Examination of Witnesses (Questions 200
- 213)
WEDNESDAY 11 FEBRUARY 2004
MR JEFFREY
GAZZARD
Q200 Mr Chaytor: Could I take you
back to one of the points you made about the emissions trading
scheme. You said that the nature of the airline industry, the
mobility of the industry meant it was not really possible to construct
an emissions trading scheme. Why is that? How should it be different
for a company with a fleet of 1,000 aircraft, all of whose journeys
are logged and where we know the CO2 emissions per
kilometre as against a company with 6 cement factories which are
totally static?
Mr Gazzard: No, you are quite
right. What I meant was set against the pattern of growth it is
very difficult because in an emissions trading scheme you have
to have targets and you have to have a price and some of them
even have a floor for a price and if the price rises the participants
can withdraw from it. It is an interesting area. What I meant
was, and I am sorry if I was not clear, it is that pattern of
growth that makes it very difficult. We have two problems with
emissions trading. One is the philosophical concept of it, we
do not think it is any good. Secondly, as I think I said in the
last paragraph of the letter that we sent to you, nobody can produce
for me a model of where the savings are going to come from. So
the theory is air transport grows because it is very important
and society and Government and policy makers make that decision.
You then have to find elsewhere in the economy equivalent savings
and those savings must be in a Kyoto or some other kind of framework.
But we know that the growth in air transport is so huge just in
terms of tonnes of CO2 per year, let alone the multiplication
factor. Nobody can show me a mathematical model where this extra
allowance, as it were, is going to come from. That is the problem
I have with it. I am sorry if it was not clear.
Q201 Mr Chaytor: But if someone could
show you a mathematical model, would you then be converted to
an emissions trading system?
Mr Gazzard: It depends on whether
they had a local impact in terms of reducing air quality because
they might not, whether they did anything to stabilise emissions
from air transport or whether it was just an allowance to have
growth and whether the impact of that growth impinges on other
areas like noise. To get back to my Dutch maritime metaphor, there
are a number of holes in the dyke and you are plugging them. The
theory of emissions trading arose from US think-tanks and the
US government's desire to come up with anything that avoided it
altering its current pattern of industrial activity. That is not
a political statement, that is a policy process. I have seen no
evidence that emissions trading schemes work. Even the much vaunted
power plant sulphur dioxide system in the States for acid rain
does not actually finish until 2010 so nobody can tell me whether
it works. The mathematical theory is fine that you have just alluded
to but I can see no evidence based on existing schemes, let alone
future analysis of how these savings could be delivered to enable
me to have any confidence in it, but I accept that it might work.
But in the absence of that we are very keen to put it as the last
item on the policy agenda to mop up the emissions that are left
at the end of it. For us in terms of air transport it is demand
management, trying to stabilise emissions, getting a sustainable
growth rate and having some kind of hard grip on the reins of
the environmental impacts that the industry is responsible for.
Q202 Mr Chaytor: If there were a
greater element of demand management then one of your three objections
to emissions trading schemes (that is you cannot see where the
savings are going to come from because of the excessive growth
of air traffic) would be dealt with, surely?
Mr Gazzard: Absolutely.
Q203 Mr Chaytor: If we are down to
350 million passengers per annum rather than 500 or whatever the
current target is, then that does deal with your issue. So your
objection is not one of fundamental principle, although you have
reservations about the principle? Your objection is really mechanics,
it is the mathematical modelling and the fact that the growth
is so huge that it is not possible to make the overall savings?
Mr Gazzard: Well, because nobody
has shown me that it can be done. So you have neatly summarised
my objections for me and if you can give me world copyright on
that sentence that would be most useful!
Q204 Mr Chaytor: In your submission
you refer to the work by Curtis Moore[7]
and you say you have sent the papers to the Committee electronically.[8]
Could you just briefly tell us a little bit about that and exactly
what were the practical difficulties and the outcomes of that
work.
Mr Gazzard: Yes. He has looked
at three or four schemes in the States, the sulphur dioxide scheme
and some state and nation things, leaded gasoline phase out, reclaim
and one or two other things as well and in some of the schemes
they have actually found, dare I whisper it, mafia involvement
and fraud. I think I am right that the Environment Protection
Agency head, who I think has just got the sack last year, Christine—I
cannot remember her surname but it will come to me in a moment,
Whitman—was actually in charge of environmental issues in
one of the States and she pulled the plug on one of these schemes
because she was not happy that it could be verified and audited.
He then came to Europe and looked at some embryonic schemes, I
think in the Nordic countries, for stationary sources that he
said were much better in terms of their design and then he produced
a commentary in a series of 6 papers, which you have got, which
said, "Nobody can prove that this works to my satisfaction.
