Select Committee on Environmental Audit Minutes of Evidence


Annex

GLOBAL WARMING AND AIRPORT CAPACITYA BRIEFING NOTE FROM BRITISH AIRWAYSAnnex to British Airways' submission to Environmental Audit Committee Inquiry—Pre-Budget Report 2003

Summary

  1.  The UK government has set ambitious targets for the reduction of greenhouse gas emissions in its latest Energy White Paper, including a 60% cut in carbon dioxide emissions by 2050. However, projections for the growth of aviation show that the carbon dioxide emissions from aircraft are likely to continue to increase over this period. This raises the question of how a programme of airport expansion—which is designed to accommodate the growth of aviation—is consistent with the government's current policies on global warming.

  2.  In this paper, British Airways argues that these policies are entirely consistent as long as aviation is brought into a global emissions trading scheme, which would ensure that growth in carbon dioxide emissions from aircraft are offset by reductions elsewhere in the economy. BA has already played a leading role through its participation in the UK Emissions Trading Scheme. The next major step forwards could be the incorporation of intra-EU aviation emissions in the EU emissions trading scheme from 2008, followed by the allocation of international aviation emissions to national inventories in the next Kyoto commitment period (ie from 2010).

  3.  Restricting airport capacity is generally an inefficient and ineffective means of limiting the environmental impact of aviation, and this is particularly so in relation to the contribution of aviation to global warming. Using government figures, we estimate that a policy of preventing runway expansion would reduce UK carbon dioxide emissions by at most 1.6% (relative to a 2000 baseline) in 2030 and probably by much less than this. Bringing aviation into a system of emissions trading would make a much more significant contribution to the government's target, by ensuring that any future increase in aviation emissions is neutralised by ensuring the industry purchases reductions from other sectors.

  4.  It has also been argued by some (including the Environmental Audit Committee) that global warming costs undermine the economic case for airport expansion. In its submission to government on South-East runway expansion, British Airways addressed this issue and showed that it was not true as long as the airport expansion programme focussed on options where the economic benefit was the greatest—ie building a third runway at Heathrow to enhance its strength as an international hub, followed by incremental developments at other SE airports.

CLIMATE CHANGETHE ROLE OF AVIATION

  5.  The climate change impact of aviation falls into two parts: (1) the contribution to global CO2 from aircraft burning fossil fuels; (2) other effects in the upper atmosphere, linked to the emissions of NOx, particles and water vapour. The total combination of these two effects is measured by "radiative forcing". According to UK government estimates, aviation emissions of carbon dioxide are about 5% of the national total (though this figure is sensitive to the method used for allocating international emissions). The contribution of aviation to total radiative forcing is likely to be higher—though there is great uncertainty surrounding the scale of the non-CO2 effects.

  6.  Future growth of aviation would be likely to be accompanied by higher emissions. The UK government has calculated that by 2030, carbon dioxide emissions from aviation and related activities (including ground travel to airports) would rise from 27 million tonnes of CO2 in 2000 to between 70 and 80 million tonnes. However, according to government forecasts, the bulk of this growth occurs irrespective of whether new runways are provided, as existing runways are used more intensively and larger aircraft are deployed to meet rising demand with constrained capacity. The additional growth generated by runway expansion accounts for less than 10m tonnes of CO2, about 1.6% of the 2000 total.

  7.  There are also good reasons for believing that these projections are an overestimate. They make no allowance for efficiency improvements as newer aircraft types are designed and come into production. Historically, increased fuel efficiency has helped reduce emissions per passenger by 1.3% a year and in its assessment of the future impact of aviation emissions, the International Panel on Climate Change (IPCC) projected forward a similar efficiency improvement. Allowing for this efficiency trend would cut the projected contribution of aviation emissions in 2030 to between 47 million and 54 million tonnes of CO2. This represents a rise from around 5% to around 10% of the current total (using the government's allocation methodology for international aviation emissions). However, as the bulk of this growth is projected to occur irrespective of whether new runways are provided, the contribution of runway expansion accounts for only about 1 percentage point of this increase.

