APPENDIX 6
Memorandum from Friends of the Earth
SUMMARY
All external costs, including environmental
costs, should be identified and paid for. Measuring external costs
and internalizing them is an important but only first step. It
is important that the Government uses a full and complementary
suite of costs rather than looking solely to apply those easiest
to measure. The recent Treasury exercise is a late yet welcome
move although the costs identified are extremely limited.
Beyond the exercise of identifying and applying
costs key broad principles exist which should be used to inform
and achieve wider public policy objectives as well as a sustainable
aviation sector. The test of internalising costs is whether it
bears results against stated policy and objectives both for the
aviation sector and for wider public policy.
Even where costs can be easily quantified other
policy measures are required, not least demand management and
absolute interventions, to achieve specific objectives. On its
own internalizing costs is unlikely to be enough to address the
growing impacts of the aviation industry especially potentially
significant effects both in the near and longer term.
Certain absolute interventions have a particular
role in sending economic signals to deal with aviation's current
and forecast excessive growth impacts rather than simply relying
on permitting payment for the privilege of polluting. This is
likely to be particularly necessary in the case of aviation's
emission of climate change gases (CO2, NOx and water vapour) and
to bring about the speed and scale of the change required.
In terms of carbon and carbon dioxide emissions
Government policy remains in its infancy while aviation's growth
demands are advanced. There is no certainty—and no guarantee—that
the eventual prices set for the damage caused by CO2 emissions
will ensure emissions fall in time to meet particular targets.
Indeed, aviation's contribution is set to rise leaving other sectors
and parts of society to do more to address the issue and make
up for aviation being allowed to grow. It remains unclear whether
emissions from aviation bunker fuels sold in the UK will count
toward the 60% target. If excluded, aviation's emissions could
rise even more dramatically.
In its 2002-03 consultation the Government exaggerates
the claimed economic and social gains and under-estimates environmental
impacts and the costs related to these. The consultation also
tends to regard all economic and social elements as benefits when
there are clear downsides which have not been factored in to obtain
an accurate "net benefit". The effect is to skew the
picture presented to the public.
Results from a re-run of the DfT's own computer
model do not support the Government's claimed economic benefits
quoted in the consultation documents. Further, the new information
shows how the scale of airport and air travel growth proposed
by Ministers, and put to the public in the 2002-03 consultation,
is unnecessary and misleading.
The Government's interest in "minimizing"
environmental impacts is un-quantified, meaningless and symptomatic
of a mitigation approach to environmental protection. Government
policy in the area of aviation continues to unhelpfully suggest
that the environment can be "traded off" for the claimed
economic or social benefits, which is not an advancement of sustainable
development.
1a. Can the full environmental costs of aviation
be identified?
Most if not all of the major costs can be identified
in qualitative terms. They include:
— loss of wildlife, habitats and biodiversity
— impacts on watercourses and groundwater
— increased risk of flooding due to
loss of natural surfaces
— harm to townscape and visual amenity
— loss of heritage, eg ancient churches,
old buildings and monuments
The boundary between the environmental and the
social is not strict. Environmental effects tend to have both
social and economic implications and the effects may stray beyond
strict allocations to the three strands of sustainable development
(economic, social and environmental). For example the loss of
countryside or heritage may be considered as having social implications.
But the distinction is not important insofar as all external
costs should be paid, not just the environmental ones.
Non-environmental costs may include:
— third party safety (insofar as insurance/compensation
is not covered by the industry)
— road traffic growth and congestion
— expediting the spread of disease
While costs can be identified qualitatively,
quantification is much harder and for some is probably not possible.
For climate change, noise and air pollution, defensible estimates
are available. For congestion it would be possible to calculate
costs on an airport-by-airport basis. For the other costs, we
are not aware of any robust or generally accepted methods. For
this reason and to ensure that wider public policy is not distorted
or affected by the demands and activities of one sector it is
necessary to rely on other policy mechanisms such as demand management
measures. It is also necessary to invoke "absolute"
measures such as giving absolute protection to Ramsar sites, National
Nature Reserves or Sites of Special Scientific Interest (SSSI)
or requiring that air pollution standards are not be breached.
