Memorandum from the Department for Transport
1. The Department welcomes the opportunity
to submit this Memorandum as part of the Committee's Inquiry into
the Budget 2003 and aviation.
2. Aviation, along with its considerable
benefits also brings a number of adverse environmental impactsin
common with other modes of transport. These include notably aircraft
noise, impacts on local air quality and contribution to climate
3. As the Committee knows, the Government
is committed to publishing an air transport White Paper setting
out a framework for the future of air transport in the United
Kingdom, looking ahead 30 years. A key principle, articulated
in the Integrated Transport White Paper in 1998, is that aviation
should meet the external costs, including environmental costs,
that it imposes. That should be the case irrespective of any decisions
about future airport expansion.
4. The Government's approach to valuing
external costs, including climate change impacts, was set out
in the publication Valuing the External Costs of Aviation
in December 2000. This accompanied a wide-ranging consultation
document, The Future of Aviation, which invited views on
a range of aviation policy issues, including environmental impacts.
5. More recently, in February 2003, the
Department published a discussion document on Aviation and
the EnvironmentUsing Economic Instruments. This outlined
the Government's approach to policy appraisal and the use of economic
instruments to encourage environmental behaviour, in line with
the principles set out in the Treasury's publication Tax and
6. The paper Aviation and the Environment
identifies climate change costs as the largest environmental
cost that can be quantified in monetary termsestimated
at £1.4 billion in 2000, rising to £4.8 billion in 2030
(making no allowance for demand and supply side responses to economic
instruments, and therefore likely to be an over-estimate).
7. Forecasts for aviation's CO2 emissions
from international and domestic aviation in 2000 and 2030 were
set out in The Future Development of Air Transport in the UK:
South East consultation documentClimate
change costs identified in Aviation and the Environment
are calculated using two further assumptions:
Aviation's CO2 emissions are scaled
up by a radiative forcing factor of 2.7 to account for the impact
of emissions from aircraft at altitude (IPCC,1999), and converted
into tonnes of carbon;
In agreement with DEFRA, an illustrative
cost of carbon is taken as the damage costsarising
from inaction in response to climate change, assessed at a global
level. For 2000, this damage cost is assessed as £70 ptC,
rising at £1 ptC p.a. to account for the cumulative effect
of emissions, giving a cost of £100 ptC in 2030.
8. The total cost of noise impacts for all
airports is estimated at around £25 million for 2000. This
is assessed for all major UK airports (including Manchester, Birmingham
and Edinburgh) and is based on a hedonic house price study undertaken
at Heathrow. This concluded that a sustained 1dBA rise in the
quantity of noise was likely to reduce house prices by between
0.5 and 1% relative to what they otherwise would have been. However,
this has to be considered against a possible upward pressure on
house prices from the convenience of being near to the airport.
9. As regards local air quality impacts
(mainly NO2 and PM10), estimates of NHS costs of respiratory illnesses
suggest the total amount would be too low to be expressly represented
in any economic instrument.
10. The discussion document Aviation
and the Environment, published on the DfT website, formed
the basis of a series of discussions in April and May with invited
stakeholders across the spectrum of opinion on the scope for,
and effectiveness of, different economic instruments to ensure
that aviation is sustainable and meets its external costs. The
outcome of these discussions will be reflected in the air transport
11. Decisions in the White Paper on how
much, if any, additional airport capacity should be providedand
if so where, and subject to what controls and conditionswill
also be informed by the outcome of the airports consultation (see
footnote 1). This suite of documents set out the current state
of air transport across the UK and canvassed views on a range
of possible options for future airport development, taking into
account forecast demand and environmental concerns. The consultation
period closes on 30 June.
12. The Transport Committee has recently
been conducting its own Inquiry into aviation, in the light of
this consultation. The Department submitted a Memorandum to that
Committee on 31 January this year and the Secretary of State gave
oral evidence to the Committee on 21 May.
The appraisal framework
13. From its outset, SERAS (South East and
East of England Regional Air Study) was seen to be larger and
more complex than comparable studies in the other regions: the
size of the region, the scale of the demand it generates, the
diversity and status of airports it contains and the range of
air services available. Also, given the existing capacity constraints
at some of the existing airports, SERAS had to look in greater
detail at options for runway development. The scale of SERAS involved
a comprehensive appraisal of a wide range of options. The method
of assessing impacts was agreed inter-Departmentally and is described
in The Appraisal Framework for airports in the South East and
Eastern Regions of England, published by DETR in November
2000. This was reproduced in Annex B to the SE consultation document
and is appended to this Memorandum (see Annex).
