Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 700 - 719)



  Q700  Colin Challen: I was wondering how high in the order of things the modal shift between short haul air aviation to high speed rail is. How does the department regard that as a priority?

  Mr Alexander: Of course we are considering the case for an additional high speed line. Within that, environmental impacts will be one of the considerations that we will have to bear in mind. My knowledge of this is limited given my time in the department. One of the features that one needs to be aware of is that these high speed trains, if they travel at the kinds of speeds that are often discussed, use a lot of energy. The mechanism by which we are looking at this issue more generally is the Eddington Review. Rod Eddington is undertaking a review that was jointly commissioned by my predecessor and the Chancellor of the Exchequer. It will be in that context that we will be looking at these issues. Finally, if you look at the west coast main line and the differences in terms of journey time between London and Manchester that have recently been achieved, the idea that this discussion is only relevant to a brand new, high speed train link is undermined by the evidence. If you can pretty much guarantee for people a two hour travelling time from central London to Manchester Piccadilly, you do begin to see the kind of modal shift that I am sure this Committee would welcome given the time it takes to get to Manchester Airport and get back in from Heathrow.

  Mr Webb: The Channel Tunnel Rail Link has been done in two parts. There is quite clear evidence that the investment we made from the Chunnel up to Ashford has made a gain. The second phase of the Channel Tunnel Rail Link coming into St Pancras which is going to get the journey to Paris and Brussels down significantly compared to the current Waterloo run is expected to tilt that balance further for rail passengers on those two routes.

  Mr Alexander: It has already tilted the figures if you look at particularly business travellers and people travelling between Heathrow and Charles de Gaulle. There is no doubt that already the fact that there is a service which people can rely on and want to use has meant a significant transfer of modes.

  Q701  Chairman: Is it an explicit policy now to try and encourage that modal shift from where it is possible to achieve comparable journey times on a train or a plane?

  Mr Alexander: We want to see the railway continue to grow. We now have a billion passengers. It is the fastest growing railway in Europe. We look at the merits of specific schemes that are brought to us and we are looking at a lot of these issues in the context of the Eddington Review which will look more generally at the contribution that transport infrastructure in particular makes to economic growth. I would not wish to leave the Committee with an impression that I am saying that it is implicit in the department's policy that we want to stop people having the ability to get around. We want to make sure that there are genuine choices available to people. Whether that can be by rail or other modes, that is a choice which ultimately people will make.

  Q702  Mr Stuart: Your department is carrying out a progress review of the 2003 Future of Air Transport White Paper this year. Could you tell us what the remit of that review is and particularly tell us whether you are going to reappraise the need for five new runways as set out in the White Paper?

  Mr Alexander: I know that this was the subject of a fairly lengthy session of this Committee under a different chairman prior to the last election when my predecessor gave evidence on the terms of the White Paper that was published in December 2003. This may disappoint colleagues around the table but the department, in terms of what we are anticipating doing towards the end of the year as we undertook to do at the time of publication in December 2003, published a progress report on the policies and proposals set out in the White Paper. The purpose of this is to report progress in implementing the policy commitments set out in the White Paper and it will not be the review of all White Paper policies which we remain committed to as a department.

  Q703  Mr Hurd: This is a question about the emissions trading scheme which is held up as to the answer for what we do about aviation. Could you share with the Committee what you see as the key milestones towards delivery of this scheme and when do you expect it to happen? Could you reassure the Committee that we are not drifting into a process that will lead to the allocation of emissions to the industry that will simply allow them to potter along delivering the fuel efficiency improvements that they already would deliver under business as usual, given the high proportion of costs of fuel? Is there not a risk that we lose this opportunity to control something that could swamp everything else the department is doing to control emissions?

