Select Committee on Environmental Audit Ninth Report


53. Environmental or social goods such as health, biodiversity, or the climate are difficult to value in financial terms. But there is increasing interest in doing so. Such an approach informed the initial development of the Landfill tax and the Aggregates Levy. It underpins Tax and the Environment: Using Economic Instruments (November 2002) in which the Treasury set out for the first time what it considers to constitute an environmental tax strategy.[48] In our own report on Pre-Budget 2002, we expressed support for the general principle involved—that all cost externalities, including environmental, are internalised—but we were critical of the Treasury's increasing emphasis on monetarisation where these costs are intrinsically difficult to calculate.[49]

54. The discussion document, Aviation and the Environment, takes forward this agenda in a specific policy area. In it, the Treasury estimates the total environmental costs arising from aviation at £1.4 billion a year, rising to £4.8 billion a year by 2030. The valuation relates almost entirely to global warming effects from carbon emissions: the only other monetarised values the Treasury quotes are between £119 million and £238 million for local air pollution, and £25 million for noise.[50]

Biodiversity and heritage

55. No attempt is made in Aviation and the Environment to value the impact of any expansion in aviation on landscape, tranquillity, heritage sites, and biodiversity. A number of memoranda, including those from the CPRE and the Woodland Trust, argue that this is a significant omission.[51] We entirely agree. We accept the point made by Forum for the Future that some of these aspects would need to be addressed at a local level through regulation or the planning mechanism.[52] But the point still stands that the public would place a value on these aspects. Indeed, the Government introduced the Aggregates Levy on the basis of studies which valued the local impacts of quarries on nearby residents at nearly £400 million.[53] It is not inconceivable that the public might place a far higher value on the local impacts of a major expansion in aviation.

56. If it is to be consistent with its approach in other policy areas, the Treasury should carry out thorough valuations of all the environmental impacts of an expansion in aviationincluding impacts on landscape, biodiversity, tranquillity and heritage.

The cost of noise

57. Aviation and the Environment states that the total cost of noise impacts for all airports has been estimated at around £25 million for 2000. However, this appears to be based on outdated research. In his memorandum to the Committee, Professor David Pearce, a leading economist whose earlier work underpins some of the Treasury figures, said that "it is disappointing that the ... document did not offer more comprehensive estimates of the externalities from aircraft." He went on to state:

58. We are also concerned that the methodology for quantifying noise—which is based essentially on revealed preferences—may fail to pick up underlying health related effects of constant exposure to sounds in excess of 50db. Evidence from Germany on the effects on two different local schools of temporarily moving an airport demonstrates that noise can have subtle but substantial effects.[55] Wider effects on the health of those who live around airports could be quite considerable. As far as we can see there has been little attempt to evaluate them in order to feed into the Aviation White Paper.

59. Recent work by the EU suggests that those subject to excess noise levels will increase by 40% over the next 20 years, reversing the downward trend of the last 20 years or so. The CPRE has recently concluded that in the UK 606,300 people will be seriously bothered or subject to unacceptable levels of noise in 2030—more than double the number of people affected today. Present valuation methods do not take into account the nuisance value of aviation noise experienced—albeit at lower levels—by those who live further away from airports.

60. The Treasury discussion document, Aviation and the Environment, seriously underestimates the impact of noise by quoting a figure of £25 million for the UK. The cost for Heathrow alone might range from £27 million to £66 million on the basis of up to date figures from the same source. Furthermore, noise may have impacts in terms of health, education, and wider nuisance value, which present methodologies make no attempt to include.

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 expresswhether directly or indirectly—could change dramatically, with large increases in the associated environmental costs.


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 timeespecially 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

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