Select Committee on Environmental Audit Written Evidence


Memorandum submitted by the Freight Transport Association

INTRODUCTION

  Freight Transport Association represents the freight transport interests of businesses throughout the UK. Its members range from small and medium size enterprises to multi-national public companies and are involved in all modes of transport. FTA members operate over 200,000 heavy goods vehicles, about half the UK fleet, are responsible for 90% of freight moved by rail and 70% of goods shipped by sea and air. This unique multi modal mandate enables FTA to speak authoritatively on all aspects of freight based on the broader transport needs of industry in the economy.

PROGRESS TOWARDS MEETING NATIONAL REDUCTION TARGETS FOR GREENHOUSE GAS AND CARBON DIOXIDE EMISSIONS

  Latest figures produced by the Department of Agriculture, Environment and Rural Affairs (DEFRA)[32] suggest that the UK is on course for meeting its Kyoto target of reducing total greenhouse gas emissions by 12.5% relative to the 1990 base year over the period 2008-12. Greenhouse gas emissions fell steadily throughout the 1990s and by 2000 were 12.9% below 1990 levels. Since then emissions have stabilised.

  The UK has been less successful in meeting its domestic carbon dioxide reduction goal of a 20% fall in emissions relative to the 1990 base year. Carbon dioxide emissions fell by 7.3% between 1990 and 2000. Since then they have risen and in 2004 were just 4.2% below 1990 levels.

ANSWERS TO SPECIFIC ISSUES POSED BY THE COMMITTEE

1.  What progress is the DfT making against carbon reduction targets or forecasts included in the Ten Year Plan (2000), the Climate Change Strategy (2000) and the 2004 Transport White Paper?

  The contribution of the main sectors of the economy towards meeting these two targets shows marked differences. In particular, road transport has seen its levels of carbon dioxide emissions (the main source of greenhouse gases from the sector) stay stubbornly high. The effect has been that road transport's contribution to total man-made carbon dioxide emissions has risen from 18.6% in 1990 to 21.3% in 2004.

EMISSIONS OF CARBON DIOXIDE 1990-2004 (MILLION TONNES EQUIVALENT)


1990
1995
2000
2004
% of total man-made
carbon dioxide
emissions in 2004

Road transport
29.9
30.3
31.7
32.6
21.3
Rail transport
0.5
0.5
0.4
0.3
(est)
0.2
Total man-made sources
160.7
149.6
149.1
153.0


Source: Defra, DfT

  The main reasons behind the "stickiness" in carbon dioxide emissions from road transport over the period have been threefold:

  Traffic growth: between 1990 and 2004 road traffic on UK roads rose by 21.4% to 498.6 billion kilometres. Growth in car traffic accounted for 66% of this increase, light vans 25%, hgvs 6% and other traffic 3%.

  Change in composition of traffic: maximum weight articulated trucks are undertaking a growing proportion of total kilometres on UK roads. In 1990 goods vehicles with five or more axles accounted for 19% of total hgv traffic. By 2004, these vehicles accounted for 40% of hgv traffic.

  Change in composition in vehicle stock: The proportion of vehicles with large, less fuel efficient engines within the total vehicle stock has risen. In 1990 vehicles with an engine capacity below 2,000 cc represented 8% of the private car and light goods vehicle parc. By 2004 this had risen to over 12%.

  Improvements in fuel efficiency have failed to counter these upward pressures on carbon dioxide emissions from the sector.

    —  Average fuel consumption of petrol and diesel cars has remained static at 30 mpg and 40 mpg respectively. The limited improvement in overall fuel efficiency (from 31 mpg to 32 mpg) that has been achieved has resulted from the switch from petrol to diesel cars.

    —  In-use fuel efficiency for rigid hgvs and articulated hgvs has improved over the period from 8.0 mpg to 8.3 mpg for rigids and from 6.8 mpg to 7.9 mpg for artics. However, the change in mix of hgv road traffic has partially offset this improvement at an aggregated level.

2.  Is the DfT's carbon reduction target underpinned by a coherent strategy stretching across the department's entire range of activities?

