Examination of Witnesses (Questions 520
- 534)
WEDNESDAY 24 MAY 2006
24 MAY 2006 DR
ANDREW SENTANCE
AND MR
CHRIS ESSEX
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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