic instruments to achieve environmental objectives. In addition, the overall framework for government policy is sustainable development, which involves balancing economic, social and environmental issues.

  25.  British Airways supports this sustainability framework as the basis for aviation policy. As we have highlighted above, four principles are particularly important in applying it to the choice of policy measures, including economic instruments:

    —  Recognising economic benefits as well as environmental costs.

    —  Avoiding damaging international competitiveness.

    —  Ensuring measures are cost-effective.

    —  Incentivising environmental performance improvement.

  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?

  26.  Whether the "incorporation of environmental costs" is sufficient to achieve sustainability in air transport depends very much on the specific measures taken. The management of noise is a good example of how the industry has successfully reduced its environmental impact, while continuing to expand its operations and deliver enhanced economic and social benefits.

  27.  For example, at Heathrow Airport, the noise disturbance created by the airport has been cut by 80% over the last three decades. The large amount of mitigation applied, through various forms of regulation and the impact of a series of noise certification standards, is reflected in the government's financial estimate of just £25 million for the environmental cost of noise pollution around all UK airports.

  28.  We believe that local air quality problems can be dealt with in a similar way—using a combination of mechanisms. This would include reductions at source—ie lower aircraft nitrogeon oxide emissions—and improved operating procedures by airlines and airports. Road traffic is a major contributor to local air quality problems around airports, so improved public transport and road traffic management need to be part of the package of measures deployed.

  29.  For greenhouse gas emissions, it is important to recognise that the problem is a global challenge and any measures taken by the UK can only be effective if they are part of a coherent international response. British Airways has consistently supported the participation of international aviation in an open emissions trading scheme for carbon dioxide, and has supported that approach in the discussions at ICAO. We believe this is the most economically efficient and environmentally effective way of ensuring aviation reflects the cost of carbon dioxide emissions.

  30.  By including aviation in an open emissions trading scheme for carbon dioxide emissions, its contribution will be limited by the cap applied to the scheme. Airlines would either need to cut their emissions directly, or effectively pay other industries to make an equivalent reduction by buying permits from them. However, there would need to be international agreement on the caps applied for this system to work and a fair allocation across sectors and between countries. It would be totally ineffective for the UK to make a 60% reduction if at the same time other much larger countries (eg the United States) were increasing their emissions. It remains to be seen whether international agreement can be reached on such a stretching target as a 60% reduction by 2050.

  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?

Local airport issues

  31.  Local airport issues—noise and air quality—can be successfully managed through a "balanced approach"—a mix of measures which can be tailored to the local situation. British Airways supports the ICAO recommended Balanced Approach to Airport Noise Management. The Balanced Approach defines a process for evaluating four potential elements to determine the most cost-effective solution:

    —  Improvements at source (quieter aircraft)

    —  Operational procedures (altering flight paths and descent approaches)

    —  Land-use planning (eg noise zones in which new housing developments are restricted)

    —  Operational restrictions (eg night noise regulations and noise contours)

  32.  Although there are differences between the impacts of noise, which is aircraft dominated, and air quality, which is heavily influenced by road traffic emissions, a similar "balanced approach" could also be applied to the management of air quality around airports.

  33.  In managing these issues, economic instruments could have a role to play, such as noise and emissions charges or tradable quotas. However, these instruments are unlikely to be effective if deployed in isolation. They should be deployed as part of an airport environmental management plan, which aims to combine economic instruments with other regulatory or operating measures to achieve a clearly identified environmental objective. It is also important that revenue generated should be hypothecated, either to incentives for good environmental performance, or to mitigation measures.

Climate Change

  34.  For CO2 emissions, British Airways has consistently supported the participation of aviation in an open emissions trading scheme as the most economically efficient and environmentally effective way of ensuring aviation reflects the cost of these emissions. Under such an emissions trading regime, the market will determine the cost of carbon necessary to meet the agreed target. Unlike a tax, where the level of tax needed to achieve the environmental objective is unclear, the environmental objective is assured by the overall cap on emissions.

  35.  Another advantage of emissions trading is that it works with the grain of incentives, combining a "carrot" alongside the "stick". Assuming a grandfathered system of allocation, firms which achieve the biggest reductions can gain by selling their permits into the market. This reinforces the financial incentive for investing in technology which will enhance emissions reductions.

  36.  As a signal of its commitment to emissions trading, British Airways has joined the UK Emissions Trading Scheme. Because international aviation emissions are not included in the agreed Kyoto caps, the scheme can only include our domestic services and UK ground energy sources. For 2002, BA has reported a 16% reduction in its carbon dioxide emissions covered by this scheme, compared with the 1998-2000 baseline.

  37.  The incorporation of aviation into a global emissions trading system should, however, be the long-term goal. UK government policy should be aiming to support this through its participation in ICAO and other international forums, consistent with the strong support for emissions trading set out in the latest Energy White Paper. The UK government should also be exploring the technical, environmental and economic consequences of incorporating intra-EU aircraft emissions within the EU emissions trading scheme.

  38.  The participation of aviation in an open global emissions trading regime is complicated by the Kyoto treatment of emissions from international bunker fuels, which has the result of excluding international aviation emissions from the global caps which have been agreed for the current commitment period. The UK government should be working with other parties to ensure that international aviation is properly included in the emissions caps agreed for the second Kyoto commitment period from 2010.

  39.  While the government may be under pressure to introduce new taxes and charges as an "interim solution", or as a supplementary measure, this pressure should be resisted. In particular, unilateral measures taken by the UK government outside of any agreed international framework for aviation risk seriously damaging the competitiveness of the UK aviation industry.

  40.  Aviation already pays a specific "environmental tax" in the form of Air Passenger Duty (APD). Though this tax is not a very effective environmental instrument, as it simply taxes air travel rather than penalising any specific adverse effects, it does raise nearly £1 billion each year for the Exchequer, none of which is recycled back to any specific support for the airline industry. Airlines in the UK also pay their full infrastructure costs, unlike the main competing public transport mode—rail, for which infrastructure costs and many services are directly subsidised.


  41.  British Airways is committed to sustainable development, based on a balanced assessment of economic, social and environmental impacts.

  42.  Environmental economic instruments could have an important role to play in aviation, particularly in tackling global warming, through an international framework for emissions trading. We see a much more limited role in tackling local issues at airports which are already being largely addressed through existing regulations and voluntary action.

  43.  In seeking to apply economic instruments to aviation, therefore, the government's main objective should be the inclusion of aviation into an internationally agreed framework for managing and trading CO2 emissions on a competitive and cost-effective basis.

June 2003

1   Oxford Economic forecasting Report 1999. £12.6 billion is calculated as 1.4% of UK Gross Value Added at Factor Cost of £903.3 billion in 2002. Back

2   Aviation and the Environment Istruments-HM Treasury/Department for Transport, March 2003. Back

3   HM Treasury, Tax and the environment: using economic instruments, para 5.28 November 2002. Back

4   CBI, Green Taxes; Rhetoric and reality, April 2002. Back

5   Intergovernmental Panel on Climate Change, Aviation and the Global Atmosphere, 1999. Back

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