14. The SERAS appraisal is closely modelled
on the NATA framework earlier set up to appraise the impact of
projects in other transport sectors. Co-ordination of the other
regional studies (known as RASCO) used the same methodology as
SERAS with regard to potential major new airport infrastructure.
15. Wherever possible, monetary values are
used to assess the environmental impacts, for example noise and
climate change. The values referred to in Aviation and the
Environment are consistent with the values in the air studies
reports. In particular, the impacts described in the SE consultation
document on demand for air travel taking into account the impact
of aviation on global warming use the same illustrative "cost
of carbon" as in Aviation and the Environment.
16. Where practicable, impacts have been
looked at on the basis of packages of optionssee, for example,
economic benefits in Table 14.6 of the SE consultation document.
But in practice, many environmental impacts are specific to particular
airports. On noise, to take one example, the respective consultation
documents and supporting papers set out, in each case, the impacts
of development in terms of areas and population subject to daytime
aircraft noise levels in excess of 54 dB LAeq in 2015 and 2030,
along with an estimated valuation of the reduction in house values
associated with aircraft noise. Illustrative examples of potential
night-time noise disturbance have also been made, with 90 dBA
SEL (Sound Exposure Level) footprints produced for the loudest
aircraft likely to operate regularly at night for each runway
option. Again, numbers of people subject to potential disturbance
have been estimated.
17. The number of possible permutations,
however, means that it is not practical to provide a single table
setting out all the impacts at every airport for comparative purposes.
In the final analysis, decisions will require a balance to be
struck between the environmental, social and economic considerations,
and since these cannot all be readily or comprehensively quantified
and, since valuation methodologies are at varying degrees of robustness
and formality, that will necessarily require a degree of judgement
18. Summary appraisal tables have been publishedsee
SERAS supporting documentation on www.airconsult.gov.uk.
Integrated policy appraisal
19. The Integrated Policy Appraisal tool
(IPA) was developed in the former Department of the Environment,
Transport and the Regions. It is designed to give policy makers
a checklist to ensure that the widest range of potential impacts
from a given policy or programmewhether environmental,
social or economic impactsis considered, along with the
possibility of differential impacts on particular groups eg by
age, sex, race, disability and so forth. Impacts should be quantified,
where possible, or otherwise subject to a qualitative assessment.
20. The IPA framework is being used within
the Department to ensure that all relevant considerations are
taken into account in reaching decisions about airport development.
The Department is considering whether it should publish a version
of the IPA to reflect the final decisions in the White Paper.
Strategic environmental assessment
21. Directive 2001/42/EC on the assessment
of the effects of certain plans and programmes on the environment
must be transposed into UK law before 21 July 2004. The Directive
will require, among other things, environmental assessments to
be carried out for programmes which set the framework for future
development consents for a range of projects in transport and
other sectors, including those for which an Environmental Impact
Assessment (as set out in Directives 85/337/EEC and 97/11/EC and
implementing regulations) would be required.
22. The Directive does not formally bite
on developments/projects before June 2004 and in any event provides
for exceptions in the case of work already under way at that time.
It is hoped to publish the air transport White Paper by the end
of 2003. But, in so far as the key principles of the SEA Directive
require appropriate environmental assessment of plans and programmes,
and prior consultation with environmental groups and the public,
these principles are already being adhered to within the approach
adopted for the current exercise.
Relationship to other Whitehall requirements
23. The Committee asks how the approach
to environmental appraisal relates to relevant guidance or regulatory
requirementssuch as Regulatory Impact Assessments, the
Strategic Environmental Assessment Directive, the "Greening
Government" requirement to screen policies and conduct environmental
or integrated appraisals where necessary; Treasury guidance (as
expressed in documents such as Tax and the Environment,
the Treasury Green Book and the Cabinet Office policy maker's
24. Some of these are touched on above.
For the rest:
Regulatory Impact Assessment
(RIA) is primarily concerned with impacts of regulation or policy
on small businesses. The air transport White Paper, when published,
will be subject to an RIA in line with current practice;
Treasury's Green Book is the
definitive guide to appraisal for Whitehall Departments. The appraisal
of airports options is in full accord with Green Book principles
and practice, including the latest revisions updating the recommended
Health Impact Assessment (HIA)
is nested within the Integrated Policy Appraisal framework. Formal
detailed HIA will become appropriate if and when specific runway
development options were taken forward in the planning system.