Here are some of the issues, philosophical, technical, auditing
verification and practical," and put those papers forward.
He used to be a head of staff to a republican chair of one of
their environmental scrutiny committees in the House and they
are reasonably well written. That is the only study I have been
able to find that has any even slightly critical comment on emissions
trading as a concept or in reality. What it seems to me, if I
can make a criticism of policy makers, is that they have an issue
that they think will work and they are just running with it. It
might be a bit of a bold statement but—
Q205 Mr Chaytor: But is it reasonable
to draw conclusions from those kinds of smaller scale schemes
and extrapolate those as to the likely success of the European
wide Emissions Trading System?
Mr Gazzard: Well, it is a start.
It is the only analysis I have found that is at all a commentary,
let alone critical. I have been to four IPCC COP assemblies where
the talk is of emissions trading and I have seen nothing substantially
that interests me at all in this as a concept because nobody can
ever explain it to you. People say two things: one, it works for
the fishing industry. Well, self-evidently it does not. That is
the concept of a cap and a trade facility. So that is that one
out of the window. The second one is the sulphur dioxide scheme
for power plants in the States where they had a huge changeover
from one type of coal to one with a much more lower sulphur content
and that presented them with the savings that they could then
trade. But we are nowhere near the end of that scheme and that
is all anybody ever says about emissions trading and you hear
it over and over and over again. I know this makes me sound barmy
but really that is the top and bottom of emissions trading.
Q206 Gregory Barker: Could I pick
up on the point about fishing though. Fishing, as I understand
it, has been successful in New Zealand and Australia where they
actually do have people having ownership of the sea and they are
able to trade. Where it has not worked are places where you have
a common policy like the UK or you confuse the two.
Mr Gazzard: Or you have competing
commercial imperatives, Mr Barker. Believe it or not, I am not
an expert on fish. I like it with chips!
Q207 Gregory Barker: Sure, but I
understand that it has been more successful where they do have
trading schemes, I do not know the details on this but in the
antipodes, than it has been in European waters.
Mr Gazzard: We are not wholly
sceptical on this. One of our partners in this alliance that we
run that faces ICAO is the Climate Change Action Plan, which is
an American think-tank which is funded by the coal industry. So
we are quite a broad church in who we deal with and they will
have this information and I will ask them about that. But I have
heard about it and I believe it is country-specific, species-specific,
a lot of local involvement and no outside competitive pressures.
Chairman: I think we need to move on
from fish. I am aware that Simon Thomas wanted to come in.
Q208 Mr Thomas: I just wanted to
briefly follow up on emissions trading. If we were to have an
aviation emissions trading system then could you just briefly
say how, in your view, that could deal with the other environmental
effects of aviation, radiation forcing, noise which I think you
mentioned in reply to Mr Chaytor, and secondly the relationship
then that any such scheme would have with a national envelope,
post-Kyoto, whatever it may be. It seems to me that one of your
criticisms is that it may or may not deal with the particular
aspect of the environmental impact of aviation but it certainly
would deal with the others?
Mr Gazzard: Well, essentially
it cannot deal with noise.
Q209 Mr Thomas: But could it deal
with forcing? Is there a way of making an emissions system deal
with that?
Mr Gazzard: Well, it would deal
with forcing. There would be an allowance for forcing which the
Committee has identified better than we have done, in that you
have to take that multiplier into effect, be it 2.2 to 4 times
or 4 to 13, or whatever the multiplier is. The industry acknowledges
that and indeed the Government says that in Chapter 3. But the
point, as you and Mr Chaytor are making, is that you might be
able to design an emissions trading scheme for air transport.
Whether it is effective or not I do not know but you might be
able to design a scheme. That in itself would allow growth and
that would have more noise impact as a direct result of it. Then
you would have to look at other ways of controlling growth, which
might be moving people away from where they live around airports,
for instance. There are solutions here but some of them are quite
costly. So my view is that it is an industry which has a lot of
impacts across the scale of almost everything—land-take,
biodiversity, climate change, local air quality, noise, you name
it—and the only comprehensive suggestion we could make is
to kind of have policies that control and reduce those by halving
the growth rate to begin to know what you are dealing with because
if it is continually rising self-evidently you will never get
a handle on it. But just to bring the two threads together, the
reason I am extremely sceptical about emissions trading is that
I ask the questions that you have asked me of policy makers and
people who are involved with the schemes and you just cannot get
a clear answer on this. I mean, I am reasonably well educated
and I like to think I have some analytical capability but when
you cannot get to grips with an issue there is something fundamentally
wrong with it.
