The cost of carbon
61. There is no unanimity on the environmental cost
to be attributed to carbon emissions. In our Fourth Report of
2002-03 (the Pre-Budget Report 2002), we raised concerns on this
issue, and the apparent commitment of the Treasury to monetary
valuations.
62. The Treasury valuation of £1.4 billion (in
2000) for the environmental costs of aviation is almost entirely
based on valuing carbon emissions at £70 per tonne carbon
(£19 a tonne CO2). This figure was based on research
conducted some two years ago. However, there is no consensus
on this value. Some of the memoranda we received (eg from Professor
David Pearce) argued that a value of £70 per tonne significantly
overstated the true cost, while others (eg CATE, Bartlett School
of Planning etc) argued that it understated them.[56]
63. In calculating the price of £70 per tonne
carbon, the Government has not attempted to put a value on significant
or catastrophic changes. Such estimates are only based on our
current preferences and values, and—to the extent that those
values could change dramatically as a result of major environmental
changes—they could prove to be hugely inaccurate. They also
raise major issues about inter-generational equity. Indeed, the
economist Brian Pearce told us that it is impossible to quantify
meaningfully the total environmental costs of emissions in terms
of global warming. The climate as such is of infinite value to
everyone: all one can do is to try to quantify the value people
place on marginal changes. [57]
64. This also raises significant issues relating
to education and awareness. The preferences people will express
and their valuation of carbon emissions, for example, will partly
depend on the extent to which members of the public understand
the connection between environmental standards and quality of
life. If the impacts of climate change increase, it is likely
to result in a higher valuation on environmental protection.[58]
In this connection, we were disappointed that a DfT survey undertaken
as part of the consultation demonstrated little general awareness
of the connection between the growth of aviation and global warming.[59]
65. Such arguments have huge implications for the
Treasury's programme of monetarising environmental externalities.
Current valuations of carbon make no attempt to take account
of significant or catastrophic changes to the atmosphere. Indeed,
in practice it is impossible to calculate the total value of our
climate. If climate change bites deeper, the preferences and valuations
people express—whether directly or indirectly—could
change dramatically, with large increases in the associated environmental
costs.
Conclusions
66. The concerns raised above give good grounds for
questioning both the accuracy and the comprehensiveness of the
environmental costs included in the HMT/DfT discussion document,
Aviation and the Environment. They appear low, and indeed
some organisations have suggested that they are far lower than
the total external costs of the industry.[60]
Moreover, it may not be enough to incorporate environmental costs
even if this has little effect on demand. One might need to go
far further than this in order to influence behaviour—as
indeed the Government has accepted in the case of road fuel duties
and the Landfill Tax.[61]
67. The HMT/DfT document Aviation and the Environment
tries to calculate the totality of environmental costs arising
from aviation. The attempt to do so may be fundamentally flawed
and the exercise could ultimately prove a waste of time—especially
if there is a move towards emissions trading systems. At the very
least we have little doubt that the level of costs identified
by the Treasury is unlikely to be sufficient to stimulate significant
behavioural change.
48 Op. cit. Back
49
EAC, Fourth Report of Session 2002-03, Pre-Budget Report 2002,
April 2003, HC 167, paragraphs 44 to 62. Back
50
Op. cit. Back
51
Ev105, 145. Back
52
Ev45, QQ122-123. Back
53
EAC, Fourth Report of Session 1999-2000, The Pre-Budget Report
1999: Pesticides, Aggregates and the Climate Change Levy, February
2000, HC 76-I, paragraphs 34ff. Back
54
Ev123 Back
55
Sixth Report of Session 2002-03 from the Transport Select Committee,
July 2003, HC 454-II, memorandum 99 from Professor Stansfeld. Back
56
Ev39, 97,101. Back
57
Ev44ff. Back
58
Ibid. Back
59
The Sky's the Limit, IPPR 2003, page 41. Back
60
eg. Ev36. Back
61
Ev9, Q63. Back