Other screening requirementsThe
Department is making use of the Integrated Policy Appraisal tool,
as described above. It is the Department's hope that the IPA,
currently the subject of an inter-Departmental pilot, will be
accepted as the natural successor to the policy maker's checklist
and a number of existing screening requirements for individual
SERAS appraisal framework
(This Annex reproduces Annex B to the SE Consultation
This Annex explains the background to the SERAS
study that was commissioned by the Government in 1999 to examine
the demand for airports up to 2030 and consider options for airport
capacity to meet that demand. It goes on to explain how SERAS
was carried out including the different criteria that were used
to appraise the various airport development options.
1985 White Paper
The most recent major statement of the Government's
airports policy was contained in the 1985 White Paper "Airports
Policy". It was envisaged that the decision relating to expansion
at Stansted, together with already approved plans for developing
Gatwick (Gatwick North Terminal opened in 1988) and Heathrow (Terminal
Four opened in 1986), would lead to the provision of enough capacity
within the South East airports system to the mid 1990s. In the
event, traffic at Stansted has grown more slowly than envisaged
in 1985, despite the recent rapid growth of low cost carriers,
but the use of Heathrow has grown to a level well beyond what
The last long-term airport planning exercise
for the South East was RUCATSE (Runway Capacity to Serve the South
East) carried out by a Working Group led by the Department of
Transport. RUCATSE started in 1990 when the CAA advised that another
runway's worth of capacity would be needed to serve South East
demand by around 2005. RUCATSE looked for a full runway's worth
of capacity, and did not look at variants offering less capacity
but with reduced environmental impact. On 2 February 1995 the
then Secretary of State for Transport, Dr Brian Mawhinney, announced
that the Government was rejecting RUCATSE options for new runways
at Heathrow and Gatwick (the statement was silent on the RUCATSE
option for Stansted). Further work was commissioned from the CAA
on making more use of existing capacity at Heathrow and from BAA
to consider less environmentally damaging options for new runways.
The SERAS study
The SERAS study was announced in March 1999
and had the following objectives:
To assess the demand for airport
capacity in the South East and East of England, consider options
for how this might be addressed, and appraise their economic,
environmental and social implications.
To help the Government devise a 30
year sustainable development policy for UK airports.
There are a number of lengthy reports and a
larger number of supporting technical documents. A complete list
of study documents is in Annex C. This consultation document contains
the key information from those reports needed to understand the
choice of packages and the options at each airport. But for a
full understanding of the complex appraisal process you will need
to look at the relevant supporting documents.
From its outset, for a number of reasons, SERAS
was seen to be larger and more complex than comparable studies
in the other regions: the size of the region, the scale of the
demand it generates, the diversity and status of the airports
it contains, and the range of air services which are available.
Also, given the capacity constraints that already exist at some
of the region's airports, SERAS had to look in greater detail
at options for runway and terminal capacity enhancement, including
options for new airports. The scale and complexity of SERAS involved
a comprehensive appraisal of a wide range of options.
The appraisal framework
The method of assessing impacts in SERAS is
described in The Appraisal Framework for Airports in the South
East and Eastern Regions of EnglandThe
appraisal framework was used in SERAS to examine options over
the next 30 years including:
no development beyond that already
envisaged in the land-use planning system
development of terminal capacity
to make full use of existing runway capacity; and
development of additional runway
and terminal capacity.
The approach to airport appraisal follows that
in the then DTLR' s Guidance on Methodologies for Multi-Modal
Studies which sets out the Government's five objectives for transport
investmentsafety, economy, environment, accessibility and
integration. A further consideration is commercial viability,
which is a hurdle that must be passed for airport developments
on both existing and new sites. A policy that relied on options
that could not be funded by the private sector for the bulk of
a major airport investment would not have been a useful outcome.
