Examination of Witnesses (Questions 260
- 273)
WEDNESDAY 11 FEBRUARY 2004
DR ANDREW
SENTANCE
Q260 Gregory Barker: Do you see the
interests of British Airways as totally synonymous with those
of the low cost airlines or do you think they may be getting a
free ride on the back of BA given that the bulk of the growth
is actually coming not from mature airlines like yours but from
the very low cost, budget airlines?
Dr Sentance: Different airlines
will have different perspectives. I think you will have to ask
them what they think of that. There was a reported statement from
Easyjet in the run up to the White Paper criticising the notion
of taxes and charges on the industry and the rise in APD and saying
that the Government should be exploring other approaches including
emissions trading. That is the only reference I have seen to emissions
trading from a low cost airline. I have not seen them either oppose
it or support it, apart from that reference, so I think you just
have to ask them.
Q261 Mr Thomas: If we do not get
agreement on an EU emissions trading scheme (and also bearing
in mind that if we do get agreement on an EU emissions trading
scheme that does not deal with global aviation it just deals with
EU-based aviation) what would you say are the reasonable policy
options in either event? What could we use either in the failure
of an EU scheme to deal with emissions or at a global level?
Dr Sentance: Well, that is not
a situation we would like to be considering.
Q262 Mr Thomas: You mean you have
no plan B?
Dr Sentance: We have been quite
clear about what we think is the most economically efficient and
environmentally effective way forward on emissions trading in
general—
Q263 Mr Thomas: Which is the EU scheme
or worldwide?
Dr Sentance:—to use the
EU scheme as a means of demonstrating internationally that that
can work and I think that is an important element in countering
some of the scepticism from the US side, which Jeff Gazzard was
referring to. The stance of the US government is clearly not helpful
in ICAO discussions. I made that point when I came to talk to
you last summer. If we are going to make international progress
we have to somehow demonstrate that emissions trading can work
and is not going to be economically damaging. I think this is
a good opportunity for Europe to lead the way. So we think there
are very strong economic benefits from going down this route.[14]
Q264 Mr Thomas: But I still have
to press you on this. If we do fail in 2005 to get an EU emissions
trading system off the ground—because it is possible to
fail at a European level, we have seen that happen—is it
not then the case that Government would have to take very seriously
the idea of either raising a passenger duty or some sort of pay-as-you-go
based on emissions and impose that then on the industry? We have
to do something in this country, do we not, which contributes
to our Kyoto and UK emissions targets even if we fail at European
level? Would you not accept that?
Dr Sentance: If we were looking
for alternative mechanisms I think they would have to fulfil certain
criteria, which I think emissions trading does fulfil. The first
is that they provide incentives for improvement alongside penalising
people who are increasing emissions. That is one of the benefits
of emissions trading. If you are cutting your emissions you get
a benefit and that is what creates the incentive to make it work,
which I know Jeff Gazzard was rather sceptical of. So I would
not be looking for a mechanism that sought to extract large amounts
of money out of the industry, but I think there are good reasons
for not looking for that, or if they were extracting large monies
out of the industry they were going to fulfil the environmental
objective rather than just padding the coffers of the Exchequer.
The second is we need an approach which does not distort the international
competitiveness of the UK industry versus the rest of the world
or the European industry versus the rest of the world. Again,
the proposal to bring in emissions trading to intra-EU aviation
avoids that international distortion in large part. I think those
are the two criteria that are important for us. Most of the other
proposals that we have seen in this area have not satisfied those
criteria but we would be looking for a proposal that would be
brought forward consistent with those criteria.
Mr Thomas: Thank you.
Q265 Mr Challen: I think I heard
you correctly earlier on this afternoon saying that it was not
onerous for BA to be in the UK ETS and in paragraph 11 of your
memo[15]
you say that BA has made a 16% carbon reduction as a result of
its participation in that scheme. If it was not onerous why was
that figure not greater?
Dr Sentance: I was asked about
the administrative onerousness of the scheme, so let me be clear
what I meant by that. I was asked about the overhead that it imposed
from the administration and participation in the scheme. There
is a separate issue of whether that drives decisions differently
within British Airway and there is a number of areas, I think
I mentioned them to the Committee, where it clearly does. One
part of our involvement in the emissions trading scheme was with
our ground emissions from the properties that we own in the UK.
We have now begun to set efficiency targets to reduce our emissions
from those sources as part of our participation in this scheme.
Our network planners, when they are looking at aviation emissions
that are in the scheme, have to take the cost implications into
account in their network decisions. So there are ways and clearly
it has had an impact on our operations. I would say that the 16%
reduction actually is larger than we expected, but that has been
due to circumstances in the industry, which has seen the output
of the industry and the activity in the industry reduced significantly.