Without such policy interventions, particularly
man-made climate change, the risk is that aviation's contribution
to climate change will be excessive, by which time other parts
of society will have had to bear the brunt of action and many
of the physical expansion proposals may have been granted thereby
guaranteeing that future trends perpetuate current unsustainable
growth rates and impacts.
The Cabinet Office Performance and Innovation
Unit concluded in 2001 that aviation's share of total UK energy
use in 2050 would, according to various scenarios, be between
10-28%, with two central scenarios at 15% (PIU/ Energy Review
Advisory Group: Energy Systems in 2050, Annex 1, tables one and
four
http://www.cabinet-office.gov.uk/innovation/2001/energy/ag2contents.shtml)
It is a significant feature of both the DfT
and Treasury consultations that no upper limit would be placed,
by the mechanisms proposed, on the forecast growth in aviation
emissions—so potentially growth could be open ended. With
such an approach to such crucial areas it is necessary to implement
further policies beyond the strict internalisation of identified
external costs.
1b. What are the main issues of principle
and methodological difficulties in attempting to do so?
There is extensive literature on this which
we make no attempt to review here. However, important broad issues
of principle include:
— Moral/ethical—is it right to
reduce every impact such as threats to life and health to a sum
of money? The Government does not suggest that it is; safety standards
on the ground are based on "maximum acceptable risk"
of say 1 in 100,000, not on economic cost/benefit considerations.
— Is "willingness to pay"
morally acceptable? Should people be put implicitly in the situation
where they have to pay or justify actions financially in order
to afford their environment a level of protection?
— All economic costs include a major
element of financial "discounting". It is questionable
whether this approach is appropriate for the biggest impacts over
long time periods of many decades. The "present cost"
of completely destroying the economy or even destroying life on
earth may not appear to be great if that destruction does not
take place for, say, 200 years. But few would argue that we should
ignore such issues. When disposing of nuclear waste very long
timescales are considered irrespective of the effects of discounting.
— The economic costs do not usually
differentiate between rich and poor. The claimed "benefits"
of aviation appear large because, according to national travel
data and the aviation industry's own research, it is mainly better-off
people who fly and they are able and prepared to spend a good
deal of their time and money on flying more frequently.
The costs of aviation may appear small because
they affect poorer people as much if not more than better-off
people. Here costs may be direct (such as directly affected airport
communities or people living on a flight-path) or indirect (money
being spent on tax concessions to the aviation sector instead
of being available either to assist less damaging sectors of the
economy or to fund essential public services on which poorer people
in particular tend to rely).
Our general approach to these issues is to say
that payment of external costs alone may be appropriate where
the impacts are:
— Not potentially catastrophic
— Not a major infringement of human
rights
— Not a major risk to life or health
— Not generally considered morally
or ethically unacceptable
Where any of these significant potential effects
do apply, other approaches are needed. Here the sustainable development
imperative particularly comes into play because it is best placed
to address issues which cannot be dealt with by means of a purely
economic/accounting approach.
1c. Can remote but potentially catastrophic
risks be properly reflected in such an approach?
In principle one can calculate an "expected"
cost. Statistically, the expected cost is the sum of the cost
of each possible outcome multiplied by the probability of that
outcome. So if the probability of, say, the Gulf Stream stopping
is assessed at 1 in 100 and the economic cost is estimated at
£10 trillion, the expected cost is £100 billion. This
must be added to the cost for all the other outcomes which are
collectively considered 99% probable.
In practice it is doubtful whether the probabilities
of catastrophic events can be assessed to any useful degree. If
this is so, it would be better to apply external costs only for
the more likely and less catastrophic outcomes and adopt a different
approach to deal with catastrophic impacts. This approach is consistent
with the precautionary principle of sustainable development.
The approach used to achieve sustainable development
and the precautionary principle requires extensive debate. It
may be that direct regulatory and legal measures are appropriate.
