Select Committee on Environmental Audit Written Evidence


APPENDIX 9

Memorandum from the Royal Society for the Protection of Birds

1.  SUMMARY

  1.1  The RSPB considers that Government's approach to devising aviation policy is inappropriate for finding solutions to the environmental problems posed by the sector. Their approach, as represented by consultations issued by the Department for Transport (DfT) and the Treasury (HMT), is theoretically compelling in environmental terms. It is to implement the "polluter pays" principle, under which aviation should pay its full environmental costs. In theory, the identification and calculation of all the external costs of aviation, in the context of similar costs imposed on activities in other sectors, would make it possible to impose those costs on aviation. A socially desirable level of aviation activity, and acceptable level of environmental damage, would be the theoretical result. In practice, however, it is extremely difficult to identify or accurately calculate what those costs are. The practical challenge is actually impossible in the context of an environmental problem, like climate change, the severity (and costs) of which change as carbon emissions go up or down, and the impacts of which are potentially catastrophic and irreversible. Even if it were possible to calculate the costs, it is difficult then to design policy instruments that capture them efficiently.

  1.2  In this situation, the primary driver of policy is the scientific imperative to achieve or avoid certain practical outcomes. In the case of climate change, that imperative is significant carbon reduction, relatively quickly. In recognition of this imperative, the Government has already undertaken a commitment to reach progressively stringent targets over the next fifty years: a 12.5% reduction in greenhouse gases by 2008-12 (Kyoto Protocol); a 20% reduction in carbon dioxide by 2020; and a 60% reduction in carbon dioxide by 2050.

  1.3  Were we to rely solely on the imposition of the theoretically-derived costs of aviation to achieve these targets, we would almost certainly fail to meet them, and fail to encourage aviation itself to make an appropriate contribution. Indeed, in all probability, aviation-related emissions would still rise steeply and the costs of reducing overall national emissions in line with the targets would have to be borne by other emission sectors.

  1.4  The key, practical way forward is therefore to develop a policy framework that ensures delivery of targeted emission reductions in the most cost-effective manner possible. Target delivery can be guaranteed by imposing emission caps on all sectors, including aviation, which contribute to the relevant problem—climate change. Cost-effectiveness can be guaranteed by allowing emissions trading among actors. In the context of aviation, which incurs all sorts of other significant costs, including noise, air quality, land take and habitat destruction, growth should also be constrained for a variety of reasons, by physically restricting airport capacity so that it cannot meet unsustainable demand, and by increasing the costs borne by aviation via a basket of financial instruments.

  1.5  In conclusion, the RSPB considers that it is not practically possible to accurately determine the environmental costs of aviation, although we agree that it is necessary to try to approximate them when devising the basket of financial instruments for managing demand. In this context, however, we note that the DfT and HTM estimates for the cost of carbon are likely to be too low because they have tended to employ forecasts of demand that are lower than the median of their own growth forecasts.

  Turning to the specific issues outlined by the Committee:

2.   Can the Full Environmental Costs of Aviation be Identified? What are the Main Issues of Principle and Methodological Difficulties in Attempting to do so? Can Remote but Potentially Catastrophic Risks be Properly Reflected in such an Approach?

  2.1  The full environmental costs of aviation cannot be identified. Indeed, it is hard to identify the full environmental costs of any area of human activity. This is especially so when it comes to assessing some processes, like climate change, with potentially catastrophic or irreversible consequences. Climate change is likely to result in significant loss of human life and at least some species and ecosystem extinctions. These practical limitations are implicitly recognized, but not addressed, in the HMT/DfT consultation entitled "Aviation and the environment: using economic instruments", which notes that it "takes no account of uncertainties including the probability of... climate catastrophe...socially contingent impacts or... the costs of impacts post-2100".

  2.2  Whilst acknowledging that it is hard, if not impossible, to estimate full environmental costs, the RSPB agrees that it can be useful to try to do so. Clearly, when trying to devise economic instruments intended to limit particular human activities, some estimate of environmental costs is helpful. As the HMT/DfT consultation is intended for just this purpose, it is appropriate to attempt to estimate costs, as long as the limitations of such estimates are borne in mind, and those limitations determine the use to which the estimates are put.