Q266 Mr Challen: In fact, the 16%
is not entirely due to membership of the scheme, is it? It would
be disingenuous to say that it was when you are already doing
things in terms of cutting back in your capacity and introducing
more fuel efficient aircraft. You were already doing these things.
You told us last year this was happening. So to say that this
is all due to the scheme would be wrong. So the question really
still stands. Why could you not have made a larger reduction within
the scheme? What is the constraint?
Dr Sentance: The constraint is
the economic incentive on us, being a commercial organisation.
The purpose of an emissions trading scheme or any sort of arrangement
like that is it works with the grain of the commercial incentives
that a business has. It puts a price on increasing emissions.
It gives you an incentive to reduce emissions and then you respond
to that as a business. The outcome of the business decisions that
we have taken within the scheme is that it has produced a 16%
reduction. There has been more reduction in the short term than
we would have expected because the industry has had a very difficult
time but we are hoping to recover from that and so the economic
pressures are going to be in the opposite direction over the next
few years. The economic pressures are hopefully going to be for
some recovery in the industry and we will need to then balance
out the impact that has on our emissions, which is going to be
pushing in an upwards direction, and the efforts that we will
need to take to offset that or even perhaps buy additional permits
if we need to.
Q267 Chairman: Does the 16% reduction
relate only to national flights or does that include international
flights as well?
Dr Sentance: It relates to national
flights because those are what are included in the UK inventory
and this is all to do with the UK inventory. International flights
are not covered by the UK emissions trading scheme or any inventory
of emissions at present.
Q268 Mr Challen: In paragraph 14
of the annexe that you have provided you refer to the 30% improvement
in fuel efficiency that has been gained. Could you guarantee any
further absolute reductions in emissions through fuel efficiency
or are we now perhaps, to use an expression made earlier on, scraping
the barrel looking for further reductions in that area?
Dr Sentance: Well, currently we
have made a 23% reduction towards that target so we have still
got some way to go to make sure we hit that target. I would expect
that we would continue to drive up fuel efficiency beyond that
date.
Q269 Mr Challen: But not by leaps
and bounds?
Dr Sentance: As Jeff Gazzard mentioned,
it is not clear that that fuel efficiency that is going to be
generated is going to outstrip the growth of the industry. Most
projections suggest it will not. But there are new developments
coming along like the Boeing 7E7 aircraft, which is a very fuel-efficient
aircraft which has been designed using new materials technology.
One of the major environmental improvements that we would be looking
for if we were to be involved in purchasing that aircraft—which
has been the subject of our discussions with Boeing—would
be improvement in fuel efficiency.
Q270 Mr Challen: What is BA's contribution
to research and development in fuel efficiency? Do you make a
big contribution to that or looking for alternative fuels?
Dr Sentance: We contribute indirectly
through the price that we pay on our aircraft through the manufacturers.
We have done studies into alternative fuels. We participated in
a DTI study recently. What that showed was that the scope for
alternative fuels was fairly limited in the aviation industry.
Q271 Mr Challen: What is BA's latest
available figure for your total aviation emissions?
Dr Sentance: 15.1 million tonnes.
I just need to be clear, that is CO2, not carbon, because
the Government has moved to carbon.[16]
Q272 Mr Savidge: In improving fuel
efficiency and in reducing emissions, to what extent is that a
matter of altering the aircraft technology and to what extent
is it more a matter of fuel technology, do you feel?
Dr Sentance: I think it is more
aircraft technology than fuel technology but one of the dilemmas
we have here is that there are some trade-offs that you have to
manage between the various environmental improvements that you
are seeking to make and some of them are complimentary. You can
get, for example, fuel efficiency improvements that actually reduce
the NOx emissions that Jeff Gazzard was talking about and we have
made some recent modifications to some of our aircraft that have
actually reduced the NOx element and improved fuel efficiency,
but there are also trade-offs between making aircraft quieter
and improving the emissions profile. So you cannot move rapidly
on all fronts. We have moved very rapidly, I think, and put a
lot of emphasis over the last 20 years on noise and that has been
a very important element. I think we should and will continue
to improve the noise profile but we have now got to balance that
against the need to improve the emissions performance as well.
Mr Savidge: Thank you.
Q273 Chairman: Okay. I sense that
time has run out but I am very grateful to you. There may be one
or two other points, not least perhaps the situation in relation
to Heathrow and NOx and your confidence around that that we might
like to pursue in writing. Would that be okay with you?[17]
Dr Sentance: We would be very
happy to do that.
Chairman: Very good. Thank you very much
indeed.
14 Please also see supplementary memorandum on Ev.
75. Back
15
Please see memorandum, Ev 66. Back
16
Please also see supplementary memorandum on Ev. 75. Back
17
Please see supplementary memorandum on Ev 75. Back
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