Fuel duty escalator

  The Government's principal strategy for tackling carbon dioxide emissions from road transport during the 1990s was the fuel duty escalator. The rationale behind the escalator was that by increasing the price of fuel through fuel duty, consumption of fuel by road transport would be checked. Between 1993 and 1997, road fuel duty increased by 5% in real terms each year. From 1997 it increased by 6% per year, until public and political pressure led to the mechanism being switched off in 1999. Evidence of any beneficial effect of the fuel duty escalator on emissions from private motorists is inconclusive. Between 1993 and 1999, emissions from passenger cars grew by 2%, to 21.1 million tonnes of carbon equivalent, whilst car traffic rose by 11%. Following a cut in fuel duty of three pence per litre in Budget 2001, duty remained unchanged in 2002 and 2003—the overall effect being to reduce fuel duty by 2.9% in real terms. However, carbon dioxide emissions from passenger cars have fallen back to 1993 levels (19.8 million tonnes of carbon equivalent), despite car traffic volumes rising by a further 5%.

  For road freight operators the imposition of the fuel duty escalator since 1993 has simply added to the cost base of the sector and served to undermine the competitiveness of the UK economy. Moreover, there appears to be no link between the imposition of the escalator and fuel efficiency improvements in the sector. Carbon emissions from hgvs failed to respond to the fuel duty escalator between 1993 and 1999. Over the period, carbon emissions from hgvs rose by 21%, reflecting, for the most part, an increase in freight activity of 17%, broadly in line with economic growth. Between 1999 and 2003 (when fuel duty fell in real terms), emissions from hgvs rose by just 3%, despite hgv traffic rising by 5%.

TRENDS IN TRAFFIC AND CARBON DIOXIDE EMISSIONS: 1993-2003


1993
1999
2003

Carbon dioxide
emissions
(mt C)
Traffic
(bvkm)
Carbon dioxide
emissions
(mt C)
Traffic
(bvkm)
Carbon dioxide
emissions
(mt C)
Traffic
(bvkm)
Cars
19.8
338.5
20.1
377.419.8398.1
Hgvs
5.8
24.0
7.0
28.17.229.4

Source: Transport Statistics Great Britain, DfT
NB: mtC = Million tonnes of carbon, bvkm = Billion vehicle kilometres


  FTA believes that the level of fuel duty currently faced by UK hgv operators compared to competitors based elsewhere in the EU contributes little, if anything, to the UK's carbon dioxide reduction goals. The deregulated nature of the UK domestic haulage industry means that the market has always been an intensely competitive one. Operators will therefore focus on minimising fuel costs (which typically account for 35% of the cost of running an hgv) to ensure they can offer an attractively priced service. The intense competitive pressure that foreign operators are placing on UK carriers, by virtue of the cheaply taxed diesel that they use whilst in the UK, adds no extra impetus for UK carriers to reduce fuel use. Arguably it is proving counter productive. To compete with cheap foreign haulage, UK carriers must shave costs off other areas of the business—such as delaying vehicle replacement and running older, more polluting vehicles for longer.

  The duty escalator and its legacy of high diesel prices in the UK relative to our EU competitors, has not encouraged vehicle manufacturers to produce more fuel efficient vehicles. Motor manufactures supply to a European market, and will make decisions about the relative priority of investment in fuel efficiency in the light of prevailing fuel costs across Europe, rather than unilateral tax decisions taken by one country. Furthermore, efforts to improve fuel efficiency have had to taken a back seat to mandatory air quality (Euro standards) for cars, light commercials and hgvs. The concerted attempt to improve exhaust emissions since 1993 has focused on particulates, oxides of nitrogen and carbon monoxide. In the case of an hgv, one vehicle in 1990 emits the same level of tailpipe pollution as 20 vehicles registered from October 2006, when Euro 4 became mandatory. it is only since 2001 that the global warming implications of methane have been reflected in the Euro standards. It will not be until Euro 6 at the earliest (possibly in 2012) that carbon dioxide emission criterion will be set.

EURO EMISSION STANDARDS FOR TRUCKS 1990-2009


Emissions by Euro class g/kWh
Carbon
monoxide
Hydrocarbons
Nitrogen
dioxide
Particulate
matter
Methane

Euro 0 (1990)
11.2
2.4
14.4
Euro 1 (1993)
4.5
1.1
8.0
0.36
Euro 2 (1997)
4.0
1.1
7.0
0.15
Euro 3 (2001)
2.1
0.66
5.0
0.1
1.6
Euro 4 (2006)
1.5
0.46
3.5
0.02
1.1
Euro 5 (2009)
1.5
0.46
2.0
0.02
1.1


  FTA does not believe that a "one size fits all" approach of using price in the form of fuel duty to lever carbon dioxide efficiency savings from the road transport sector is effective. In the case of the road freight sector, the policy has resulted in no clear carbon dioxide saving. Rather it has undermined the competitiveness of UK businesses—already under intense pressure from Sterling's strength against the Euro and from developing countries in Eastern Europe and the Far East—by increasing transport costs of the UK road leg. Duty on diesel used by hgvs in the UK should be brought down to the average level elsewhere in the EU.

