The
Committee consisted of the following
Members:
†
Blizzard,
Mr. Bob
(Waveney)
(Lab)
†
Brazier,
Mr. Julian
(Canterbury)
(Con)
†
Carmichael,
Mr. Alistair
(Orkney and Shetland)
(LD)
†
Dobbin,
Jim
(Heywood and Middleton)
(Lab/Co-op)
†
Havard,
Mr. Dai
(Merthyr Tydfil and Rhymney)
(Lab)
†
Jenkin,
Mr. Bernard
(North Essex)
(Con)
†
McCabe,
Steve
(Birmingham, Hall Green)
(Lab)
†
Marshall-Andrews,
Mr. Robert
(Medway)
(Lab)
†
Merron,
Gillian
(Parliamentary Under-Secretary of State for
Transport)
†
Neill,
Robert
(Bromley and Chislehurst)
(Con)
Rowen,
Paul
(Rochdale)
(LD)
†
Simon,
Mr. Siôn
(Birmingham, Erdington)
(Lab)
Watkinson,
Angela
(Upminster)
(Con)
Emily
Commander, Committee
Clerk
†
attended the
Committee
The
following also attended, pursuant to Standing Order No.
119(5):
Chope,
Mr. Christopher
(Christchurch)
(Con)
European
Standing
Committee
Tuesday 27
March
2007
[David
Taylor
in the
Chair]
Emissions Trading Scheme
4.30
pm
The
Parliamentary Under-Secretary of State for Transport (Gillian
Merron):
Mr. Taylor, it is a pleasure to serve
under your chairmanship as we discuss a very important measure. I am
responsible for UK policy on the regulation of aviation, but, as the
Committee will be aware, the Department for Transport and the
Department for Environment, Food and Rural Affairs have joint
ministerial responsibility for our policy on the inclusion of aviation
in the European Union emissions trading scheme, and so I am here
representing both
Departments.
Today’s
debate is timely. In the 16 months since we last debated the matter,
the science behind climate change has become even more conclusive, and
there is enormous political and public pressure for a post-Kyoto global
agreement. Earlier this month, the European Union summit resulted in an
historic announcement: that the EU would make a firm and independent
commitment to cut its emissions by at least 20 per cent. by 2020, even
before a global agreement is reached and irrespective of what others
do. That target will increase to 30 per cent. if matched by other
developed
countries.
Domestically,
the Government have recently published the Climate Change
Bill—the first legislation of its kind in any
country—which demonstrates the UK’s leadership as
progress continues towards the establishment of a post-2012 global
emissions agreement. It forms a fundamental part of the UK’s
strategy to address the issues raised by the Stern review and sets
challenging and legally binding carbon dioxide reduction targets for
2020 and 2050.
The
recent publication of the Stern and Eddington reports confirmed without
doubt the need for action. They concluded that the benefits of strong
and early action to tackle climate change far outweigh the economic
costs of not acting. Stern argued specifically for carbon pricing and
other measures to be extended to international aviation.
It is important to put the
environmental impact of aviation in context. The air transport progress
report published in December last year reiterated the importance of air
travel to the UK’s economy and continued prosperity. For
example, in 2002, aviation added £10 billion to the UK economy,
and an estimated 200,000 jobs in the UK depend directly on the
industry. Almost half of the population fly at least once a year, and
we expect that trend to continue—it has been estimated that
twice as many passengers will pass through UK airports in 2030 as did
in
2005.
Clearly,
there are many substantial economic benefits to a growing aviation
industry, but it is important to
evaluate and consider the environmental impact of air travel. Forecasts
have suggested that by 2030 CO
2
emissions from UK
aviation will amount to some 16 million to18 million tonnes of
carbon. Assuming that other sectors continue on track to meet the 60
per cent. reduction target by 2050 referred to in the Climate Change
Bill, aviation could account for a quarter of the UK’s total
contribution to global warming by 2030. The Government are therefore
keen to
act.
However,
we believe that it is not for the Government to deny people the right
to travel or the UK opportunities for prosperity. We need a balanced
approach that reflects people’s desire to travel and the
opportunities that that brings, but reduces and minimises the impact of
aviation growth. For an international industry, an international
trading scheme is the best solution, so we are pursuing one with the
International Civil Aviation Organisation. However, the Government
think that, until a truly global solution can be found, including
aviation in the existing EU emissions trading scheme is the best
multilateral option
available.