  2.3  Because of the uncertainties inherent in such estimates, where they are attempted it is always best to employ a range of costs, and other sensitive assumptions. Given this methodological principle, and the fact that HMT/DfT accept that catastrophic climate events are "probable", it is surprising that a higher figure for the cost of carbon was not adopted at the top of the range. The consultation uses an illustrative cost of £70/tC, rising at £1 tonne per annum. Yet DEFRA, in the study looking at the social costs of carbon from which the figure of £70/tC was derived, advise using an upper estimate value of £140/tC and a lower value of £35/tC (all at 2000 prices) for performing sensitivity analyses that reflect the range of risks associated with climate change damage[27]. Whilst the HMT/DfT consultation mentions this range in Annex A, the estimates made in the analysis are all based upon the median forecast. Similarly, we note that the radiative forcing from aviation carbon emissions is assumed throughout to be 2.7 times that of ground-based emissions- again, a range of values, of which 2.7 is a median, should be employed.

  2.4  Whilst employing a median cost for carbon (and a median value for radiative forcing) makes presentation simpler, it obscures the fact that costs (and forcing) could be (far) higher or, indeed, lower. Given that the UK Government subscribes to the precautionary principle when tackling environmental problems, there would be a good case for employing the upper ends of both ranges both for presentational purposes and when designing economic instruments for minimising environmental damage.

3.   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.

  3.1  An underlying concern about both consultations is that the DfT have not conducted a full set of demand forecasts to the year 2030. Their most recent set of forecasts (Air Traffic Forecasts for the UK 2000) only extends to 2020. The 2030 values are merely extrapolations from the 2020 figures. We question the wisdom of basing extensive analysis of costs, and the need for increased airport capacity, on a simple extrapolation exercise, however well performed.

  3.2  We also have concerns about some of the assumptions that underlie the DfT's 2020 (unconstrained) demand forecasts. Whilst none of these assumptions is obviously unreasonable in itself, we note that, according to the DfT's own sensitivity analyses, the forecasts are extremely sensitive to small changes in certain key factors, such as GDP, market maturity and changes in air fares. If any of the assumptions made about these factors change significantly over the next 30 years, as they may very well do, then the forecasts will also change significantly. For example, in the median scenario, the model assumes that fares will decrease at a rate of 1% per year. According to the DfT sensitivity analysis, if fares were to remain constant then passenger numbers in 2020 will be 301 million per annum as opposed to 401 million in the median forecast, and would thus be significantly lower even than the "constrained" forecast of 349 million. Similarly, the DfT may have underestimated the impact of growth in low cost carriers by over-estimating the maturity of that section of the aviation market. If the market is less mature than the model assumes, then there would be higher growth than predicted in all scenarios. There is thus a significant probability that the demand forecasts could be in error by a considerable margin.

  3.3  To deal with this possibility, in line with the precautionary principle, we would advocate working on the basis of the higher estimates. In fact, estimates used in both consultations to calculate future carbon emissions, and consequently future environmental costs, derive from the low estimates of air traffic growth. Specifically, they are based on a scenario that assumes that no new runways will be built anywhere in the UK between now and 2030, and consequently represent what is arguably the lowest feasible emissions future. Employing this low-capacity scenario, the HMT/DfT consultation estimates that aviation in the UK will emit 19 million tonnes of carbon in 2030. This figure is then used to calculate the environmental costs of air travel to be £4.8 billion in 2030. However, if the high airport capacity scenario is used, carbon emissions would rise to 25 million tonnes by 2030, at a cost of £6.25 billion, see Table 1.

Table 1

CLIMATE CHANGE COSTS IN 2000 AND 2030
YearCarbon emitted
million tonnes
Radiative
Forcing Factor
Effective Carbon
million tonnes
Cost of carbon £
per tonne
UK cost
£ billion
20008.22.4 20701.4
2030Low Capacity Scenario*
192.5 481004.8

High Capacity Scenario**
252.5 62.51006.25


10% reduction from high capacity scenario***
19.62.5 491004.9

*415 million passengers per annum (mppa)

**480 million passengers per annum

***432 mppa

Source: Adapted from "Aviation and the Environment" Table C1, HMT 2003

4.   Has the Government Defined the Correct Environmental Policy Objective for Aviation—that, where Appropriate, the Industry Should Pay for its Environmental Costs? 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?