Fuel efficiency

  The Department for Transport is the sponsoring department for a comprehensive suite of free guidance and advice for road freight operators under the banner "Transport Energy". DfT funded fuel efficiency work with the industry started in the 1980s when work concentrated on fuel efficiency devices—such as vehicle aerodynamics.

  Since then the work has extended to embrace initiatives designed to reduce the energy intensity of road transport activities (for example, using computerised vehicle routeing and scheduling to improve resource deployment and minimise vehicle mileage) as well as measures to improve fuel consumption. The work is generally project-based, with external consultants engaged to commission the work and deliver each initiative.

  The library of energy efficiency publications is now extensive and covers best practice case studies, in-service trials, driver training in fuel efficiency techniques, benchmarking and basic commercial advice about pricing haulage work. Industry has been supportive of the initiative and has often actively engaged with the Department's work in this area.

  Freight Transport Association has collaborated with DfT and its consultants to raise the profile of the "Transport Energy" work. However, it is clear that the footprint of the work is limited to the most progressive parts of the industry. Transport Energy has approximately 1,000 operators which it is in regular contact with, out of an industry of some 65,000 companies.

  The success and value of "Transport Energy" and previous programmes is difficult to gauge. FTA is unaware of any overall carbon emission related targets for this work, nor any specific saving targets for individual publications and initiatives. Whilst it undoubtedly makes an important contribution to the understanding of energy efficiency within the sector, its contribution to UK competitiveness is unclear. There is a strong case for the scheme to migrate away from a reference resource for the well initiated and provide hands-on practical help to operators in controlling costs and ensuring business sustainability. However, even then it falls a long way short of offsetting the commercial pressure created by the legacy of the fuel duty escalator.

Use of gas as a road fuel

  During the 1990s industry invested heavily in the development of gas powered commercial vehicles as an environmentally attractive alternative to diesel engines vehicles. The uptake of gas powered vehicles was influenced, in part, by the Government's duty treatment of road fuel gas. Duty of cng and lng road fuel gases was frozen in the 1997 and 1998 Budgets and reduced by 29% (7.2p per kg) in the 1999 Budget.

  The 2004 Budget announcement that the Government had reassessed the environmental attractiveness of gas and that the duty differential for liquefied petroleum gas (lpg) would narrow against conventional fuels over the period 2004-05 to 2007-08 has left operators who invested in this technology high and dry. Operators make fleet specification decisions on whole life costs of the asset. The change in tax treatment for gas leaves such operators with a ratchet increase in gas duty each year and a much lower residual value for the vehicle than originally anticipated.

  The net result is that operators are now wary of alternative technology where Government support has been pledged; for fear that support could be removed as quickly as it is given.

  Future long-term decisions about relative duty levels on road fuels must be signalled sufficiently far in advance to allow industry to adjust its vehicle acquisition and replacement policies to achieve the lowest whole life cost for its vehicles.

3.  What realistically could the DfT achieve by 2010 and 2020 in terms of reducing transport-related carbon emissions, and what is the role that demand management should play in doing so?

Carbon dioxide emissions from transport to 2020

  Carbon dioxide emissions trends from transport since 1990 suggest that overall levels of emissions have been largely unresponsive to policy initiatives targeting at this sector. On this evidence, and with no other policy instruments and initiatives in place, carbon dioxide emissions from transport are likely to remain stable at best, assuming current DfT projections of 2.2 to 2.9% annual road traffic growth continue. Recently commentators have suggested that provisional traffic figures for 2005 showing a stabilisation in activity is linked to the higher world oil prices. It is too early to say whether such a link does exist and whether the traffic levels will remain broadly static if high oil prices persist.