  Mr Alexander: In terms of the timing of the emissions trading scheme bringing in aviation, there is no change in our policy and ambition which is to try and secure that entry from 2008 or as soon as possible thereafter. This is a highly complex area. It is inherently international. We are bound by certain treaty obligations and it is against that backdrop that we continue to believe that the introduction of aviation into the emissions trading scheme at European level represents the most effective means by which we can address the rise in emissions that we have already discussed. In terms of important milestones, I would start by identifying the decision and the conclusions that were reached by the Environment Council back in December which reflect the fact that we did make significant progress on this issue during the British presidency of the European Union. I had some familiarity with these issues when I was the Europe Minister prior to assuming this office. In terms of the next milestones, the key milestone, with no disrespect to our colleagues in the European Parliament who will be debating and voting on this issue in a plenary session next month, will be when the list of proposals of the European Commission are brought forward which we anticipate towards the end of this year. We do regard it as being the way forward. I read the evidence that was submitted to this Committee by some of the airlines who were represented. I think it is significant that even amongst the airline industry there is some awareness that moving towards the kind of process which would involve aviation being brought within the ETS is the most effective way forward to address this challenge. In terms of where we are in those negotiations, the evidence from the public statements of Lufthansa, even in the last 48 hours, evidences that the argument is not yet won within the aviation community. It is also no secret that some of our international partners are less than convinced of the merits even of a European scheme, never mind a wider scheme given the global nature of air travel. Therefore we need to keep working at it but it is a matter of real pride to us in Britain that we have been so central to securing that consensus at the Environment Council and continuing to argue for aviation coming within the ETS in 2008 or as soon thereafter as we can achieve.

  Q704  Mr Hurd: How do you respond to the specific concerns of the manufacturing industry who say that airlines are in a better situation than anyone else to pass on the costs of carbon credits to their customers so they are naturally inclined just to buy these credits in the market place and this would drive up the costs for everybody else? The power of that lobby, Friends of the Earth say, will mean inevitably that the allocation to airlines will be more generous than the situation demands. Therefore, we get into this situation where they are just being allowed to deliver the efficiency improvements they would do anyway and we are not going to get a transformation.

  Mr Alexander: I will ask Simon to say a word about the anticipated thinking in terms of the entry of aviation. If you look at the ETS more generally, there were similarly genuine concerns raised by the operation of the allocation system at the time of its establishment. Notwithstanding the teething difficulties that ETS encountered in terms of allocations with there being too many allocations provided in certain markets, there is now a growing consensus that, notwithstanding those specific difficulties around allocation, it was a sensible and rational way to secure effectiveness in terms of environmental impacts and also in terms of economic benefits given the stimulus towards innovation. I do not believe that the hurdles in terms of allocations are so considerable or so distinctive in terms of the airline industry that it would be impossible for us to address concerns that others raise in terms of the allocation policy as part of the ETS.

  Mr Webb: There are two levels of allocation. One is that we need an overall view on whether we are going to do the allocation on an EU-wide basis or by countries. The debate is going on. I do not want to get dogmatic on any point because we have people on this working group. You have to go a bit with other people's views as well. The sense we have is there is not a sensible option beyond an EU-wide harmonised cap and allocation methodology. In other words, it is done across the industries as a whole and this reflects the homogenous nature of the industry. After all, it has been regulated on an international basis for quite a long time, so no surprise there. The first answer to your question is not dogmatic but our take is that we should do this on an EU-wide basis. On the methods of allocation, we certainly have a preference for measures of allocation that need to be equitable but which provide incentives for reductions. If you go through the standard list that I am sure you are familiar with of grandfathering, bench marking, auctions, base line or direct, there are some of those which recognise where people have already made improvements which is a way of sending a signal to the industry that we are going to give credit in future for people who make improvements. There are issues about whether there are mixes and the role of auction in mixes and so on. There is a lot of detailed design stuff to be gone through but we are on the case.

  Mr Alexander: There are very divergent voices within the industry. If you talk to Easyjet or British Airways in terms of whether they want grandfathering as part of the scheme, you get two rather different voices.

  Mr Webb: The incentive for efficiency, as you would expect from a Brit, is high.

  Q705  Chairman: Given all the difficulties which you have alluded to, including some resistance from airlines in other countries and the fact that there are a lot of people who expect this to be one round of this argument, it is likely to be quite a long time before a system is in place which effectively starts to curb the growth in emissions from aviation. Since one of the intended effects of bringing aviation into the ETS is to raise the cost of flying, would it not be a good idea to explore ways of doing so more quickly so that we could give a more direct and immediate market signal to what is one of the most challenging areas in terms of carbon emissions?