  4.1  Chapter 16 of the DfT consultation paper (The Future Development of Air Traffic) states the Government's commitment to aviation and airport policies that are sustainable and "find and maintain a balance between economic, social and environmental objectives". The HMT/DfT consultation goes further adding that "Policy for airports should aim to maximise the significant social and economic benefits [of aviation], whilst seeking to minimise the environmental impacts. Within this framework, the polluter should pay and aviation, like other industries, should meet its external costs, including environmental costs."

  4.2  In theory, the RSPB subscribes to the view that the polluter should pay but, as stressed earlier, we are deeply concerned about relying too heavily on this approach because, in practice, it is hard or impossible accurately to evaluate full environmental costs, especially for activities like aviation, and environmental problems like climate change. Moreover, on the basis of the methodologies in current Government consultations, it is likely that existing estimates of costs are significantly too low.

  4.3  In practice, for problems with long-term, potentially catastrophic or irreversible consequences, we must set policy goals and targets based on scientific need, and meet them in the most cost effective way possible. Those targets have already been set, through a process of scientific investigation, international negotiation, and UK national policymaking. The UK has an internationally agreed 12.5% greenhouse gas reduction target by 2010 (Kyoto commitment) and a nationally agreed long-term objective of a 60% reduction in CO2 by 2050. Simply requiring aviation to pay estimated external costs would not necessarily ensure either that the targets were met, or that aviation would make a proportionate contribution (compared to other emission sectors) to meeting them. More effective will be the establishment of overall emission caps, and the opportunity for aviation, along with other relevant sectors, to trade its emissions allowances with others. This would be a more reliable way of achieving agreed targets, and would do so at lowest cost.

  4.4  In light of these concerns and the fact that climate change is likely to cause an unacceptable degree of damage, the RSPB considers that it will also prove necessary to restrict demand considerably below the Government's unconstrained forecasts. We consider that growth in aviation should be further constrained using two main approaches: pricing to reduce demand and providing insufficient capacity to meet environmentally unsustainable demand.

5.   Would the Incorporation of Environmental Costs be Sufficient to Achieve Sustainability in the Air Transport Sector? What Additional Measures, if any, Would Need to be Taken if this were to have Little Impact on Rates of Growth? 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 CO2 by 2050?

  5.1  This section examines the questions of whether the incorporation of environmental costs would be sufficient to achieve sustainability in the air transport sector, and how far this would go to help achieve the Government's long-term objective of a 60% reduction in CO2 by 2050. The question of which additional measures would be needed is addressed in section 5.

  5.2  The HMT/DfT consultation paper concludes that "Meeting the cost of climate change would have the effect of reducing demand by around 10%, depending on demand responses and technical improvements and supply-side effects". We do not believe that a 10% demand reduction would be sufficient to achieve sustainability, firstly, because we do not consider that it is possible to fully take into account all environmental costs and, secondly, because the particular DfT/HMT cost estimates are low, for the reasons outlined earlier. Moreover, and most importantly, a 10% cut in demand against a background where all forecasts indicate a far more rapid growth in demand would have little effect on the UK's overall greenhouse gas emissions. It would therefore make it extremely difficult to meet the Government's targets to cut UK carbon emissions by 20% by 2010 and 60% by 2050, and would certainly not represent a requirement for aviation to make an appropriate contribution to those targets.

  5.3  To illustrate these points, we need only look at the scenario forecasts themselves. National CO2 forecasts for 2030 were carried out for two scenarios: a low capacity scenario, with no new runways in the UK, yielding a figure of 415 million passengers per annum (mppa), and a high capacity scenario, with new runways at Heathrow, Gatwick, Stansted, Birmingham, Manchester and Edinburgh, giving a national throughput of 480 mppa. If the higher estimate (480 mppa) were cut by 10%, this would result in about 48 million fewer passengers, giving 432 mppa, ie more than double current passenger numbers. Unfortunately, a CO2 forecast for a passenger growth scenario of around 432 mppa was not undertaken and so it is only possible to estimate carbon emissions by assuming a similar proportional relationship between mppa and CO2 emissions as used by HMT for the other scenarios[28]. However, by this means, it is possible roughly to estimate that, were air travel in the UK to reach 432 mppa in 2030, the resulting emissions would be about 72 million tonnes of CO2 (about 19.6 million tonnes of carbon[29]).