But it may be that economic instruments such as taxes or charges
are best. In this case, the distinction between charges for external
cost to and additional charges for precautionary/sustainability
reasons will not be obvious to those paying.
Another key is that people both as individuals
and as part of society tend to be risk averse. If we were offered
a choice of a 10% increase in wealth/income with a probability
of 95% or a total 100% loss with a probability of 5%, we would
not take the risk. Yet on the basis of expected economic benefits
we ought to take the risk. The 100% loss of income/wealth is here
the "catastrophic" event.
2. How Comprehensive and Accurate are the
Environmental Costs Included in Aviation and the Environment:
Using Economic Instruments, and in the Department for Transport's
Consultation The Future Development of Air Transport in the United
Kingdom?
We welcome the Treasury's initial consideration
of economic instruments to influence aviation policy. Since the
Treasury has been considering economic instruments for a decade
or more it is a pity that its work on aviation has not informed
the main consultation documents and therefore the public debate.
The public is effectively denied much of the information and excluded
from discussing the proposals in relation to the wider consultation
on the future of air transport in the UK.
The figures carried in the Treasury/DfT document
are limited in scope and there is some dispute over those costs
which have been identified—these details are examined in
more detail below.
Moreover, an attempt to provide an effective
response to the Committee's inquiry is confronted by a basic deficiency
in the Government's presentation of the information and argument:
— the DfT Airport Consultation
contains the results of a sole sensitivity test of the cost of
internalising a single environmental impact (carbon dioxide emissions),
and concludes that this will result only in a reduction of the
forecast rate of growth, but without identifying what that entails
for the resultant level of forecast demand (See the original
south east main document 5.12)
— Aviation and the Environment:
Using Economic Instruments on the other hand identifies a
total cost for a larger (but still not comprehensive) number of
impacts—£4.8 billion in 2030—but does not identify
the amount of reduction in forecast demand this would result in.
It also does not take forward its introductory work on air quality
and noise effects and costs.
The specific conclusions of these two documents
are also not actively related to each other, and therefore consultees
(the general public not being actively consulted on the Treasury
paper) are left with a limited and selective presentation of the
issues and of the consequences on the resultant demand for air
travel.
In these circumstances, it is difficult if not
impossible to make wider comments on the impact on "sustainability"
in general, if that impact has been most inadequately identified.
OBSERVATIONS ON
THE TWO
CONSULTATION DOCUMENTS
REGARDING ACCOUNTING
FOR EXTERNAL
COSTS
Climate change
The DfT's consultation documents accept that
there are appreciable external costs of climate change. They use
a cost of £70 per tonne of carbon, rising by £1 pa,
as advised by DEFRA. The cost is multiplied by 2.7 to reflect
the "radiative forcing" at cruise altitudes due to the
effects of water and NO2 in addition to CO2. This is covered in
more detail in the Treasury consultation, where the total cost
at year 2000 is estimated at £1.4 billion, rising to £4.8bn
at 2030. We have not studied the costings in detail, but regard
the figure of £70 per tonne as reasonable, derived as it
is from a wide review of the literature.
There, is however, a major qualification. The
Treasury consultation notes: "The £70 per tonne of carbon
value takes no account of uncertainties including the probability
of so-called `climate catastrophe' (eg melting of the West Antarctic
ice sheet, Gulf Stream suppression etc); the "socially contingent
impacts" of climate change (eg famine, mass migration etc)".
These are just the effects that would have the
biggest impacts. For example, Gulf Stream suppression could wreak
havoc with the UK economy (and Scandinavia), while famine and
mass migration could de-stabilise whole continents. While the
probability of events or such responses may be considered low,
the very high cost means that the "expected" external
cost is not negligible. (This is expected cost in a statistical
sense, being the probability of each outcome multiplied by the
cost of that outcome and the values summed). We do not have any
firm data on which to assess this effect, but we consider it would
be prudent to assume that the expected cost of climate change
is higher—perhaps up to three times—the Government
figure.