  Mr Alexander: The premise on which your question is based, at least implicitly or explicitly, suggests that it will be a significant period before we can see aviation coming within the ETS. I would not wish to give encouragement to those who are less than convinced of the case of aviation within ETS by suggesting that if they hold out long enough, by default, we will turn our focus to other measures. Frankly, we have a very keen interest in persuading our other European partners and those within industry who have concerns that this is the right thing to do and that there will be continued focus and momentum on the part of the British government to achieve it. It is one of those issues—I say this bringing in my perspective as a former Europe Minister—where I am not sure there has been a full recognition within the United Kingdom as to how much of a leader the UK has been on this issue. I think if our remarks were to be raised in other European capitals as indicating that if they wait long enough we will move towards other policy tools that would be very regrettable because we are convinced that this does offer a sensible, effective way to achieve the kinds of goals that we want to see. Clearly in this discussion there is often the issue raised of airline passenger duty and whether that would provide a better alternative. As my predecessor has said, APD seems to us a fairly blunt instrument. On a previous occasion it has been suggested that if you were interested in terms of incentives to the industry to effect the kinds of changes we want to see, given the changes that have taken place in airline technology and the fact that the fleet coming into Heathrow tends to be a younger and therefore more fuel efficient fleet than other airports across the world, one of the things that could be considered would be whether you can incentivise the right kind of aircraft to be landing in terms of your landing charges at Heathrow. We are not actively participating in that discussion at the moment because my main focus is on making sure that we see the progress we want to see in terms of aviation in the ETS. Alistair's previous comments give flavour to the fact that some of the discussion in terms of the way forward does not most accurately recognise where there is the opportunity to leverage the maximum environmental benefit.

  Q706  Chairman: Unlike some EU countries, we do have a significant domestic aviation sector and it would not be giving any comfort to prospective back sliders on ETS at EU level to raise their passenger duty for domestic flights and perhaps to do so in a way that directly related that particular tax to the emissions caused by particular flights. They would be giving a very direct signal to passengers and indeed to airlines and manufacturers. Is that something that you would consider, given the problem area that aviation constitutes?

  Mr Alexander: Firstly, the sustained investment that we have made, for example, on the Manchester to London journey time on the railways does manifest the fact that you can by the kind of sustained investment we have made effect changes in terms of passenger behaviour. The second point however is a rather larger one. Frankly it does not matter in terms of CO2 whether the CO2 is generated at Inverness Airport or Charles de Gaulle in terms of the impact on the environment. That is why, in terms of the design of the system, we believe that it does demand a global response and that the logical place to take that international response in the first instance is the European Union. I would not want to be in a position again where, in these detailed negotiations with other European partners, they were able somehow to say, "Well, you have made unilateral steps in the United Kingdom. Why do you care about this issue?" when there is a broader argument to be secured and a consensus to be achieved which is that we can at European level deal with this more effectively than by individual actions by individual countries. The third point to emphasise candidly, which I think you drew out in an article in The House magazine, was the point that the Prime Minister made. This is not easy political terrain. If any of the Members of this Committee were invited to go back to their constituencies and say, "I recommend that our constituents stop flying" it is a very difficult request to make of individual politicians. I think the right response to that is to say, "What is the most effective policy framework that we can have?" We believe that is bringing aviation within the ETS. The right response for ministers is therefore to commit focus and attention to trying to achieve that goal, which has certainly been the approach both during the British presidency and now under the Austrian presidency. I can give the Committee an assurance that it will be a continued priority for me during my time in the department.

  Q707  Chairman: You do not believe that Britain's influence internationally in our leadership role which you say we have in this particular field would be strengthened if it was seen we were tackling our purely domestic problems? No emission from any foreign airport arises as a result of a domestic flight. We do not fly in and out of Charles de Gaulle in going from London to Glasgow. There is an opportunity therefore for Britain to pioneer the way forward by having a tax on air passengers which is specifically related to the emissions caused by their choice of form of transport. On domestic flights there are always alternatives. There are trains and, when the trains improve, they become effective. Even driving most low emission cars is better than going on an aeroplane. In terms of domestic choices, we could introduce a policy which would be a pioneering policy. Would that not greatly strengthen the influence which you believe we exercise in international negotiations?