Emissions
trading is the best way for aviation to contribute to the long-term
goal of climate stabilisation. It has several advantages over other
measures. First, it guarantees the desired environmental outcome in a
way that other instruments, such as charges, do not; secondly, it
ensures that the emissions reductions that are required to achieve any
environmental outcome are made in as cost-effective a manner as
possible; and, thirdly, it therefore allows all sectors to contribute
to emissions reductions through a combination of emissions reductions
within the sector and the purchase of reductions produced more cheaply
by other sectors. Such measures may not provide a total solution, so we
will continue to explore and discuss options for the use of other
economic instruments for tackling aviation’s greenhouse gas
emissions.
For
all those reasons, we welcome the punctual publication and ambition of
the Commission’s proposal and we are pleased that the German
presidency has taken the work forward so quickly. The UK has been at
the forefront of making the case and winning the argument for the
inclusion of aviation in the European Union emissions trading scheme.
The dossier was discussed in broad terms at both the Environment
Council in February and the Transport Council last week, and there was
strong support for the main lines of the European Commission’s
proposals. Here in the UK, we will be launching a joint DEFRA-DFT
formal consultation before Easter to seek stakeholder views and
analysis on the Commission’s proposal. There are many points of
detail contained in the proposal that require further analysis before
we can establish a UK negotiating
position.
I am sure
that hon. Members will wish to cover a number of areas today and I am
happy to deal with their questions. As I have said, much of the detail
of the UK’s response will be decided following consultation. I
am looking forward to the Committee’s deliberations, which will
inform the debate and the outcome of the
consultation.
The
Chairman:
We now have until half-past 5 for questions to
the Minister. I remind hon. Members that their questions should be
brief and asked one at a time. There is likely to be ample opportunity
for all hon. Members to ask several
questions.
Mr.
Julian Brazier (Canterbury) (Con): I, too, am pleased to
serve under your chairmanship, Mr. Taylor.
We welcome the inclusion of
aviation in the ETS and the approach to funding, which will help the
industry to address the important green considerations outlined
by the Minister. May I ask her about the projections for aviation
demand growth? We have just had two big announcements from
Brussels—one on open skies and another one on airport charges
yesterday. Jacques Barrot’s office is quoted as saying that that
would produce an extra 26 million passengers over the next five years.
What percentage growth does the Minister see in ETS up to 2020? Is it
still 135 per
cent.?
Gillian
Merron:
I thank the hon. Gentleman for his support and for
his commitment to seeking a balanced approach, which is clearly what we
want to achieve. I shall deal with the demand for UK air travel first
and the forecast that we have. UK air passenger demand continues to
show strong growth, even when environmental costs have been factored
in: it is expected to grow from 228 million passengers per year in 2005
to 490 million passengers per year in 2030, if it is not held back by
airport capacity constraints. That is a considerable
challenge.
It is worth
mentioning growth forecasts for other European hub airports. At
Frankfurt, there is a planning application for a fourth runway that
would increase capacity to 660,000 air traffic movements per year by
2010. Similarly, a fifth runway was opened in 2003 at Amsterdam
Schiphol airport and there are plans to increase the capacity further
to 600,000 air traffic movements a year by 2010. I give those examples
to show the scale of the development. That is why the inclusion of
aviation in the EU ETS is
crucial.
Mr.
Brazier:
Could the Minister clarify whether the 490
million figure refers to 2020 or 2030, and tell us what the numbers
would be with and without the ETS? We get the impression from previous
EU projections that the difference is less than one year’s
growth.
Gillian
Merron:
I am happy to clarify that the predicted increase
is to 490 million passengers per year in 2030. I hope that that assists
the hon. Gentleman. I have done my best to understand the question, but
I am happy to take clarification. The emissions trading scheme is not
about constraining passenger growth; it is about setting a cap on
environmental impact.
Mr.
Alistair Carmichael (Orkney and Shetland) (LD): I, too,
welcome you to the chair, Mr. Taylor.
The Minister will be aware that
one of the interesting and novel features of the scheme is that it
allows trading between aviation and other sectors. That provides
certain opportunities, but it might also serve to distort the market in
aviation and other sectors. How do the Government intend to monitor the
impact of inter-sector trading on the sectors
involved?