Air pollution
The main consultation documents only take account
of the effect of NO2 (nitrogen dioxide) on hospital admissions
which do not lead to death. The resulting cost is "...too
low to be expressly represented in any environmental levy."
This estimate is of no value. It ignores the economic cost that
expresses the suffering and deaths from air pollution. It also
ignores all pollutants other than N02, especially the dangerous
PM10 and ozone.
A study by CE Delft estimates the cost of air
pollution at an average European airport at between one and two
Euros per LTO (Landing and Take Off) cycle. This result is quoted
in the Treasury consultation where it is converted to total cost
of £119-236m for UK passengers. We have not studied the derivation
in detail, but it appears a reasonable estimate.
Noise
The main consultation documents say on the cost
of noise "Values at Heathrow ranged between 36 and 40 pence
per passenger; at all other airports, values never exceeded 5
pence per passenger." The method of calculating the cost
of noise—by estimating an effect per decibel (dB) of noise
on house prices—was described in a study by Professor David
Pearce and Brian Pearce "Setting Environmental Taxes for
Aircraft: A Case Study of the UK. 2000".
A study by the Aviation Environment Federation
(AEF) has uncovered some major shortcomings in the method. The
study only refers to noise within the 57 Leq contour and thus
ignores all people who are affected by noise but are not exposed
to 57dB. The 57 cut-off was based on a study over 20 years ago
which took 57dB as representing low levels of "high annoyance".
However, recent studies indicate the onset of annoyance at around
50dB and the WHO considers that people should not be exposed to
levels over 55dB on health grounds.
There are also other problems, in particular
that aircraft noise is assumed to be superimposed on quite high
levels of existing background noise. Re-calculation of the costs
by AEF suggests that the true costs are more than double those
produced by Pearce and Pearce and used by the DfT in the consultation.
The AEF's analysis was sent to the DfT in 2002 and an acknowledgement
is hoped for.
The noise cost is based on a study that uses
empirical evidence on the reduction of house prices due to noise.
In principle this takes account of the total cost imposed on residents.
But it does not take account of non-residents; thus is would be
inappropriate for areas valued by visitors for their tranquility,
such National Parks or Areas of Outstanding Natural Beauty. This
is a further source of under-estimating the cost of noise. An
additional cause of under-estimating is that the method based
on house prices does not take account of the health effects of
noise.
A study by CE Delft in 2002, "External
Costs of Aviation" puts higher figures on noise. It estimates
the "marginal" cost of noise at about 3 Euro per seat
LTO. The CE Delft study includes a full analysis of many studies
of which Pearce and Pearce is just one, so the CE Delft study
can therefore be considered more reliable.
The CE Delft figure of three Euro is a marginal
cost and it assumes there is already noise from other aircraft.
Because of the logarithmic nature of noise, the marginal cost
of aircraft is lower than the average cost. If aviation is to
pay its full external cost, the average cost is appropriate. CE
Delft's figure for average cost is 6 Euro per LTO. This cost is
more than 4 times the cost used by the DfT. Converting to a total
cost, the cost of noise in 2000 would be £720m.
Although the CE Delft study was more comprehensive
and includes the Pearce and Pearce one, the consultation documents
only refer to the latter. Even the Treasury's recent "Economic
Instruments" paper only refers to Pearce and Pearce. We believe
that the main reason why the Government does not want to expose
any results other than Pearce and Pearce's is that the latter
makes a key assumption that populations outside the 57dB noise
contour are not affected by noise. As a result, they are able
to claim that the areas affected by aircraft noise are far less
than is actually the case.
The assumption of a 57dB is cut-off is entirely
consistent with the ongoing Government and industry line which
is not supported by the CE Delft study, WHO or anyone else.
There are no costs given for all the impacts
mentioned in our reply to 1a above and we are not aware of any
useful estimates. If seems likely, looking at the range of impacts,
that their total cost could be considerable. We highlight just
one component of one impact—the rapid spread of the recent
SARS outbreak.