The appraisal framework enables decisions to
be made on the basis of trade-offs between indicators for each
of these considerations. The framework does not make judgements
on the relative value to be put on different considerations and
does not provide a mechanistic way of reaching decisions. The
weight Ministers put on each consideration will be made clear
in the decisions set out in the air transport White Paper.
The stages of SERAS
There have been four main appraisal stages in
SERAS: Stage 0, Stage 1, Stage 2 and Stage 3.
SERAS stage 0
Stage 0 involved a "site search" to
identify new sites to serve the South East and East of England,
so that these could be evaluated alongside further development
of existing airports. Sites examined included those within the
SERAS region itself and others in adjacent regions, that could
serve at least part of the South East and East of England catchment
area. The study evaluated the full range of potential new locations
including "greenfield", "brownfield" and "offshore"
sites (including several previous proposals eg Maplin, Foulness,
Marinair and Cublington). Two types of new site were considered;
a major new passenger airport and specialist facilities designed
to cater for freight and low cost carriers.
The new sites proposed in this consultation
are Cliffe in North Kent for a major airport and Alconbury in
Huntingdonshire for a more specialist airport.
SERAS stage 1
The principal objective of Stage One of SERAS
was to establish the feasible options for the development of capacity
at each airport in the South East, and to appraise those options
in order to determine which should be carried forward to Stage
2. In Stage 1 each airport was considered in isolation.
SERAS stage 2
In Stage 2 the options selected from Stage 1
were appraised in more detail. Airport development options were
combined and the economic and financial costs and benefits of
those combinations of options (many of which comprise options
at more than one airport) were assessed. In the SERAS study these
combinations were referred to as "packages". A list
of the packages is in Annex D.
The study results quoted in this consultation
document are taken largely from the SERAS Stage 2 Report.
SERAS stage 3
In Stage 3 sensitivity testing has been undertaken
on selected packages. These tests have included:
Government's policy requirement that
aviation should bear its full costs, by estimating the effects
on demand and economic and financial appraisal of incorporating
environmental costs (based on Stage 2 findings in respect of noise,
local air quality and global warming) into air fares;
The effects on noise and local air
quality, of alternative assumptions about the performance in those
respects of the aircraft using different airports. We have used
the results from this sensitivity work to inform our thinking
on the measures that might be introduced to manage the adverse
impacts of airport options; and
Some limited revisions to the airport
layouts and capacities in different packages and the phasing of
options within packages.
How were different packages and options compared?
The following is a summary of the appraisal
process. It gives some background on how different criteria were
appraised in order to help you understand the information presented
in Chapters 7-12 about options at each airport and in Chapter
14 about the possible combinations ("packages") of airport
The central objective of the study was to provide
robust appraisal of various airport options and packages that
would allow comparisons to be made between them. The SERAS methodology
was therefore geared to assessing the relative impacts of options
rather than the impacts of options compared to the present position
or the mitigation of impacts that might be brought about through
intervention (eg faster improvements in technology or regulation).
Economic and financial appraisal was conducted
over the period to 2030 and beyond, so that the effect of increasing
airport capacity could be assessed year by year over the life
of new infrastructure. These annual effects were summarised in
net present values of providing increased capacity relative to
the base case (no development beyond that already envisaged in
the land-use planning system).
To measure the impacts and benefits of developing
airports over 30 years, two appraisal years2015 and 2030were
used. The 2015 appraisal year was used for packages involving
no new capacity; additional terminal capacity but no new runway;
various options for one new runway; and for a new airport at Cliffe
with two runways. The 2030 appraisal year was used for packages
with larger numbers of new runways.
Key appraisal assumptions
In order to compare options looked at in the
SERAS study, a number of assumptions were made about how each
new runway scheme might be taken forward. This enables us, for
instance, to estimate the cost of construction and measure the
impacts on people and the environment. Outline layout plans were
produced for terminal and other facilities as well as an assessment
of the road and rail infrastructure needed to support the airport
development. A year for the opening of each runway was assumed.
The capacity of different airport options was estimated and forecasts
produced of how many passengers would use the new facilities.
