Annex
GLOBAL WARMING
AND AIRPORT
CAPACITY—A
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 CHANGE—THE
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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