EMISSIONS TRADING—THE WAY AHEAD

  8.  It is clear from the above discussion that restricting airport capacity is an inefficient and ineffective way of limiting the contribution of aviation to global warming. Rather, the solution is not to limit the industry's access to necessary infrastructure, but to ensure that if it does increase its emissions, this rise is funded by cuts in other sectors. This can be achieved by incorporating aviation emissions within an emissions trading scheme.

  9.  For CO2 emissions, British Airways has consistently supported the participation of aviation in an open emissions trading scheme as the most economically efficient and environmentally effective way of ensuring aviation reflects the cost of these emissions. Under such an emissions trading regime, the market will determine the cost of carbon necessary to meet the agreed target. Unlike a tax, where the level of tax needed to achieve the environmental objective is unclear, the environmental objective is assured by the overall cap on emissions.

  10.  Another advantage of emissions trading is that it works with the grain of incentives, combining a "carrot" alongside the "stick". Assuming a grandfathered system of allocation, firms that achieve the biggest reductions can gain by selling their permits into the market. This reinforces the financial incentive for investing in technology that will enhance emissions reductions.

  11.  As a signal of its commitment to emissions trading, British Airways has joined the UK Emissions Trading Scheme. Because international aviation emissions are not included in the agreed Kyoto caps, the scheme can only include our domestic services and UK ground energy sources. For 2002, BA has reported a 16% reduction in its carbon dioxide emissions covered by this scheme, compared with the 1998-2000 baseline.

  12.  The incorporation of aviation into a global emissions trading system should, however, be the long-term goal. UK government policy should be aiming to support this through its participation in ICAO and other international forums, consistent with the strong support for emissions trading set out in the latest Energy White Paper. The UK government should also be exploring the technical, environmental and economic consequences of incorporating intra-EU aircraft emissions within the EU emissions trading scheme.

  13.  The participation of aviation in an open global emissions trading regime is complicated by the Kyoto treatment of emissions from international bunker fuels, which has the result of excluding international aviation emissions from the global caps that have been agreed for the current commitment period. The UK government should be working with other parties to ensure that international aviation is properly included in the emissions caps agreed for the second Kyoto commitment period from 2010.

  14.  Any trading scheme requires monitoring and reporting of emissions. Airlines should be encouraged to report emissions and make voluntary commitments to improvements in fuel efficiency. British Airways reports its global warming emissions in its annual Social and Environmental Report and has committed to a 30% improvement in fuel efficiency between 1990 and 2010.

  15.  While the government may be under pressure to introduce new taxes and charges as an "interim solution", or as a supplementary measure, this pressure should be resisted. In particular, unilateral measures taken by the UK government outside of any agreed international framework for aviation risk seriously damaging the competitiveness of the UK aviation industry.

OTHER GLOBAL WARMING EFFECTS

  16.  CO2, however, is probably less than half of the contribution of aviation to global warming, according to the IPCC report. This conclusion is backed up by more recent research, though the scale of the additional global warming impact is still uncertain.

  17.  The upper atmosphere global warming effects generated by aviation are not related to other greenhouse gasses, such as methane. Rather, they are likely to depend on the time and place of flights and weather effects.

  18.  Designing economic instruments to take these issues into account is difficult until there is a clearer scientific basis. A combination of instruments is likely to be needed, combining technical improvements and operational changes. There may be a role for economic instruments, but it will be inefficient and ineffective for one country to act in isolation. The main emphasis in the short term should be on research to better understand these effects and how they might be mitigated.

  19.  In suggesting a more cautious approach by policy-makers to these upper atmosphere effects, aviation is not asking for special treatment. The upper-atmosphere effects identified by the IPCC report are not covered by the Kyoto basket of greenhouse gasses and therefore are not being addressed in other industries. Our priority should be to incorporate aviation CO2 in a robust international framework, while gathering stronger scientific research and better operational understanding of the other effects.