Key assumptions for the purposes of comparing
options on a consistent basis were
the timing of construction of new
runways. The first new runway (or the first two at Cliffe) is
assumed to be open in 2011. In packages of three new runways,
the second and third runways were assumed to open in 2018 and
2024. Cliffe's third and fourth runways are assumed to open in
2021, as is the second runway in packages with two new runways;
the order of construction of new
runways. In our modelling, the principle followed was to assume
that the first runway would be built wherever there was the greatest
pent-up demand and therefore the project was most likely to be
commercially viable; and
airport capacity in the regions outside
the South East is always sufficient to meet demand. This includes
a new runway at Birmingham, and possibly also (if necessary) at
Manchester, to be built in 2021.
We made the latter assumption because the Government's
policy, set out in the 1998 New Deal for Transport White Paper,
is to encourage the growth of regional airports to meet local
demand for air travel where consistent with sustainable development
principles. However, the Government has not yet reached a view
on any specific projects at any of the regional airports, but
will do that as part of the forthcoming air transport White Paper.
Appraisal of options and packages
Many of the impacts of airport options can be
identified on an option by option basis. Some impacts can only
be addressed for the South East airports as a system ie in packages
(eg economic benefits) or even at a national level (CO2 emissions).
Appraisal of options
Chapters 7-11 identify the impacts of
the options appraised at Heathrow, Gatwick, Stansted, Luton and
Cliffe. The principal impacts reported in these chapters are:
land take, households displaced,
heritage, ecology, water;
land use and urbanisation; and
The full SERAS appraisal considered other impacts,
for example safety risk. There is not space in this consultation
document to set out all the results of the SERAS appraisal. These
can be found in the SERAS Stage 2 and 3 reports.
The impacts of additional air travel on surface
transport networksairport access links and wider impacts
on strategic road and rail networksare potentially significant
and have been modelled and assessed in some detail. Forecast airport-related
tripsby passengers, employees, air freight and otherhave
been added to background, non-airport traffic for 2015 and 2030,
and their combined consequences for road and rail networks assessed.
Particular rail infrastructure and service improvements
were assumed to accompany airport development options and their
performance appraised. On the strategic road network, the principal
intention has been to identify where airport-related trips would
cause particular problems, and, if those problems were to be tackled
through capacity enhancement, what that would entail.
This work had to be undertaken while a transport
strategy for the East and South East was still being developed.
The Government's 10 Year Plansets
a broad vision and investment levels for the current decade. Regional
Transport Strategies will set out regional priorities for transport
policies and proposals, across all modes, to support the wider
spatial strategy in Regional Planning Guidance. These plans will
be informed by the findings of the multi-modal studies (MMSs),
some of which are due to present their strategies this summer,
others later. The principal MMSs of relevance to SERAS are:
Orbit: looking at orbital travel
round London (the M25)
SWARMMS: London to the South West
Thames Valley: London to Reading
In January 2002, the Strategic Rail Authority
(SRA) published its Strategic Plan setting out a series of projects
and timescales to deliver the targets of the 10 Year Plan. SERAS
is liaising with the MMSs and the SRA, and has passed details
of airport-related trips to them for inclusion in their considerations.
This part of the appraisal took the form of
detailed computer modelling (for noise and air quality) and a
more qualitative assessment based on desktop research (for other
SERAS modelled the impacts of daytime noise
from aircraft based on the frequency and types of service (eg
long or short haul) and, on this basis, a stylized depiction of
the mix of different aircraft types that would use the airport.
In the chapters describing the options at each airport there is
information about the noise levels today and what they might be
in 2015 and 2030 both with no new runway and with one or more
Critical to the modelling of noise impacts were
assumptions about future improvements in engine technology and
the fleet mix at airports. These were intended to be fairly conservative
(ie pessimistic). It is quite possible that the actual noise impacts
of these airport developments could in fact be reduced, for example,
through the faster introduction of quieter engines.
Sensitivity testing was carried out to consider
the possible improvements in the noise climate that might be achieved
by: a faster retirement programme for aircraft types no longer
in production; a better matching of future aircraft types to service
requirements to minimise noise levels; and more stringent noise
standards for future aircraft typesof 14 dB below Chapter
3 noise levels as opposed to the 8 dB assumed in the initial noise
modelling and the 10 dB required by ICAO member states for new
aircraft designs submitted after 1 January 2006. Since these more
challenging assumptions better reflect the conditions that might
prevail, it is the results of these extra tests that are presented
in this document.
