Examination of Witnesses (Questions 214
- 219)
WEDNESDAY 11 FEBRUARY 2004
DR ANDREW
SENTANCE
Q214 Chairman: Good afternoon, Dr
Sentance, and welcome back to you. It is good of you to give us
your time. You may wish to open by commenting on some of the issues
you have just heard us discussing. I do not know whether you would.
Dr Sentance: I think the main
comment I would make in regard to what Jeff has said is that I
think he is overplaying the technical difficulties of applying
emissions trading in aviation. I am speaking from the experience
of a company that has actually got involved in emissions trading
through the UK emissions trading scheme and that was one of the
main reasons for actually getting involved, to understand some
of the practical issues. You can track the emissions. You can
account for them. There are obviously allocation issues in any
emissions trading scheme with the initial allocation and what
your quota is but we believe, based on our experience, that it
is practical to move into the EU emissions trading scheme with
aviation.
Q215 Chairman: I think we will come
on to that in a minute but I cannot resist asking you whether
you look forward with pleasure at the prospect of having the growth
rate halved so that your profitability can increase.
Dr Sentance: Well, I think it
depends on exactly how some reduction in the growth rate of the
industry is achieved. I think if you have an effective emissions
trading scheme which puts a limit on some of the environmental
impacts of the industry there would be some impact on the growth
of the industry. The advantage of doing that through an emissions
trading route is that the people who reduce their emissions actually
get benefits at the same time as those who actually increase their
emissions face costs. The problem with many of the other mechanisms
that are suggested for reducing the growth of the industry is
they involve putting large cost increases on the industry and
large financial burdens on the industry which are going to swamp
any benefit from having perhaps a more financially sustainable
growth rate in the industry. I think it is generally recognised
in the industry that the industry has often expanded too rapidly
in the upturn and then lived with the consequence in the downswing.
But if you believe in moderating the growth of the industry the
way in which you go about it is critically important to the financial
health of the businesses in the industry.
Q216 Chairman: Does not an emissions
trading scheme though involve quite a lot of admin? How many people
have you got employed on that at the moment?
Dr Sentance: If we look at the
implications, you have to monitor the carbon dioxide emissions.
We are focusing on carbon dioxide in the UK scheme and I think
that is what we would propose in the EU scheme. There is a very
close relationship between carbon dioxide and fuel burn. You can
measure fuel burn directly, many airlines do, or you can monitor
it indirectly by looking at the distance that the aircraft has
travelled and what aircraft is travelling on that route. So you
can quite easily get to fuel burn and hence to carbon dioxide.
Then it is a question of making sure you track the right emissions
because any EU scheme is going to only apply by necessity to intra-EU
aviation. Again, we faced the same issue with the UK emissions
trading scheme, which the only aviation component in it is UK
domestic aviation and we found it quite possible to isolate the
particular routes concerned and to report on that basis. So we
do not have large ranks of people involved in it. It is part of
the job of a number of people in British Airways but it is no
one's exclusive job just to deal with the emissions trading scheme.
Q217 Chairman: But it is not just
a question of the monitoring, is it? It is a question of the trading
as well. You do not have the sort of Enron scale operations somewhere
near Heathrow.
Dr Sentance: There are various
forms of trading activity that already take place in an airline,
such as fuel hedging, and what we have done operationally is to
link the emissions trading activity to the fuel hedging and the
people who understand hedging activities and those markets find
it quite easy to make the transition to understanding emissions
trading.
Q218 Chairman: So in terms of overheads
the emissions trading idea is a low cost option?
Dr Sentance: We think it is a
cost-efficient option in a number of ways. We have not found it
particularly onerous to deal with in being in the UK emissions
trading scheme.
Chairman: Thank you.
Q219 Gregory Barker: The White Paper
has been described as a return to old-fashioned predict and provide.
Do you agree?
Dr Sentance: No, I do not agree
with that at all. I think in many ways the aviation industry is
already coping and dealing with its environmental impacts and
incurring costs as a result. The most obvious is noise, where
there has been quite a long process of building tighter and tighter
noise standards into aircraft and that is not a cost-less activity,
that is reflected in those costs of that aircraft, and we see
the benefits of that in some of the environmental impacts of the
industry. So, for example, the global noise impact of our aircraft
fleet has actually halved over the last five years and that is
reflected in those technological improvements. We are now getting
to grips with some of the local air quality issues around airports
and, as you know, that is a very important issue for determining
whether there is going to be another Heathrow runway. We are also
now beginning to get to grips with the mechanisms that we need
to put in place to deal with the other major impact, which is
global warming. So in each of those three areas what we need to
have in place, or what we will be putting in place, is a coherent
framework for dealing with the environmental impacts. When we
have that in place I think it is quite reasonable to allow within
that framework the industry to work on a commercial basis and
to have access to the infrastructure that it needs to deliver
the economic benefits. But that is not a simple predict and provide.
Predict and provide implies you put on one side the environmental
impacts and that is not what we are doing in the aviation industry.[10]
10 Please also see supplementary memorandum on Ev.
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