Select Committee on Environmental Audit Written Evidence


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:

    —  climate change

    —  air pollution

    —  noise pollution

    —  loss of wildlife, habitats and biodiversity

    —  impacts on watercourses and groundwater

    —  increased risk of flooding due to loss of natural surfaces

    —  loss of countryside

    —  loss of landscape

    —  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 irreversible

    —  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


 
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