Subject and pursuant to the "balanced approach"
agreed by ICAO, and to EU Directives (in particular 2002/30/EC),
noise impacts could also be reduced or mitigated in other ways,
for example the use of operational controls (eg the way aircraft
take off and land), by imposing noise limits or by providing noise
insulation for those affected. Proposals for various policy measures
of this kind to deal with aircraft noise are discussed in more
detail in Chapter 16, Action To Tackle Environmental Concerns.
Policies in relation to night-time noise at
the major London airports have been implemented by limits on the
overall number of flights plus "noise quotas", which
take account of the number of night-time flights, permitted aircraft
types and noise emissions by aircraft type. The October 2001 judgment
by the European Court of Human Rights on night flights at Heathrow
has been referred to the Grand Chamber of the CourtUntil
a final judgment is made, the implications for future night-time
noise regulation remain uncertain.
As illustrative examples of potential night-time
noise disturbance, SERAS produced 90 dBA SEL (Sound Exposure Level)
footprints for each runway option, for both arrivals and departures
and for both directions of runway operation, based on a single
movement by the loudest (QC2) aircraft typically likely to operate
at night in the forecast years.
(ii) Local air quality
The SERAS air quality assessment has focused
on NO2 and PM10 as important air pollutants sensitive to increases
in aviation activity and associated surface access movements.
Mandatory EU limitswill
come into force for these pollutants in 2010 (NO2) and 2005/2010
(PM10). The SERAS air quality methodology has been developed to
provide a comparison between options in 2015 and 2030 using these
mandatory limits. Where approximations or simplifications have
had to be made, and where there is inadequate information, the
SERAS methodology over- rather than under-estimates the air quality
At Heathrow where the worst exceedances were
identified, sensitivity tests have been run embracing more stringent
NOx performance for future new engines and more precise estimates
of the degree of thrust used by aircraft. The results are shown
in Chapter 7.
(iii) Environmental appraisal
With so many factors to take in account, SERAS
required a carefully constructed and consistent approach to determining
whether an environmental effect is significant and, if so, its
level of severity. Criteria were established to define four levels
High* adverse (HA*), an effect which
in isolation should have a substantial bearing on decision making;
High adverse (HA), an effect which
in isolation could have a material influence on decision making;
Medium adverse (MA), an effect which
on its own could have some influence on decision making, particularly
when combined with other similar effects; and
Low adverse (LA), an effect which
on its own is likely to have a negligible influence on decision-making,
but when combined with other effects could have a more material
The impacts described in Chapters 7-11 on airport
options are generally those that meet the definition of High*
or High Adverse.
Employment/land use and urbanisation
The development of an airport will have a number
of consequences both for the area it is in and the wider region.
Jobs will be created both at the airport and further afield generating
demand for employment land and housing. The impact of this on
the local housing market takes account of the potential need for
workers from outside the airport catchment area (known as "in-migration").
The SERAS appraisal allows us to consider whether
the expansion of an airport might place demands on the housing
market beyond what is currently envisaged by regional planning.
A qualitative assessment has been made of the
impact of development options against existing regional policy,
for example Regional Planning Guidance (RPG) published by Government
Offices and economic strategies of the Development Agencies for
the East of England, South East and London.
Appraisal of packages
Principal impacts addressed on a package basiswith
results described in Chapter 14, Airport Development up to
2030deal with the economic benefits. Although important
also in their own right, the treatment of principal environmental
externalities also has to be considered.
Economic appraisal requires assessment of both
direct benefits, capital costs, and wider economic benefits.
As part of the SERAS Stage 2 study, an economic
assessment has been carried out to measure the direct benefits
and net benefits of each package. A model was developed to calculate
direct benefits and to bring costs and benefits together so as
to calculate the present value of the net benefits for each package.
The key outputs are the present value of the
net benefits (NPV), the benefit: cost ratio (BCR) and the NPV
per additional million passengers per annum (mppa) of each package
Much the largest element of benefit quantified
is the benefits to passengers who in the absence of additional
airport capacity would transfer to less preferred airports or
not travel by air at all. Other benefits quantified are those
to existing passengers from additional air frequencies because
of higher airport capacity plus benefits to airports from additional
capacity plus Air Passenger Duty plus benefits to air freight
users less capital and operating costs of new airport developments.