Gillian
Merron:
I thank the hon. Gentleman for his comments
because he gives me the opportunity to make a point about perspective.
It is interesting to note that in 2005 the five largest power stations
in the country generated more CO
2 than UK aviation. That
fact, and the hon. Gentleman’s comments, suggest to me that it is
proper that aviation should be included in the scheme. Indeed, it is
the first form of transport to be so included, and it is to the credit
of the UK Government that we have pushed so definitely for that.
It is too early to
comment on the risk of distortion. However, I hope that the hon.
Gentleman and others will take part in the consultation. We are seeking
comments on such matters in order to design the most appropriate
system. While it is possible for sectors to trade, my strong suspicion,
and that of those who provide guidance, is that it is infinitely more
likely that, although it is possible to trade across sectors, trading
will take place within the aviation sector—certainly in the
first
instance.
Mr.
Bernard Jenkin (North Essex) (Con): It is a pleasure to
serve under your chairmanship, Mr. Taylor.
Will the Minister
clarify whether it is intended that existing airlines be allocated an
emissions trading allowance free, as happened when the main trading
scheme was launched, or will she follow the recommendations of the
Select Committee on the European Union, which looked into the matter,
and allocate only auctioned amounts of trading
credit?
Gillian
Merron:
The hon. Gentleman asks a very good question about
a matter of concern to the UK. The Commission talks about auctioning
some 3 per cent. of the units, with the proceeds made available to
cover administration and so on. The UK’s initial response was
that we are keen not to do that. The use of proceeds is an important
matter and it should be up to member states to decide what they do.
That is a matter of concern that we are exploring through the
consultation. I assure the Committee that in the consultation I shall
take into account the recommendations of the Select
Committee.
Jim
Dobbin (Heywood and Middleton) (Lab/Co-op): Will the
Minister tell me what the UK Government are doing at international
level with regard to aviation and the
environment?
Gillian
Merron:
I certainly can. Our No. 1 priority is, of course,
the EU emissions trading scheme and the inclusion of aviation. I want
to put on record that the UK that has really pushed for that since
about 2003, when it did not find great favour—we were clearly
somewhat ahead of ourselves. That position has changed radically as the
years have gone on.
Of course, dealing with
environmental challenges is a global matter, so it needs a global
solution. Through ICAO, we are proposing new measures. I must be honest
with the Committee and say that we are not finding a lot of favour, but
we will not be daunted. For example, we are proposing the international
taxation of aviation fuel and, of course, extending the trading scheme
more widely. However, we feel that the EU is the right place to start;
that is where we make headway. We did not start as positively as we are
now proceeding. However, I am committed to continuing our work, not
only within the EU but beyond.
Mr.
Christopher Chope (Christchurch) (Con): May I, too, say
what a pleasure it is to serve under your chairmanship, Mr.
Taylor?
When we last
discussed this issue in Committee, about 18 months ago, the then
Minister said that there was a problem in relation to the legality of
charging airlines in respect of aircraft leaving, for example, the
United States and entering the EU, or aircraft leaving the EU and going
to a destination outside the EU. Can the Minister tell us to what
extent those legal issues have been
resolved?
Gillian
Merron:
I thank the hon. Gentleman for raising that point,
which was raised in the previous Committee. What I can update the
Committee on is that a feasibility study was conducted by CE Delft, a
Dutch consultancy, for the Commission and that study concluded that
there are no legal obstacles to the inclusion of international aviation
in the EU ETS.
Mr.
Brazier:
But even accepting the Minister’s last
answer—it is not the view universally taken by lawyers, who are
rubbing their hands out there—does she not accept that there are
still problems about deciding which country will handle which non-EU
airline? The document says that each airline will be handled by one
country. Will she also tell us why the EU has decided to focus on
airlines rather than airports, where, of course, none of those
difficulties would
arise?
Gillian
Merron:
The EU is, of course, seeking the most workable
solution; certainly, that is what our consultation within the UK will
be about. Again, I invite the hon. Gentleman to make his party’s
views known. I look forward to hearing them.
I cannot, of course, comment on
whether lawyers are rubbing their hands with glee. However, the present
proposal is that the scheme would apply to airlines and would be
administered by the country with which each airline does the most
business. In including aviation in the ETS, we are seeking the most
workable and practical scheme that everyone will understand. I would
emphasise, however, that the issue is up for consultation to help to
direct our view in the UK.