  Mr Alexander: I am not convinced that if we moved our focus from the progress that we have made at a European level as recently as December, anticipating as soon as the turn of this year the legislative proposals that will emerge from the European Commission, that that would strengthen our ability to seize the bigger prize. I believe that the biggest prize and the biggest opportunity is to do this at European level. There is learning in terms of allocation policy and on other points which can be drawn from the general operation of the ETS. I believe that we need at this stage to focus the momentum on trying to secure the entry of aviation towards the ETS according to the timescale that I have set out, 2008 or as soon thereafter as can be achieved.

  Q708  Chairman: American airlines will be treated in exactly the same way as European ones for this purpose?

  Mr Alexander: If you were even to read The Economist magazine this week, you would see that there are fairly robust views being expressed not just by individual American airlines but by some within the American administration as to the impact of aviation's entry into the European emissions trading scheme. These are issues which we will need to continue to discuss.

  Q709  Chairman: Does that mean the robustness of the American airlines' views might mean they would be treated leniently compared to the European airlines?

  Mr Alexander: No. What I have made clear is that there are continuing discussions with not just European partners but there will no doubt also be discussions with other international partners as we try and make sure that we have a scheme which balances the need to make sure that people are able to continue to travel within the European Union with a more effective means of capturing the environmental consequences of air travel.

  Q710  Joan Walley: This exchange gets us to the very heart of it, does it not? This Committee does recognise certainly the leadership that the government has shown in trying to get a European-wide solution and how public opinion can help to make the case even faster to get that European-wide solution. We do not want to detract from that in any way. You mentioned earlier on the talks that you had when you were out in Sweden. We were very impressed by some of the developments in Sweden where they looked internally at things that they could do on domestic air flights in advance of any European scheme. Without wanting to compromise your negotiating position in terms of maintaining that leadership role across Europe, given what the government has said in respect of the Climate Change Programme which keeps the government's options open and reserves the right for the government to act alone or bilaterally at a later stage, if we do not get the agreement European-wide, how will we know that the time is right for plan B? Given that that is included in the Climate Change Programme statement, what would plan B consist of if we reached that stage because the one thing that we have not really reflected on in our exchanges up until now has been the amount of time that we have to start to deal with the emissions in terms of global warming.

  Mr Alexander: I suppose it is inevitable that I bring to this conversation a perspective I gained during the British presidency and from spending significant portions of my life in rooms in Brussels negotiating with European partners. In the Foreign Office I was never allowed to claim a victory in Europe. The way to secure consensus on these kinds of policy matters was not to countenance defeat at a critical point in the negotiations. In that sense, notwithstanding the caveat you added at the beginning of your question, saying without compromising our negotiating position, I think it would be simply impossible at this particular point, anticipating the European Commission's legislative proposals—we are working very closely with the European Commission in terms of the terms of those proposals—to at this stage suggest that we should either unilaterally in terms of policy measures that we would introduce in the United Kingdom or simply in terms of giving comfort to those at an international level who do not share our views with the same sense of speed and urgency, talk about plan B. I genuinely think the way that you secure that victory is to engage with your partners to continue the discussions. In terms of the evidence I would bring to bear supporting that contention, I would say look what we achieved during the British presidency. It would be more difficult frankly for me to sustain that line of argument but for the progress that we did make in the second half of last year where we secured that consensus in the Environment Council. That speaks to the potential that we have to maintain the progress that has now been achieved and has continued within the European Union. Let us see where the European Parliament ends up in terms of its role next month. We have some very critical negotiations and discussions to have with other European capitals in the months ahead of December. I would not want to prejudice those discussions today.

  Q711  Joan Walley: You do acknowledge, do you not, that the government has made it clear that it would reserve that right to act alone or bilaterally if progress at international level proves too slow? That has to be, if you like, a fallback position.

  Mr Alexander: Given where we are in our negotiations with our European partners, I would not want to give comfort to those who believe that if they simply sit it out out of our back pocket we will produce either a unilateral series of measures or alternatives, when I believe that the significant prize, not just for the British government because it is our stated position but in terms of all of us concerned with climate change, would be to see the agreement at European level that we continue and will continue to strive for.