The assessment of economic benefits is conservative,
as no account is taken of, in particular: suppressed traffic at
the peak of daily and annual demand; the traffic which is already
being suppressed at Heathrow and Gatwick; the market premium Heathrow
currently enjoys; benefits to airlines including those of reducing
aircraft delays as a result of higher airport capacity; and indirect
benefits to the economy, including lower business costs, and the
impact of additional air services on foreign direct investment,
tourism and the UK's competitive position vis-a"-vis other
European countries (but see below).
Wider economic benefits
In addition to the direct benefits, increased
airport capacity is expected to have wider, indirect economic
impacts for the economy as a whole, for those parts of the economy
most closely linked to aviation and air transport, and for those
sub-regions most affected by airport development. Wider economic
impacts identified and assessed in SERAS are:
the potential increase in productivity
across the economy as a whole due to an increase in aviation capacity;
the increase in foreign direct investment;
the benefits in the tourism industry.
The focus in the economic evaluation of the
SERAS packages has been on the estimation of the direct impacts
of increased airport capacity, as being the most tangible, most
certain and most measurable indicators of the economic benefits
of increased airport capacity and the enhanced air services thereby
made possible. In addressing the wider economic impacts, the intention
has been to explore the issues and to present an order of magnitude
estimate of their potential. It is important to avoid double counting
benefits: the value of improved services to business travellers
themselves, for example, is already recognised in the direct user
benefits. Basically, the approach adopted for wider economic benefits
is to recognise the larger contribution of an airport package
which enabled more foreign business travellers to fly to and from
the UK, without attempting to quantify the contribution of those
passengers to Foreign Direct Investment.
Capital costs include both costs of providing
additional capacity and major repair expenditure to keep the extra
infrastructure in good order.
Estimates of capital costs are required both
for the assessment of net economic benefits of providing infrastructure
and for financial analysis on the part of airport companies regarding
the financial viability of projects.
Capital costs of options have been estimated
under a number of headings and summarised under the following
main cost categories: terminals and satellites; aircraft pavements;
enabling works and infrastructure; navigation aids; cargo and
maintenance; support facilities; and associated surface access
schemes if their provision is "tied" to the provision
of additional airport infrastructure.
To ensure consistency, a common set of unit
rates was used for all major cost items, with any difference between
airports carefully documented.
Measures of capital cost per amount of capacity
provided (£ million per mppa) were calculated to compare
one option with another.
The financial model estimates the rate of return
generated by the additional investment and capacity provided in
each package. This requires, among other things, estimates of
capital costs, the capacity of additional infrastructure, and
the build-up of its use.
The calculated rate of return can be compared
with a target pre-tax rate of return (set at a deliberately demanding
12.5% in pre-tax money of the day terms) to establish the financial
viability of a package. The funding assumptions incorporated in
a model run enable standard ratios, particularly interest cover
and asset cover to be calculated. If a package fails to achieve
an acceptable rate of return, the model establishes what might
be required in terms of a levy per passenger, at an individual
airport or more widely across the South East airport system, in
order to achieve the target rate of return.
Internalising environmental costs
Estimates of external costs arising from aircraft
emissions and noise were published by the then DETR in Valuing
the External Costs of Aviation, published in parallel to the Future
of Aviation consultation document in December 2000. In SERAS,
noise and air quality were modelled at the airport-specific level.
Climate change impacts, however, arise at the global level and
are appropriately modelled by assessing the degree to which national
aviation demand would be reduced by measures to internalise the
costs in terms of global warming that aircraft emissions impose.
CO2 has been taken as the principal indicator
of SERAS options on climate change. Estimates were made of CO2
emissions in 2030 for three combinations of development options,
representing different levels of capacity provision. These estimates,
together with an allowance for other relevant aircraft emissions,
principally NOx, suggested equivalent taxes could add up to around
a 10% increase in air fares.
Two environmental sensitivity tests have been
run using the DfT air passenger forecasting model for selected
SERAS packages. It was assumed that the phased introduction of
an environmental tax would cause the demand for air travel to
be reduced by 0.5 and 1% in 2006, increasing annually to 5 and
10% by 2016 and then remaining at those levels for every subsequent
year to 2030.
In both tests, forecast usage of Heathrow and
Gatwick is not affected, given the extent of excess demand at
these airports, but there are reductions in passengers at other
South East airports.