3a. Has the Government defined the correct
environmental policy objective for aviation—that, where
appropriate, the industry should pay for its environmental costs?
This not "the" correct policy but
is just one component of it. As noted above sustainability will
not be attained simply by charging environmental external costs.
Further action is needed.
The Government's use of the expression "where
appropriate" raises concerns as one would need to see a detailed
explanation of what cases would and, more importantly, would not
be "appropriate". As used this appears to be a "get
out" for any vested interest wishing to perpetuate current
practices rather than move toward sustainable development and
genuine environmental protection.
3b. How does this relate to the Government's
primary objective for airports—to maximize the significant
social and economic benefits, whilst seeking to minimize the environmental
impacts?
The wording of the question follows the Government's
presumption that that there are "significant social and economic
benefits". This is constantly asserted by Ministers and their
officials but robust evidence is never produced. In the case of
economics, the case is particularly suspect. Few would contest
that aviation has a role in the economy and that some level of
air travel is necessary to serve our economy. But there is no
evidence that large-scale growth of air travel is either needed
or desirable.
Friends of the Earth, CPRE and the Aviation
Environment Federation obtained the Department for Transport's
permission to re-run its SPASM computer model using a different
set of assumptions from those fed in for The Future Development
of Air Transport in the United Kingdom:
(1) * that aviation fuel should be taxed
at the same rate as motor fuel (45.8p per litre), and;
(2) ** that all air travel should be made
subject to VAT at 17.5%;
(3) that duty free is abolished on all flights;
(4) it was also assumed that APD would be
abolished;
(5) that these changes should be phased in
gradually between 2005 and 2025.
The total value of these tax measures amounted
to £9.2 billion (at 2002 levels). The Department agreed to
rerun the model on these assumptions, and the results were produced
in February 2003. We regard our assumptions as conservative, reasonable
and in keeping with the Government's oft-stated policies of ending
the anomaly of tax-free aviation and ensuring that the industry
covers its costs.
The results of the re-run SPASM model are:
— the total number of passengers using
UK airports would increase at a much slower rate from 200 million
in 2000 to 315 million in 2030, compared to the official forecast
of 501 million used as the basis for the 2002-03 consultations.
— there would be no need for any new
runway anywhere in the UK in the period to 2030. The slower growth
could be accommodated within existing airport and runway capacity
and permitted expansions as at the end of 2002. The forecast numbers
at each major airport in 2030 would be: Heathrow 85 million passengers
per annum (mppa); Manchester 51 mppa; Gatwick 41 mppa; Birmingham
30 mppa; Stansted 26 mppa; and Luton 11 mppa.
— The re-run of the SPASM computer
model also showed that, with these levels of tax, the economic
"benefit" from building a new runway at, say Stansted,
would be negative.
*The reason for suggesting the same rate of duty
on aviation fuel as on petrol for cars is that air travel does
just as much environmental damage, and that air travellers should
contribute towards the cost of public services, such as health
or education, just as much as car drivers.
**The case for putting VAT on air travel is that
all industries should normally pay the same rate of tax. Air travel
cannot be called essential, since 75% is leisure. There are strong
public service and equity reasons as to why buses and trains do
not pay VAT. More relevant is that all aspects of car travel do
pay VAT.
The results show that the claimed economic benefits
quoted in the consultation documents are largely an artifact of
the modelling approach which conveniently ignores all external
costs and tax breaks.
In the Government's consultation documents there
is also an unsubstantiated presumption that the social and economic
effects are all positive "benefits". This is far from
the case. There are large potential economic losses due to too
much air travel:
— Money taken out of the UK by UK tourists;
— Distortion of the economy due to
tax exemptions; and,
— Distortion of the economy by other
sectors having to retrench more (having to take more action on
environmental issues) to make up for aviation's growth (eg on
climate change and energy use).
These costs or "dis-benefits" must
be netted off from the claimed benefits to give a "net benefit".
