Examination of Witnesses (Questions 180-199)
Wednesday 11 June 2003
DR ANDREW
SENTANCE
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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