Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 180-199)

Wednesday 11 June 2003


  Q180  Mr Chaytor: What kind of vision of sustainability in the aviation industry do you have? Can you put some flesh on these words for us?

  Dr Sentance: If we look at the sustainability issues that aviation faces, I think there is quite wide recognition of the economic benefits both of trade facilitation and of travel. The question is: can that be reconciled with an acceptable and appropriate reducing environmental impact? There are three main issues that are flagged up in the Treasury paper: noise, local air quality, and global warming emissions. We need to have a strategy and approach both as an industry and as a company to deal satisfactorily with those issues. I think on noise, that is the area where the industry has done most and has achieved most over the last 20 to 30 years, and it reflects the fact that this has been something that has been in the public policy debate for a long time. Through various mechanisms, the industry has been successful in reducing noise impact; for example, around Heathrow over the last 30 years, the number of people exposed to noise levels above the Government's limit has been reduced by about 80 %. There has been quite a considerable improvement in aircraft technology and in the operations procedures of those aircraft. We believe that same sort of approach, which is described as a balanced approach, of reductions in source, improved operating procedures and regulations can work with local air quality, but, as you heard from the previous session, there are quite important measurement issues that need to be resolved. I think the challenge of global warming is something that is still ahead of us. We only received this report, which is the authoritative, international, independent report by the IPCC, in 1999. This process has been developing within ICAO to find an international framework to address the issue. We are supporting that process.

  The Committee suspended from 4.46 pm to 4.53 pm

  Q181  Mr Chaytor: Just leaving aside air quality economics, which are fairly easily measured and I think there are accepted means of measuring, and moving on to emissions, this is the big one really, do you think it is possible to assess the cost of carbon, the cost of climate change? There is a consultants' report at the moment, an HMT consultation excise which is trying to do this. Do you think it is possible to do that?

  Dr Sentance: I think you can only do it with great range of uncertainty around the estimated that you come up with. That is reflected in the range of estimates that have come out of various studies. I think we would rather have an approach that focuses actually on reducing the contribution to global warming, rather than measuring its cost and then levying a financial charge for the industry. That is the basic point where we would come from.

  Q182  Mr Chaytor: What would your preferences be for an emissions trading system? This is years and years into the future, is it not? What is BA doing over the next few years until we get to that point to reduce your emissions, leaving aside whether they can precisely be measured?

  Dr Sentance: We think we are doing a number of things: we set up a few years ago some fuel emissions targets and aim for a 30% improvement between 1990 and 2010.

  Q183  Mr Chaytor: That is 30%?

  Dr Sentance: It is 30% per revenue passenger kilometre; that is the measure we are using. That is an indication that we are making good progress towards meeting that target. We report on it in our environmental report every year. We felt that it was important for us to get as much experience as we could of emissions trading, for a number of reasons, and also for us to be able to show that aviation could participate in an emissions trading scheme because the benefits from emissions trading come with it being an open scheme where aviation trades with other sectors and the economy as a whole finds the lowest cost reductions. We applied to join the EU scheme and participated in the second target. We have now reported on the first year of reduction within that scheme. We are well within the target set for us.

  Q184  Mr Chaytor: I return to the economic and environmental role. I am thinking for example of the environmental impact of short-haul flights and which way are you going to jump, leaving the emissions trading to one side for the moment because we are some years away from that. If there were a conflict between the two and if it is clearly proved that in short-haul flights the impact on air quality, the impact on noise, the impact on traffic congestion and the impact on local infrastructure as well as the excessive emissions are way ahead of the impact of comparable forms of travel, then would there come a point at which you would put the environmental imperative before the economic imperative? I can fly from London to Manchester for a quarter of the price of a first class ticket on Virgin Trains. Is that sustainable?

  Dr Sentance: We are operating as a commercial business and we therefore have responsibilities.

  Q185  Mr Chaytor: The economic imperative will always dominate the environmental imperative.

  Dr Sentance: It does not help the environmental imperative if a good environmental performer like British Airways goes out of business or loses market share because it is putting too big a cost penalty on itself. This is an issue that I think all businesses have to manage, which is: how far do you go in terms of voluntary commitments? We looked at this when we set our fuel efficiency target and we weighed it in the balance when we participated in the emissions trading scheme. How far do you go then in encouraging policy-makers and the industry to set a framework where you can then achieve environmental performance along with everyone else and there is no distortion to the marketplace? You have to have a twin-track approach. We made a number of voluntary commitments, and we have voluntary commitments in terms of noise as well in terms of trying to avoid night noise and taking off on reduced thrust and things like that. We have tried to work with the industry, with IATA, the International Air Transport Association, and with ICAO, the International Civil Aviation Organisation, to promote what we call the most environmentally effective and economically efficient mechanism for dealing with aviation, global warming impact and global emissions trading.

  Q186  Mr Chaytor: Just leaving aside market share within the airline industry, if it were indisputably proved that the least environmentally damaging way of getting from Manchester to London was by high speed intercity train as against short-haul flight, would BA gradually pull out of short-haul flights?