The Government's approach which seeks to maximise the gross economic
benefits instead of net economic benefits is simply flawed. Similarly,
there are also significant social costs of air travel. Impacts
such as noise pollution, which may be termed environmental, have
their social (and even economic) costs. Loss of countryside, which
is threatened by airport and associated development, is also a
social cost, although components of it are most certainly environmental.
Road traffic congestion and third party safety are also social
costs. Social exclusion and inequality are exacerbated by the
prevalence of tax-free air travel that tends to enable the better
off to fly away when they want and take their money abroad. All
such costs need to be netted off from the claimed social benefit
of allowing people to fly where, when and as cheaply as they choose.
Again in this regard the Government's approach of maximizing the
gross social benefits instead of net social benefits is also flawed.
In their otherwise pro-air transport industry
speeches Ministers often mention the need for both UK policy and
the aviation industry to "minimize the environmental impacts".
It remains unclear what is meant by "minimize" and whether
it has any worth as a form of environmental protection. It is
clearly not a literal minimizing, since impacts could be hugely
reduced by ending flights and closing airports. Minimizing impacts
could be addressed through acting to stabilize or reduce growth
rates. But from Ministers' speeches and the current consultations
this is clearly not intended and it is more likely that Ministers
are seeking to allow growth with some tinkering with some chosen
impacts.
It would be entirely possible to make large
reductions in impacts by, for example: banning noisier aircraft;
restraining car access to airports; filling empty seats on aircraft;
setting environmental limits for each airport and ensuring these
are adhered to by establishing a proper regulatory body; and,
preventing the rash of airport-related development and land use
pressures which tend to follow airport expansion.
That few if any of these is contemplated by
Government suggests that Ministers ascribe an ambiguous meaning
to the word "minimize" when they use it apart from to
reduce the impact by some unspecified amount below its previous
level. This renders "minimize" as an expression largely
meaningless and, as an intervention, unreliable. This approach
tends to sum up the Government's mitigation approach to environmental
protection when it comes to dealing with aviation and developing
UK policy. For all the above reasons we consider the Government
policy is unacceptable. The question of how particular policies
relate to it is therefore, strictly, not relevant.
A policy which seeks to address economic, social
and environmental issues needs to define criteria for each. These
must include sustainability criteria which might, for example,
include a rise in GDP and preservation of biodiversity. A policy
that does not define the criteria is virtually meaningless.
There is also the implication in this policy
that the environment can be "traded off" for assured
economic or social benefits. We reject this view, which is a fundamental
misunderstanding and misrepresentation of the meaning of sustainability
which requires that economic, social and environmental goals are
integrated and met simultaneously. We know of no evidence which
shows this is not possible and why air transport should be treated
as an exception to this growing imperative.
4a. Would the incorporation of environmental
costs be sufficient to achieve sustainability in the air transport
sector?
If the reduction of the scale of growth forecast
by the Government as a result of internalising environmental costs
is only modest—although, as we commented at the start, the
size of this reduction has not been quantified—then can
the resultant level of met demand be understood as "sustainable"?
It is far better to pursue a policy approach
that seeks to develop and apply mechanisms that will actively
manage demand down to the levels determined by policy at any particular
time. This gives the Government the appropriate levers to respond
both to issues identified at the present and for future expected
and unexpected developments.
We would also ask:
— What does sustainability in one sector
mean particularly in aviation which impacts on other sectors and
areas of public policy?
— Can we specify what emissions are
sustainable without looking at all other sectors' emissions?
Applying costs alone is unlikely to achieve
sustainability in the sector. Applying costs would need to be
accompanied by other measures including demand management. The
test of internalising costs is whether it achieves the pace and
scale of change required to achieve stated policy for the aviation
sector and for wider public policy beyond policy for aviation.
4b. What additional measures, if any, would
need to be taken if this were to have little impact on rates of
growth?
Measures could include:
— Imposition of full taxes (in the
region of £9.2 billion p.a.)