  Q712  Mr Stuart: This is slightly surreal. You are tying us to the slow lane. Whoever is the slowest in Europe we are absolutely tied to. You are suggesting that if we take any action showing our determination to tackle this issue at home somehow it undermines our efforts to do so internationally. I would put to you that it is straight out of Yes, Minister. It is clearly absurd. The idea that we will just stay there and carry on and the longer we do it doubtless there will be more investment in the policy so the more years we go on struggling and failing—

  Mr Alexander: We are not struggling and failing. If we were struggling and failing, why did we have the conclusions of the December Environmental Council that I quoted earlier? If we were struggling and failing, why is it that the European Commission is bringing forward proposals in terms of its legislative proposals in December? I leave it to you to make a judgment as to the European Union. The means by which you secure progress is by engaging effectively with your European partners, I believe, at critical points of negotiation. I return to the substantive point: given the capacity of carbon molecules to find their way round the world in a relatively short period of time, it is not for me a matter of dogma or European policy that I advocate this response. It seems to me to be the appropriate level at which to address what is inherently a global challenge. We in the United Kingdom account for about 2% of global emissions. I think there are a billion cars on the road around the world and 60 million cars produced every year. It is in that context that I think it would be surreal, as you describe my answer, to suggest that one country acting alone is a more sensible response to these challenges than is working internationally with our partners.

  Q713  Chairman: Would one way of showing our keenness to work with our EU partners be to do what most of them do and charge VAT on airline tickets?

  Mr Alexander: It has been a longstanding difference between ourselves and a number of European partners, how to address the issue of VAT. I remember the very delicate discussions that took place at the December European Council under our presidency where President Chirac was advocating very strongly that there should be a cut in VAT on restaurants. I cannot say that that was a convincing argument to the British government, the German government or to the other partners around the European Council table. I am afraid I may disappoint the Committee again but I do not appear today to announce a change in terms of our fiscal policies in relation to VAT, income tax, car duty or any other fiscal matter which will rightly be addressed by the Chancellor at the time of the Budget.

  Q714  Chairman: What reason do you think he has for not wanting to charge VAT on airline tickets?

  Mr Alexander: Chancellors, as in all decisions in terms of fiscal policy, have to strike an appropriate balance. That is the nature of the Budget judgment that is made year on year. Of course there are environmental considerations to be taken into account. There are social considerations in terms of the appropriate funding of public services. There is consideration to be given in terms of that general balance for the maintenance of economic growth which we have managed now for a sustained period during this government. It is inherent in the work that the Chancellor does that he exercises that judgment at the time of the Budget.

  Q715  Dr Turner: Quoting from the Climate Change Programme, "we welcome recent airline initiatives allowing customers to voluntarily calculate and offset emissions from their flights." If carbon offsetting is such a good idea and if it is effective, why are you not making it a compulsory charge on all air tickets?

  Mr Alexander: To read into that statement, I do not think it reflects the fact, as I said in the joint article that I referred to at the beginning of this session with the Environment Secretary, David Miliband, it is not simply a role for government or simply a role for private companies but a role for private companies, for broader civil society and for individuals and government as well. Our challenge is to set the framework. We exercise that judgment and continue to reflect upon where that framework should lie. It seems to me, given that philosophical view that this is not simply a task for government but a task for individual companies and for individuals as well, it is perfectly reasonable to acknowledge the efforts that are being made, either by individuals or indeed by individual companies to address the challenges that we all face.

  Q716  Dr Turner: There seems to be very little uptake of this facility at the moment. Certainly it is vanishingly small as far as British Airways are concerned, they told us. The government is happily taking this up for all government flights. They are generally by British Airways as a matter of policy and British Airways seem to have a different methodology for calculating the emissions and the costs of a flight from others, which is rather lower. Is the government being so good in offsetting on all its flights if BA are doing it at a cut rate?

  Mr Alexander: Let me clarify a factual point that, as a matter of policy, ministers fly with British Airways. There may have been occasions during my time in the Foreign Office when I wished that was the case but in fact value for money is one of the key considerations. When I was the Minister responsible for south and south east Asia, as a matter of course, I was travelling on Emirates flights and other flights depending on the particular circumstances. It seems to me curious to suggest that our advocacy of this and the fact that on 1 April, as a government, we adopted this position that all official and ministerial central government air travel will be offset through the government carbon offset fund differs from British Airways as being evidence that either British Airways is right or indeed that the government is wrong. The two schemes have been designed separately. As I understand it, we are out to tender at the moment across government in terms of how we can secure the offset most effectively. I welcome the fact, and believe it reflects a seriousness of intent on the part of the government, that we have taken that step, notwithstanding that there may not be that many British Airways customers at this stage who have accepted a similar suggestion.