  Dr Sentance: I think this is why you have to look at the sustainability on a triple bottom line basis, because when you look at rail transport, you can get some environmental improvements, such as on the global warming front, but you get other environmental deteriorations such as much bigger land-take if you put in new railway lines, and there may be a much bigger economic costs on society as a whole. When you impose economic costs on society as a whole, say through a subsidy for the railway industry, you then have consider what otherwise you would have done with that money. There is an opportunity cost to that. There are other environmental improvements that could have been achieved with that opportunity cost. So you really cannot get away from having to strike this balance between the economic and the environmental and one of the issues with rail is that, though you can get some environmental improvements, the infrastructure costs can be very considerable and require quite large subsidies from society as a whole.

  Q187  Chairman: Presumably, if you favour an emissions trading system, you think the Treasury's consultation on getting proper costing and environmental factors is a waste of time?

  Dr Sentance: We do not think it is a waste of time but we think it is a very good opportunity to debate the issues at quite an appropriate time for United Kingdom policy. There is a major consultation going on on the future of aviation and airports policy, and in that debate many people are making statements about the environmental unsustainability of aviation. We do not believe aviation is fundamentally environmentally unsustainable: we believe we need a framework in which we can improve our environmental performance in an economic and rational way.

  Q188  Chairman: But if you have a cap, as the ETA system would suggest, you do not really need this complicated exercise to look at the cost?

  Dr Sentance: You would certainly allow the market to determine the cost of your global warming emissions. I think it is fair to say that the carbon dioxide element of global warming from aviation can be dealt with through emissions trading. I think there is more uncertainty on how we deal with the other effects on which there is a great deal of uncertainty—

  Q189  Chairman: Which other effects?

  Dr Sentance: These were referred to in the earlier discussion. The multiplier effect that is applied in the Treasury paper is applied because, when aircraft fly in the upper atmosphere, part of it is emitted in clouds and con trails are formed. Now that is not the same thing as global warming through carbon dioxide and we need to think about that separately.

  Q190  Mr Chaytor: So clarifying this, that is really over and above the emissions trading which you prefer? The impact of this radiative forcing should be subject to a different kind of regime, should it?

  Dr Sentance: I think it has to be. Some people have suggested you apply a multiplier to your carbon dioxide emissions but the problem with that is that with some of the measures that you could take to reduce this additional effect there could be trade-offs between producing more carbon dioxide and significantly less of this additional effect, so we do not think it is adequate just to apply a multiplier to carbon dioxide emissions.

  Q191  Mr Ainsworth: We have heard that an international emissions trading scheme is years away, but you are involved in the current United Kingdom scheme. The government put up quite a lot of money to persuade people to join this scheme. How much are you getting?

  Dr Sentance: The incentive payment that we get for our participation in the scheme is about £1.3 million a year, if we meet the targets that we have said we will meet. There are quite significant penalties if you do not meet those targets.

  Q192  Mr Ainsworth: Remind me over how many years this is?

  Dr Sentance: That is over five years.

  Q193  Mr Ainsworth: And so far you have met your target?

  Dr Sentance: We have met our targets, yes. In fact, we have exceeded what we expected but that is not altogether surprising in the current climate the industry faces. The industry has cut back a lot of its operations much more than it would have expected. As we go forward, we then face the fact that our target gets tighter because it is stepped down each year at the same time as presumably the industry will recover, so the challenge gets much greater in the later years of the scheme.

  Q194  Mr Ainsworth: How much CO2 does British Airways produce altogether, globally?

  Dr Sentance: About 15.5 million tons.

  Q195  Mr Ainsworth: And that figure has come down presumably recently because the market has not been buoyant?

  Dr Sentance: That figure has come down as we have done two things. One is we have cut back on some of our capacity and we also have introduced a more fuel efficient fleet.

  Q196  Mr Ainsworth: And the United Kingdom emissions scheme only applies to domestic flight and ground-based services?

  Dr Sentance: That is right. It covers about a million tons of that 15.5 million.

  Q197  Mr Ainsworth: So in the greater scope of things, it is not a lot?

  Dr Sentance: We went into it for a number of objectives. Because of the structure of international agreements we knew it could not cover the whole of our emissions. We went into it to get experience of the scheme, to increase exposure within the company as well as outside to what it is like to do emissions trading and what it is like to manage that as part of the business, and we wanted a visible demonstration of the fact that aviation could be part of a broader emissions trading scheme, because there has been a bit of scepticism about that in the discussions that have taken place on open emissions trading.

  Q198  Mr Ainsworth: What precisely is the CO2 reduction target within the ETS?

  Dr Sentance: Our target is 12.5% roughly speaking, over five years.

  Q199  Mr Ainsworth: What is that in tons?

  Dr Sentance: 125,000 tons of CO2 from British Airways, so by year five we will have cut from about a million by 125,000.

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