RELEVANCE FOR UK AIRPORT CAPACITY DECISIONS

  20.  British Airways supports a framework for airport policy that balances economic, social and environmental effects. Generally, airport development provides economic and social benefits but at some environmental cost. We believe the right approach is to aim to capture the positive economic benefits while mitigating the environmental costs.

  21.  BA is advocating an approach to UK airport expansion focused on exploiting the economic benefits of Heathrow as an international hub, supported by expansion at other airports in the South-East and the UK regions, mainly to provide for the growth of shorthaul services. We believe that this can be achieved while:

    —  containing and continuing to reduce the overall noise impact of Heathrow airport;

    —  avoiding a significant breach of European air quality standards.

  22.  In relation to global warming, the approach to mitigation favoured by British Airways is through emissions trading. If total global warming emissions are capped by international agreements, any growth of the contribution from aviation needs to be offset by other sectors. Government policy needs to ensure that there is still a positive net economic benefit if this cost is taken into account.

  23.  The Table below looks at this issue, drawing on the analysis published in the BA SERAS submission[9]—using our own analysis of the capacity generated by the SE Airport options. It compares the net economic benefits of different runway options to global warming costs, which are valued in line with the government's preferred figure of £70/tonne of carbon (though correcting for the underestimation of improved fuel efficiency highlighted in paragraph 7, above. In this analysis, we not only allow for carbon dioxide but also the additional "radiative forcing" created by emissions in the upper atmosphere, using the government's multiplier of 2.7.) In line with the Treasury's latest Green Book guidance, benefits and costs are discounted at 3.5%, with adjustments also made for "optimism bias" in completion deadlines and cost estimates. In addition to the costs included in the government's evaluation, we have also allowed for additional surface access costs at Stansted and Cliffe, as well as the cost to the industry and consumers of inducing a shift of airline services to a new hub, when Heathrow is clearly the preferred airport.

Economic benefits and global warming costs of SE runway options


£ billion NPV, discounted at 3.5%
per annum
Heathrow 3rd
runway
2 runways:
LHR3+LGW
3 runways:
LHR3, LGW
and STN
3 runways at
STN
New airport
at Cliffe

User benefits net of costs
10.8
20.8
27.9
11.2
-0.7
Global warming cost
-3.7
-7.1
-8.9
-7.5
-9.1
User benefits net of costs, inc global warming
7.2
13.6
19.1
3.7
-9.7
Wider economic benefits
29.8
51.1
67.1
48.5
56.3
Total benefits net of costs, inc global warming
37.0
64.7
86.2
52.2
46.6


  24.  The government's approach to measuring economic benefits reflects the value which users of aviation put on the services they consume. However, British Airways believes there is an additional benefit to the productivity of the national economy from a stronger air transport network and these "wider economic benefits" have been valued using the study produced by Oxford Economic Forecasting in 1999. As the Table shows, including these benefits greatly strengthens the case for runway expansion, particularly for the runway packages including a 3rd Heathrow runway. Indeed, even if these wider benefits are excluded, there is a substantial benefit net of global warming costs for a Heathrow-based expansion strategy. The same is not true for the development of Stansted or Cliffe as a major hub.

CONCLUSION

  25.  British Airways supports the view that the expansion of the aviation industry must be environmentally responsible. This includes ensuring that future growth of aviation is compatible with a continued global reduction in greenhouse gas emissions. This can be achieved most effectively by ensuring that aviation is part of an international system of emissions trading, initially at EU level and subsequently at a global level. Simply restricting airport capacity in an attempt to curb global warming emissions would be both environmentally ineffective and economically inefficient. Rather, the emphasis should be on establishing a framework for environmentally responsible growth that allows the nation to capture the significant economic benefits of an expanding aviation industry while meeting its commitment to safeguarding the local and global environment.

19 September 2003


9   British Airways, The Future Development of Air Transport in South East England, May 2003. Back


 
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