  Arguably the most effective way of delivering carbon dioxide cuts, without undermining competitiveness, is through tackling emissions from fixed sources, principally the energy industry. It is in this sector where most of the carbon dioxide emissions savings since 1990 have been made. Although a significant carbon dioxide emissions reduction has also been recorded by "other industries", part of this fall reflects the decline in UK manufacturing over the period.

The role of national road charging

  The Government's plan for national road pricing by 2020 has the potential to reduce carbon dioxide emission from transport through influencing travel behaviour. However, the likely effects are not clear-cut.

  The experience of London congestion charging on congestion levels suggests that whilst private car traffic in the congestion charging zone has fallen since the introduction of the charge in 2003, traffic by vans and hgvs has remained unchanged. These vehicles are entering the charging zone to service customers and consumers in central London and journeys are not discretionary.

  The effect of a national road pricing scheme on passenger transport is dependent on availability and choice of alternative modes. In London, where choice exists, public transport patronage has risen. However, where no alternative modal choices exist, the main effect of demand management will be to displace traffic into quieter periods of the day/night when charges are lower, or onto different roads that attract a lower charge at the same time of the day. The spatial distribution of families, work and leisure means demand management is unlikely to prevent journeys taking place all together.

  As far as FTA can see, existing policy measures alone are unlikely to yield a marked reduction in carbon dioxide from transport. The experience of London congestion charging suggests that demand management through road pricing can have a marked impact on certain road users. However, to be effective road users need credible alternatives to private cars.

4.  What specific steps should the Department now take to reduce road transport carbon emissions and congestion over the next decade?

  FTA believes that much more can and should be done to ensure that transport plays a fuller role in reducing carbon dioxide emissions. Specific initiatives identified by FTA which would reduce emissions from freight transport include:

  To establish a methodology framework to rank carbon dioxide emissions from alternative power trains and in different driving conditions. This would enable a consistent approach to be developed in assessing the impact of carbon dioxide emissions on different policy and technology scenarios.

  Introduction of 100% enhanced capital allowances for energy saving investments for road freight vehicles and systems.

  This would incentivise:

    —  fitment of aftermarket equipment such as vehicle aerodynamics; and

    —  investment in the latest, most fuel efficient and cleanest Euro 5 hgvs. The development of Euro 4 technology means that next generation Euro 5 emission standard vehicles are now also available on the market. There is evidence from Germany and the Netherlands that where the fiscal incentives are appropriate, operators will "leapfrog" Euro 4 standards and move straight to Euro 5. In Germany the fiscal incentive has been in the form of a lower level of MAUT road user charge. In the Netherlands operators have been encouraged to adopt the cleanest technology through enhanced capital allowances.

  Reduction in stop-start driving by hgvs. Stop-start driving by hgvs is considerably less energy efficient than steady driving. Measures that can be deployed on the existing road network include no-car lanes, encouragement to use freer flowing toll roads and smart toll plazas to minimise queuing vehicles. However, investment in additional capacity, through accelerated delivery of the Department's Targeted Programme of Improvements as well as large scale infrastructure projects of national importance such as the widening of the M6 North of Birmingham also form a crucial part of the overall policy mix.

  Promotion of Freight Quality Partnerships (FQP) best practice at local level. Existing FQP best practice in terms of measures to reduce carbon dioxide emissions from hgv traffic includes:

    —  encouraging deliveries outside peak hours;

    —  relaxation of night-time delivery curfews;

    —  freight priority routes; and

    —  clearer direction and warning signage on routes used by hgvs.

  Examination of the potential role of longer, heavier vehicles. A full evaluation is needed on the role in the UK of the European Modular System of hgv design which enables 25.25 million vehicles at, up to, 60 tonnes. These vehicles are being evaluated in a number of European countries including the Netherlands. DfT has signalled its interest in the system, but has yet to give the go-ahead for an in-service trial over designated routes.

  Driver training and simulators. Driver training has been shown to deliver fuel efficiency benefits of up to 10%. However, maintaining changed styles to driving is time consuming and costly. Wider use of driver simulators could provide operators with a training resource which does not take drivers and vehicles off the road for prolonged periods of time.

  Creating the right commercial environment for rail freight. Rail freight offers important carbon dioxide savings over road freight for certain movements and can offer a commercially attractive congestion bypass for the shipper. DfT must ensure that freight operators are able to secure the train paths they require and provide a grant regime that reduces investment risks for new and existing rail customers.

February 2006







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