Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 520 - 534)



  Q520  Tim Farron: Obviously, BA wants to see the ETS restricted just to EU internal flights and Easyjet and the European Low Fare Airline Associations want to see it extended to all flights to and from the EU. My first question to our two witnesses—I guess I know the answer—is why they take the views that they do? Secondly, what difference do you think that each of the two approaches will make to the effectiveness of the ETS?

  Dr Sentance: Mr Essex will correct me on this, but I do not think that in principle we disagree that our objectives should be emissions trading extending to international aviation more broadly. Our concern is that we should apply that only outside Europe where we have the explicit and clear agreement of the government at the other end of the route. That is a competitive distortion that we have always talked about. We see quite large parts of the world where that is not going to be the case and so we will have the problems on which I touched in my earlier answer. We have a twin-track approach. One is to support emissions trading in Europe; the second is to encourage ICAO to develop guidelines for international emissions trading more generally, with the expectation that that will provide a foundation for its extension outside Europe not too long after the European scheme is established.

  Q521  Tim Farron: Mr Essex, do you take a different view?

  Mr Essex: We have a similar view but we would cut it differently. We think that as a matter of principle the most efficient scheme will have the largest footprint. The risks that my colleague has outlined are those of implementation. Perhaps lawyers will get rich over the interpretation of legislation to the detriment of all other parties.

  Q522  Tim Farron: Dr Sentance, if aviation is included in the emissions trading scheme on the terms that BA supports—just for internal EU flights with no multiplier for the effects of non-CO2 emissions—what proportion of BA's total contribution to global warming will be covered by the ETS?

  Dr Sentance: Approximately 20% of our CO2 is covered by intra-European flights. If one talks of the non-CO2 effects, that is still an area of uncertainty and I would not comment on it. But certainly in terms of CO2 it would be about 20% inside Europe. The important point is that we are in favour of extending emissions trading internationally. We believe that it is better to put it on a successful footing in Europe rather than against the background of disputes with other countries, and Europe's approach should be to seek the agreement of other countries if its wants to include flights to and from those countries in the emissions trading scheme.

  Q523  Joan Walley: I want to move on to taxes. We have just undertaken a visit to Sweden where we were very interested in some of the proposals of the Swedish Government. I should like to ask about the way in which the sustainable aviation strategy incorporates the polluter pays principle to which each of you has subscribed. I just wonder how you can justify not paying any fuel duty.

  Mr Essex: First, our view is that, given the APD tax is not hypothecated, it is almost a surrogate for a fuel duty. Some of the Swedish experience rather than the proposals is interesting. For example, they have reduced landing charges at airports and yet have had a charge for NOx emissions to incentivise their reduction.

  Q524  Joan Walley: But earlier Dr Sentance told us that he would not tell us anything about BA's plans to look at the future phasing-in of new aircraft, so how do we get a feel for what you are looking for in terms of replacements to deal with NOx emissions?

  Dr Sentance: To come back to your first question about how we can justify the absence of a tax on fuel, the reason is that international agreements have made that very difficult, but as the debate has unfolded we have had a chance to look at a tax on fuel and other tax-based proposals alongside alternatives such as emissions trading. All the studies of which I am aware, including one commissioned by the BAA a few years ago and those conducted under ICAO and the UK Government, have come to the same conclusion, namely that emissions trading would be a more effective and economically efficient approach. I think that here we have an opportunity to start off in that direction rather than in another direction, such as motor fuel which has imposed high costs and not necessarily produced the environmental benefits that people had hoped.

  Mr Essex: There are NOx emission charges at Heathrow and Gatwick today, for example.

  Q525  Joan Walley: Just staying for the moment with the polluter pays principle, can you give the Committee your best guess as to how much you should pay for the pollution that you are causing taking account of the way that your aircraft trigger dangerous climate change?

  Dr Sentance: We do not have a figure of that kind. I look at it in another way. We are prepared to put ourselves into a regime where emissions would be limited and we will accept what the market tells us we need to pay either to curb our own emissions or fund equivalent emissions reductions in other sectors. In a sense, we are handing over to the market the issue of how much we will pay because we think that will be the most efficient way of dealing with this issue.

  Q526  Joan Walley: How does that market mechanism take account of environmental issues?

  Dr Sentance: Because under an emissions trading scheme the cap that is established is set according to an environmental objective. If that environmental objective is respected—I know that some people express scepticism and say it is not, in which case we have to ensure that is the case—one will be paying to deliver it and one will then be sure of delivering the environmental objective that one sets.

  Q527  Mark Pritchard: If there was some sort of duty or tax instead of an ETS potentially would it have an impact on your routes where you do not necessarily make a profit—if you like, they are loss leaders or you keep certain routes open through altruism or because you keep out your competitors, whatever it might be—and it might bring you as a business to a decision to stop flying to certain centres where perhaps you are today, whether profitable or not?

  Dr Sentance: The aviation sector operates on very thin margins, so costs imposed will have impacts on our route network.

  Mr Essex: The market sets the price. We cannot expect to generate any further revenue, so the only choice we have is to absorb those costs. If we cannot do so you are quite right to suggest that those routes will become economically unviable.

  Q528  Mark Pritchard: To be absolutely clear, passengers, consumers, British businessmen and women going about their business and bringing income into this country and exporting and importing goods could potentially see their flight to a small city in Germany closed overnight if government took a decision to impose a tax rather than a robust voluntary ETS agreement?

  Dr Sentance: I think that risk is particularly great if the UK does something unilaterally, because we would then find ourselves imposing a charge or tax in this country that was not imposed by other countries and there might well be a diversion of routes and traffic away from the UK.

  Q529  Mark Pritchard: Do you think that would have an impact on regional airports in this country?

  Mr Essex: Yes, it would. The low fare sector has done well to develop services out of the more under-served airports in regional centres to main centres or otherwise, and today we see a lot of cost pressure. The commercial reality is that routes are closing as we speak due to higher fuel prices, for example.

  Q530  Mr Hurd: Congratulations on your initiative to offer offsetting to passengers. I recently flew with British Airways. At no point in the passenger experience from booking to landing was it ever mentioned to me as an option by anyone involved in that process. What sort of take up has there been of that initiative?

  Dr Sentance: The initiative has been presented—we are looking at this—as an invitation to people to find out more about their emissions because we want to tell them what we are doing. We realise that this is causing the reaction that many people have had. We did not see it and perhaps it was not telegraphed clearly enough, so we are looking at that issue. Take-up has been low. About 13,000 people have visited the page.

  Q531  Emily Thornberry: What is the take-up?

  Dr Sentance: We have offset between 1,000 and 2,000 tonnes of CO2 with Climate Care in the past year.

  Q532  Emily Thornberry: What does that mean in terms of figures so that we might understand it? What percentage of passengers offset their carbon emissions through British Airways?

  Dr Sentance: It would be of the order of that figure.

  Q533  Emily Thornberry: One or 2%, or less than that?

  Dr Sentance: It is less than that.

  Q534  Joan Walley: Perhaps the answer is "not enough".

  Dr Sentance: There is a low take-up, but I should like to mention one other matter. We know that passengers have to face significant fuel surcharges, and clearly that is in their minds when they book. Against that, that is perhaps not a good background for looking to pay extra on the ticket, but certainly we are looking at ways in which to promote it more effectively.

  Joan Walley: Dr Sentance and Mr Essex, this has been a truncated session. Obviously, this is a big issue for the Committee. We have votes coming up shortly and we need to press on. I thank you both for your time before the Committee.

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