  5.4  The most detailed overall greenhouse gas emissions forecast for the UK[30] only goes to 2020. Under this forecast, greenhouse gas emissions (all greenhouse gases, not just carbon) from all sources are estimated to reach the equivalent of about 160 million tonnes of carbon equivalent by 2020 (taking into account the estimated effect of existing and newly introduced policies and measures). This figure is down from 208.4 MtC in 1990, a decrease of about 23%. Aviation, by contrast, according to the HMT analysis, would actually increase by 11-17 million tonnes of carbon (see Table 1) by 2030, and more than double compared with today. Even assuming that the imposition on aviation of estimated costs resulted in a 10% fall in demand, as the consultation suggests, this would still mean, other factors being equal, that aviation emissions would increase by more than 11 million tonnes of carbon, more than double today's levels. Across all sectors, this means that aviation would be responsible for an increase in UK carbon emissions of between 5 and 8%. Clearly, this rise compares very unfavourably indeed with the Government's long-term objective of a 60% overall emission reduction in CO2 by 2050, and can scarcely be called a fair contribution, or sustainable.

  5.5  The mismatch between the Government's stated environmental objectives on the one hand and the effects of imposing estimated environmental costs on the other, reveals that economic valuation techniques alone will not adequately capture all the costs to society of a major environmental problem such as climate change. Consequently, we should manage aviation mainly according to environmental necessity, not just on the basis of valuations of environmental costs.

  5.6  In addition, we question the DfT and HMT's reliance on at least some "technical improvements" to cut emissions. We consider that policies and measures to manage demand will play a much more significant role in determining how much carbon will be emitted by the aviation sector for the foreseeable future. Technical improvements in fuel efficiency are unlikely to provide sufficient cuts in carbon emissions, partly due to the time-delay in bringing more efficient aircraft into service[31].

  5.7  In conclusion, for aviation to play a full role in helping meet the UK's target of a 60% CO2 reduction by 2050, a variety of economic and other measures will be needed to reduce growth in demand. These measures are detailed in section five.

6.   Given the International Context, what Practical Options for Incorporating Environmental Costs are Really Available to the Treasury and the Department for Transport, and How Should any Revenues be Used?

6.1  The international context

  In terms of limiting greenhouse gas emissions, the best option would be to have a global cap and trade scheme covering all emission sectors. Imposing an increasingly stringent cap over time should ensure that overall emissions were reduced whilst enabling individual firms to trade between sectors. This would be fair and could allow aviation emissions to increase as long as its emissions were offset elsewhere. It would put a global price on carbon, enabling business and industry to assess the true environmental costs of their activities and internalise them. A global cap and trade scheme would also avoid the possible problem of loss of UK competitiveness sometimes associated with unilateral action. From an environmental perspective, it would avoid the issue of exporting the problem.

  6.2  However, the best place to have a global cap and trade scheme is under the Kyoto Protocol, from which aviation and marine-related emissions are currently excluded. Emissions from these sectors are being dealt with by the International Civil Aviation Organisation (ICAO) and the International Maritime Organisation (IMO), respectively. ICAO has tentatively agreed to have an "open" cap and trade scheme, in which aviation emissions would be traded with other sectors. However, it is not yet clear how this would work, in practice, other than by effectively including aviation emissions under Kyoto. A particular concern is whether, and how, ICAO would set a cap (target). Given its remit and membership, it seems unlikely that ICAO would be prepared to set a cap at levels that are appropriate or necessary.

  6.3  The long-term aim of the UK Government should thus be to bring aviation-related emissions back within the remit of Kyoto, preferably along with the USA. However, we appreciate that for obvious reasons this is likely to take time, perhaps a decade or more. Quite apart from the purely political difficulties involved, we appreciate that there are technical questions to be resolved, notably how to allocate emissions. (We consider that the only fair and practical method of allocation would be to the point of sale of the fuel.)

  In the medium term, the UK should therefore work both to optimise any ICAO trading scheme and work for the introduction of a fuel levy on internal flights within the EU, as a matter of urgency. In addition, the UK should investigate whether and how aviation-related emissions might be included in the EU cap and trade scheme, possibly via so-called "opt-ins."