Mr.
Brazier:
Still on the point about airports versus
airlines, I am delighted to hear the Minister say that the issue is up
for consultation. Does she not accept that although airports can,
through landing charges and so on, apply pressure on airlines to get
the best possible performance out of them, there is very little that
airlines can do about the matters that airports control, in particular
the huge amount of fuel wasted by poor air traffic control and, in some
airports, by movements on the ground?
Gillian
Merron:
I have to differ with the hon. Gentleman. Of
course it is the airlines that have the most direct control. For
example, they control the type of aircraft that they use. I am reminded
of recent discussions with the chief executive of British Airways and
the chief executive of Boeing, both of whom understand the need to work
together to produce more environmentally friendly aircraft to the
benefit of both businesses. So I would differ with the hon. Gentleman
primarily because it is airlines, not airports, that decide which
aircraft to use. We are also encouraging work in
the aviation industry—this is only one part of the
process—regarding operations. Airlines have a view on that
subject, of course. It is not only simplicity that is important, but
practicality and reducing the impact on the environment. In my view, it
is the airlines, not airports, that will make the greater
contribution.
Mr.
Dai Havard (Merthyr Tydfil and Rhymney) (Lab): I am sure
that it will be a great pleasure to serve under your chairmanship,
Mr. Taylor.
On fuel saving, will the
Minister explain why the emphasis is on emissions rather than on
taxation of
fuel?
Gillian
Merron:
First—as I said earlier—the
challenge is an international one that requires an international
solution. To suggest otherwise would be misguided. It is not possible
to tax fuel internationally, because the International Civil Aviation
Organisation and the Chicago convention do not allow it. Unilateral
action on fuel taxation is allowed only in relation to domestic
aviation. The Opposition are proposing such action, but I would not
sign up to a proposal of that kind, not least because there would be an
adverse impact on the UK and because it would cause what I would
describe as perverse incentives. Fuel would be imported from other
countries, which would distort the situation in this country. That
would threaten the positive contribution that the aviation industry
makes.
Mr.
Carmichael: Did I understand the Minister to say in answer
to the hon. Member for North Essex, that the Government oppose even a
very modest 3 per cent. auctioning of slots when the system is set
up?
Gillian
Merron:
What I actually said was that that was an area of
concern and that we are
consulting.
Jim
Dobbin:
How does the Minister’s response to my
previous question on international action relate to the policies of the
Department for Transport on other climate and environmental
issues?
Gillian
Merron:
I thank my hon. Friend for that question, because
it allows me to mention a number of other areas that I am committed to
working on. Other ways to tackle climate change include
supporting and encouraging technological advancement and
manufacturing—I mentioned Boeing earlier, but I think also of
bus companies such as Alexander Dennis, which is making environmentally
friendly buses. Subsidies such as the bus service operators grant can
also be targeted with a view to encouraging more environmentally
friendly outcomes than is currently the case. We can encourage
sustainable travel and ensure that people have alternative travel
options. We are investing record amounts of money in public transport,
including £88 million per week in rail. Consideration of
environmental impacts is also at the heart of local transport plans. I
have also just launched the “Act on CO
2”
campaign, which encourages people to drive more smartly and thereby
reduce fuel usage. Those few examples show that, although inclusion of
aviation in the EU ETS is crucial, it is not the only
consideration.
Mr.
Jenkin:
If 97 per cent. of the carbon credits for the
aviation sector are to be allocated rather than auctioned, how is the
allocation to be done in a way that will avoid the mistakes made in the
existing emissions trading scheme that are costing the country so
dearly? A substantial number of countries have been allocated permits
in excess of their carbon emissions. The United Kingdom is the country
that is having to buy most carbon credits from other member states, to
the extent that we are some £470 million in deficit, whereas
countries such as Germany, Finland, Denmark, Belgium, Lithuania and the
Netherlands are substantially in surplus because their allocation was
too great. Why should we trust the Government to negotiate the
allocation of aviation credits when they have made such a hash of
allocating the carbon credits for the existing
scheme?
Gillian
Merron:
It will be up to the hon. Gentleman to decide
whether to trust the EU or the Government. The question is whether we
support the inclusion of aviation in the EU ETS. Perhaps the hon.
Gentleman will wish to comment on that in the main debate. What matters
is the level of the cap—we want it to be both realistic and
challenging. I emphasise again that input to the consultation will
determine the UK’s negotiating
position.