The lower SERAS environmental sensitivity tests
used assumptions which were somewhat more adverse than in Valuing
the External Costs of Aviation. The higher SERAS environmental
sensitivity test is more realistic.
Further information on the scientific understanding
of aviation's contribution to global warming together with some
revised estimates of the damage costs of carbon emissions is now
available. Recent evidence indicates that aircraft have approximately
three the times the radiative forcing effect than would be expected
form their CO2 emissions alone. In addition, DEFRA has revised
its guidance on the social cost of carbon with a central estimate
of £70 per tonne of carbon, increasing by £1 per tonne
of carbon per annum to reflect increasing damage costs over time.
The combined effect of these two revisions indicates that the
demand for air travel could reduce by about 12%.
However, a higher price of aviation fuel is
likely to have supply side effects through encouraging the use
of more fuel-efficient aircraft and, in the longer term, acting
as a spur to the development of more fuel-efficient technologies.
The long term effect of a tax designed to reflect
external costs will be smaller than the initial effects based
on demand impacts alone. The induced cost reductions will have
some effect in stimulating demand.
Monetary values for the effects of noise were
estimated by assessing the impact of increased air traffic noise
on house prices in the region of the option airports. The tentative
finding of past research, that a 1dB change in noise level results
in an approximate 0.5 to 1% change in house prices, was used to
estimate the order of magnitude of the noise value of different
options. Values at Heathrow ranged between 36 and 40 pence per
additional passenger; at all other airports in the South East,
values never exceeded 5 pence per passenger.
Local air quality
Robust values of the effects of local air quality
changes, primarily NO2, on health are not available. But information
supplied by DEFRA suggests that respiratory hospital admissions
might increase by 0.5% for each 10ug/m3 of NO2. This implies an
increased admission rate of approximately 5 per 100,000 people
at an NHS cost of £1,500-2,700 per respiratory hospital admission.
These values give a total cost of around £10,000 for every
100,000 people subject to an increase of 10ug/m3 of NO2 arising
from respiratory illnesses (this does not include any deaths brought
forward for which there is no evidence at present).
The analysis indicates that within the South
East, only an additional runway at Heathrow could (without preventative
measures) lead to a significant number of people being subject
to changes in NO2 of this magnitude, and this on conservative
assumptions. These estimates of the costs of respiratory illnesses
indicate that the total amount would be too low to be expressly
represented in any environmental levy.
1 One of a set of six consultation documents issued
on 23 July 2002, between them covering all the English regions,
Scotland and Wales. An equivalent consultation document for Northern
Ireland was published in August. Back
This is distinct from prevention costs, which relate to sector
abatement costs required to meet a given CO2 cap. Back
See page 174 of the South East consultation document (footnote
1 above). Back
Department of the Environment, Transport and the Regions, November
Since publication of the SERAS Stage 3 Report, some further technical
work has been done. This is set out in an addendum to the Stage
3 Report published at the same time as this second edition of
the consultation document. See Annex C for further information. Back
In Stage 3 and in subsequent work to underpin this second edition
of the consultation document, SERAS also appraised new runway
options on the basis that the 2019 agreement was maintained. SERAS
assumed that new runways would be operational by 2004. therefore,
in combinations of development involving runways at Gatwick and
at other airports, SERAS assumed that these other runways would
be built first. For example, in the package with one new runway
at each of Heathrow, Gatwick and Stanstead, the order (and Years
of opening) became Heathrow (2011), Statnstead (2018) and Gatwick
(2024); in the package with a new runway at Stanstead and Gatwick
the revised assumptions were Stanstead (2011) and Gatwick (2024). Back
Transport 2010: The 10 Year Plan, DTLR, July 2000. Back
Orbit MMS reported in November 2002. See www.orbitproject.com Back
SWARMMS was published May 2002. See www.swarmms.org.uk Back
Thames Valley MMS was published in January 2003. See www.thamesvalleytransport.org.uk Back
London to South Midlands MMS reported in February 2003. See www.ismmultimodal.com Back
LOIS MMS was published in December 2002. See www.lois-mms.co.uk Back
The hearing did not take place until 13 November 2002. A decision
is not expected for several months. Back
Council Directive 1999/30/EC. Back
See footnote to paragraph 14.25. Back