  6.4  In the short term, the UK should introduce a number of demand limitation measures within the UK itself, and advocate them in the EU. Any fiscal measures introduced need not be onerous. Sensitivity tests performed by DfT on the Air Traffic Forecasts 2000 indicate that merely keeping air fares constant would reduce demand by 100 million passengers per annum by 2020; this represents a halving of the forecast increase in demand from 1990 levels. The basket of fiscal measures should have the overall effect of slowly increasing airfares each year. Some specific measures that might be included in a basket of quite modest measures (and the possible effects that they might have on demand) are outlined below.

6.5  A fuel tax

  It would be possible to levy a fuel tax on internal UK flights and it should not be impossible to agree a EU-wide fuel tax on internal EU flights. In the climate negotiations, the EU has long maintained that such a tax is EU policy, in the absence of a global cap and trade scheme. The Deputy Prime Minister, Mr Prescott, made this point at the Kyoto climate change talks in 1997.

  6.6  However, fuel accounts for only about 10% of aviation costs and so any tax levied on fuel must be high to have any significant effect. DfT estimate that a fuel tax phased in at 10% per annum over 10 years from 2006 rising to 100% by 2016 would only reduce demand by 10% from the mid-range forecast by 2015—a reduction of 40 million passengers per annum (mppa) between 2000 and 2020[32]. Likewise, a recent study for the European Commission has concluded that an intra-EU carbon charge of

30 per tonne of CO2 would reduce growth in demand for air travel by only 4.5%[33].

  6.7  This raises the question of the level at which an aviation fuel tax will have a significant effect on constraining demand. One study has estimated, using the DfT's sensitivity analysis as a guide, that if aviation fuel were taxed at 25p a litre, half the rate applied to motor fuel (ie around 140%), this might cut demand to 344 mppa[34]. This would mean a fall in numbers of 57 million, or just under 30%, from the forecast increase in demand between 2000 and 2020. This would be a significant effect.

6.8  Value Added Tax (VAT)

  VAT (or a sales tax) on all flights could be introduced, preferably as a standard tax across the EU but, in the first instance, certainly in the UK. Simply applying VAT at the standard rate of 17.5% could reduce demand by as much as 70 mppa whilst delivering £2.5 billion in revenue[35]. Germany has recently taken the lead by announcing that flights from Germany to other EU nations will no longer be exempt from the Value Added Tax. Another option would be to add an environmental surcharge to the Air Passenger Duty.

6.9  Auctioning Slots

  Take-off and landing slots for aircraft are valuable but are currently allocated free of charge. This not only adds to the duty-free status of aviation but also deprives the service provider (ultimately the public) of revenue. Auctioning slots could help to reflect the true cost of aviation, helping to limit demand, and provide an additional source of revenue.

6.10  Introducing "Dual Till" regulation

  Currently, take-off and landing fees at UK airports are subsidised by highly profitable retail activities via a "single till" regulation that caps total revenue from airport charges and retail sales combined. Under a "dual till" approach, new take-off and landing charges could be set according to aircraft size and other factors affecting their environmental impacts. It is estimated that a 50% increase in airport charging could reduce demand by about 30 mppa, or 15% of the forecast increase in demand between 2000 and 2020[36].

6.11  Providing insufficient capacity to meet demand

  The RSPB considers it entirely reasonable that Government should simply decide not to authorise the provision of airport capacity to meet unconstrained demand, given the implications for the environment, globally and locally. Indeed, to do so would undermine the UK's otherwise commendable approach to climate change, as well as creating noise and air pollution, taking land, and destroying habitat.

April 2003


27   Estimating the Social Cost of Carbon Emissions (January 2002), Richrd Clarkson and Kathryn Deyes, DEFRA. Back

28   See Annex D, Table D6 for HMT methodology and forecasts. Back

29   3.67 tonnes of CO2 = 1 tonne of carbon. Back

30   UK's Third National Communication under the United Nations Framework Convention on Climate Change, DEFRA 2001. Back

31   See Royal Commission on Environmental Pollution, The Environmental Effects of Civil Aircraft in Flight, Special Report, RCEP 2002. Back

32   ATF2000, paragraph 7.10. Back

33   Wit, R.C.N. and Dings, J.M.W, Economic incentives to mitigate greenhouse gas emissions from air transport in Europe; CE Delft 2002. Back

34   Sewell B 2000 Tax Free Aviation. Publ. by the Aviation Environment Forum. Back

35   Grayling T & Bishop S 2001 Sustainable aviation 2030. Discussion document. Publ. IPPR. Back

36   ATF2000, Paragraph 7.11. Back


 
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