— Proper regulatory control of noise
and emissions at airports
— Establish environmental limits at
all airports with progressive reductions in emissions levels
— Effective air quality management
action plans (rather than current paper exercises which do not
require air quality objectives to be met, merely that action is
taken to attempt to meet objectives)
— Proper protection of all designated
wildlife sites
— Leadership in Europe on taxes and
standards (instead of using the rest of the world and claims of
"competition" as an excuse for inaction).
4c. To what extent is there a tension between
the policy of incorporating environmental costs (especially of
carbon) and the Government's long-term objective of a 60% reduction
in C02 by 2050?
The Government's policy of internalising the
external cost of aviation is a step towards its target of reducing
carbon dioxide emissions to 60% of their 1990 levels by 2050.
In theory, full internalisation would lead to progressive reductions
in total emissions such that concentrations of carbon dioxide
fall to levels that keep climate change to manageable levels.
However, there is a massive difference between
internalisation of external costs in theory and internalisation
in practice. The Government has yet to set a firm price for the
damage caused by carbon dioxide emissions, let alone other greenhouse
gases emitted by aircraft. There are flaws in the studies it has
carried out to date and there is no guarantee that the eventual
prices that are set will ensure emissions fall in time to meet
particular targets. Moreover, the Government needs to be clearer
about its policy toward aviation emissions. It has yet to confirm
that emissions from aviation bunker fuels sold in the UK will
be counted toward the 60 per cent target. If they are excluded,
emissions from aviation could rise dramatically.
Crucially, there is a substantial and unresolved
tension between different areas of the Government's policy, which
the airports consultation should have examined and resolved, but
simply ignored. These are, for example:
— a failure to relate rising aviation
climate change emissions to the overall national requirement to
reduce emissions, with the result that aviation's share of the
national total increases (without any upper limit being set) and
implying that other sectors should bear a disproportionate burden
of the required reductions.
— a failure to relate the timescale
of the Airports consultation planning period to the 2050 long-term
objective date, with its end date (2030) being 3/5ths of the way
through.
5a. Given the international context, what
practical options for incorporating environmental costs are really
available to the Treasury and the Department for Transport
— The Government could introduce a
tax on fuel for domestic flights as in the USA (exemptions can
be made for unique social reasons such as in the Scottish islands).
— The Government should adopt an assertive
role to move forward the ICAO deliberations on international taxation
of aviation fuel, so that the work of this UN agency is subordinate
to the requirements derived from the UN Intergovernmental Panel
on Climate Change. At present ICAO appears to be making no contribution
to the Kyoto process.
— Notwithstanding the need for the
Government to be more assertive with ICAO it could negotiate bilateral
agreements with other governments to remove part of aviation's
tax anomaly by introducing tax on aviation fuel.
— As a flat rate charge under the direct
control of UK Government air passenger duty (APD) is very well
placed to act as a price restraint on precisely those low-cost
flights which are generating the major environmental pressures
at expanding airport sites. APD could be re-defined or replaced
to make it relate more to the environmental impact For example,
relate more to distance, relate to seats rather than passengers.
— Impose noise and emissions-related
landing charges.
— The Government should support the
European Commission's proposed environmental charge.
5b. How should any revenues be used?
A combination of uses:
— Not just on mitigation, because this
is limited and economically inefficient
— Direct compensation to those significantly
affected (individually assessed)
— Compensation eg rate rebates, tax
cuts or grants for those not so greatly affected (assessed by
formula, eg by ward)
— Indirect compensation, eg grants
to local authorities related to the impacts
Revenues derived from internalising external
costs, or the still larger sums available from applying demand
management measures, can make a positive contribution to overall
welfare if they are applied to positive public policy purposes.
These can include local economic regeneration in more environmentally
sustainable and better located industries; investment in more
sustainable transport modes; and as environmental and social compensation
for the negative impacts created by aviation around airport sites.
Beyond this, revenues could be used more generally in support
of social or community facilities, and as an addition to general
taxation. Most certainly any funds should not be put back to the
industry, say to invest in more efficient engine technology, as
it already has access to Government (DTI) funding for research
and development. Recycling money into the air transport sector
would negate the point of charging external costs.
April 2003
| 