  Emily Thornberry: The series of intent of British Airways we have seen evidence of and they could not even tell us that it was 1% of journeys that are offset. They did not come up on the website. It is impossible to find them. Nick has tried to carbon offset his flights through British Airways and they are just taking the mickey. To hear that they are offsetting it at a cheaper rate, the cheapest rates they can get away with even on ones that they do not do, they are taking the mickey and it is a real shame.

  Q717  Dr Turner: It only cost 50p for our Swedish trip.

  Mr Alexander: I have spent the last few weeks becoming familiar with the work of the Department for Transport. I am glad to say that I sit here today representing the Department for Transport. If you wish to direct questions to Willie Walsh, I am sure you know where he works, just next to Heathrow.

  Mr Webb: We have set up a scheme for all official ministerial and government air travel. We think it will offset around 100,000 tonnes of CO2 per annum for three years and we will then have another look at it. In terms of management, we obviously need to achieve a certified emission reduction and we are looking at the most likely outcome which is a scheme in South Africa. We need someone to go and manage this for us properly. It is not an expertise that we have within the department. Our colleagues in DFID know about it. On the level, what we have done within government is to reflect the issue that carbon is not the whole story on emissions, particularly in the aviation context. I suspect this Committee knows a lot about this. We decided to adopt at least provisionally, initially, a multiplier of two on the carbon to reflect the other elements in greenhouse gases to recognise that point. In terms of flights, anybody who has a dedicated budget is entitled to go to any airline they like. People do very interesting experiments about buying very cheap tickets and having to cancel them because their meeting changes, doing ones over six months and working out that they do very well on low cost airlines compared to traditional bookings.

  Q718  Mr Stuart: The 2006 Climate Change Programme makes no mention of shifting freight from road to water. I wonder if you could explain why that is what steps you are taking to encourage this shift?

  Mr Alexander: We believe that there is a case for greater use of regional ports not least to reduce overland transport of material, but this will be considered as part of the ports policy review which I authorised and I think was launched by Stephen Ladyman, my ministerial colleague, within days of my arrival in the department. In the last five years the DfT has awarded grants of some £30 million for water freight schemes, only 60% of the available budget, because of the lack of viable schemes being put forward by the industry. It is not that there has not been either an allocation of resources or a willingness to commit those resources within the department. These are all issues which we can consider as part of the ports policy review.

  Q719  Mr Stuart: In 2003 international shipping from UK ports was responsible for emissions of 1.9 million tonnes of carbon and yet, just like emissions from international aviation, these do not show up on our domestic inventory and are specifically excluded from Kyoto. What is the government doing about international shipping emissions and are you going to adopt binding targets for them? Will you seek in post 2012 negotiations to see aviation and shipping brought into each country's measurements of carbon?

  Mr Alexander: The discussions in terms of post-2012 are beginning, taking forward the work that Margaret Beckett achieved at the climate change conference in November of last year, if I recollect, in Montreal. In terms of shipping, it is again inherent in the nature of ships that if you were to instigate a national regime of particularly stringent targets it would be available to ship owners to reflag their vessels and to move to another environment which was less burdensome in their view in terms of the environmental impacts. As a consequence of that, we have sought to play a key role in trying to persuade all states within the International Maritime Organisation to play an equal part in limiting CO2 emissions. As recently as 2003 the UK was active in the IMO's Marine Environment Protection Committee when we began to address CO2 emissions for international shipping. Progress, frankly, has not been smooth. I have talked again to officials about this in anticipation of discussions on it today, because all states are not convinced of the case of taking international action in limiting CO2 emissions from international shipping. We have however worked very closely with industry to develop a paper to stimulate debate on market based approaches that could work given the distinctive nature of the marine market. As recently as March 2006, we as a government presented a paper to the MEPC. Again, the more I looked into this matter, the more I was struck by the fact that, notwithstanding the inherent difficulties in the shipping market, the British government was pushing the case and advancing ideas in terms of how we could make progress.

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