Q210 Mr Chaytor: Could I just come
back to your menu of alternative solutions. Demand management
is obviously central to that, but how do you do it?
Mr Gazzard: Well, you put prices
up essentially.
Q211 Mr Chaytor: Through air passenger
duty?
Mr Gazzard: Or any way you wanted
to. I mean, I do not subscribe to the theory that air passenger
duty is a blunt instrument. The industry is very sophisticated
in its response to our agenda, which is to say, "Yes, we
agree with all this and it is horrible but here are the control
mechanisms we would like to see." The problem is the price
tag they want is three'pence and three farthings, whereas the
price tag we want is probably about 300 guineas. It is a question
of what you want to do. Airlines and airports have a job. They
want to attract more customers, they want more business, they
want to try and make more money. For airports that is quite easy.
They are a monopoly service supplier and they can do that. For
airlines it is a bit more tricky. But any notion of sustainability
so far as we are concerned says that all industries have to play
a role in it. Now, that role can be equivalent to their contribution
to the economy or what society wants. I do not have a problem
with that. What we have is no particular targets, no hurdles,
no barriers and nothing other than a fairly A-level standard analysis
of what the policy development and mechanisms could be. Now, that
may be our fault because we cannot get to grips with this. In
many ways the White Paper is quite pleasing because a lot of the
environmental issues and tentative suggestions, however imperfect
they might be, at least reflect our language and what we want
to see happen. The question, and all of the questions that the
Committee has directed to me, is how do you achieve that and what
are you trying to achieve? The best thing I can do is probably
send the Committee the submission that we made to the DfT, which
is pretty comprehensive, does not say no air travel and does have
this measure of, for instance, looking at external costs. The
Government's White Paper on the question of external costs and
the Treasury's investigations into this have just held up the
DfT's own submissions that a 1% increase in prices leads to a
1% fall in demand. So despite the consultation, despite various
submissions that we put in, including a very good authoritative
report on the fact that actually the external costs of air transport
are about
44 for every 1,000 passengers per kilometre—you
have seen this in our earlier submission—they just ignored
all that. The only thing that holds out any hope for this is the
continuing efforts that people make to try and analyse this and
to have some substantive policy target set. There are none in
the White Paper on climate change issues, it is a wish list and
therefore it is not of much use.
Q212 Mr Chaytor: Could I just ask
one final thing of a more general nature. Looking beyond 2012,
the next period for considering global CO2 reductions,
what is your view about the concept of contraction and convergence
as an international solution to the emission reduction challenges
beyond 2012?
Mr Gazzard: It is a lovely theory!
We have discussed this with Aubrey Meyer, whose personal concept
it is, and it was mentioned in the RCEP report, their energy policy
report. If I could just make a quick aside on that, one of the
big criticisms we have of the Government is that we have energy
policy reviewed by the RCEP, audited by the Number 10 PIU and
set in stone by the DTI and that is an area that anybody would
say is a really good process, whether it is aspirational or not.
Then we have the same body, the RCEP, sending out its views on
air transport which are absolutely disparaged by the DfT, which
I do find amazing and I would like the Committee to comment on
that, if it can. The point about contraction and convergence is
that in an ideal world it would be lovely. We could sit round
a camp fire and, you know, balance lentils until the cows come
home! But it is a bit like what I said about emissions trading.
You can have contraction and convergence only when you have set
a platform of the highest possible technological and environmental
protection standards, a kind of benign capitalism, as it were.
That is not a political statement, that is the best phrase I can
come up with. It is a journey and it is such a leap in terms of
imagination, let alone the practicalities of how you go from where
we are today to contraction and convergence. It is a very nice
idea.
Q213 Mr Chaytor: Beyond 2012 what
else is there, expansion and divergence?
Mr Gazzard: Well, a good question.
That seems to be what we have got in the current Kyoto process.
What Tim and myself have tried to do in all of this is to try
to find some kind of profit and loss system that industry, policy
makers and society as it stands at the moment can understand.
That is why we were very keen to put before the Committee this
issue of reinsurance companies and UNEP's financial programme
because I think that is an area where you can see that balance
being struck in a better analytical framework than I could provide.
What we tend to do is to work at the coalface of sort of everyday
environmental impacts. So the answer is, the RCEP said that it
was a great idea but some way off, so I think I am going to back
out of that one by saying I support what the RCEP have to say
about it.
Chairman: Good. Well, thank you very
much indeed. We are grateful to you for your time and thoughts.
It has been very helpful indeed.
7 See memorandum, Ev 50. Back
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