Mr.
Brazier:
The other announcement that we have had recently
was about the EU’s initiative on airport charges. Will the
Minister tell the Committee how she sees that fitting in with the ETS?
In particular, will the emphasis rightly be on penalising
CO
2 and NOx emissions, or will we see the development of
blunt instruments such as air passenger duty, which reward half-empty
aircraft and which do not touch freight flights at
all?
Gillian
Merron:
I shall have to ask the hon. Gentleman to clarify
his reference to airport charges.
Mr.
Brazier:
The Department’s website refers to an EU
document relating to an initiative on airport charging. I discovered it
this morning. I will have to come back to the Minister on the detail in
correspondence because I am having trouble finding it among my
papers.
The
Chairman:
I remind the Committee that we are dealing with
emissions trading and that that is a tangential area. It would be
appreciated if the Minister replied to that point
briefly.
Gillian
Merron:
Perhaps, to be helpful, I can deal with the matter
outside the Committee. I believe that the hon. Gentleman referred to
the EU initiative on airport charging, which is designed to address
local environmental impacts. Of course, that is not related to the EU
ETS.
It is worth
discussing the blunt instruments proposed by the Conservatives because
they are worrying. For example, VAT on domestic air tickets would, I
believe, hit ordinary families
disproportionately—
The
Chairman:
Order. I advise the Committee that the topic of
the debate is emissions trading. Perhaps the Minister will return to
it.
Gillian
Merron:
I am happy to do so. Indeed, VAT on air tickets is
not to do with emissions trading, but it was proposed by the Opposition
as a means of dealing with environmental matters. No doubt they will
make their views known in the main debate.
Mr.
Carmichael:
May I take the Minister back to the question
of allocating rather than auctioning allowances? The House of Lords
European Union Committee’s 21st report of the 2005-06 Session,
“Including the Aviation Sector in the European Union Emissions
Trading Scheme”, observed that there was substantial opportunity
for the generation of windfall profits even under an allowance system
based on allocation and that that strengthened the argument for
auctioning. What is the Government’s
policy?
Gillian
Merron:
Perhaps I can reassure the hon. Gentleman that the
Government are considering a full range of allocation options,
including auctioning and benchmarking. My main concern is that we treat
all participants fairly and that we provide incentives for reduction.
That is the primary purpose of inclusion in the EU ETS. The views that
we are seeking through the consultation will help us to decide how to
take the matter forward for the UK within the
EU.
Mr.
Chope:
Will the Minister explain the interaction between
the proposals that we are discussing and air passenger duty? Do the
Government have it in mind to withdraw air passenger duty when the ETS
is fully operative in 2012?
Gillian
Merron:
That proposal is not currently on the
table.
Mr.
Brazier
:
I should like to take the Minister back to
the interaction, which is clear in the light of her comments a moment
ago, between the provision and the open skies announcement. She said
that she will try to be fair in the allocation of permits, but she must
realise that the open skies announcement allows a three-year period in
which foreign airlines will have much greater access to our airports,
in exchange for which we will get almost nothing on the basis that the
policy will be reviewed in three years’ time to see whether the
Americans are opening up their market. If the fair allocation of
permits is taking place against that background, which involves
considerable changes at Heathrow, for example, on what basis will it be
fair? Will it be fair pre or post-review if, as most people think will
be the case, the EU concludes after the review that the Americans have
done nothing to liberalise and we have to revert to something closer to
the status
quo?
The
Chairman:
Order. There will be a section of the
Committee’s deliberations during which speeches can be made.
Questions should be short.
Gillian
Merron:
It might help the hon. Gentleman if I clarify the
position. The matter under discussion is the strategic environmental
approach. It is not dependent on negotiations in respect of individual
bilateral air service agreements.
Mr.
Carmichael:
The Minister said that she wants to be fair to
all parties in framing the allocation policy. If it is to be a
predominantly, or even 100 per cent., allocated system, how can she be
fair to those who do not have the benefit of the grandfather rights
that are proposed? Would not the system that she outlines reward the
recent nonsense of British Midland running flights from Heathrow to
Cardiff with no passengers on board simply to preserve the
slot?
Gillian
Merron:
We should return to what the emissions trading
scheme is all about: it is about a cap on carbon emissions from
aviation, which we do not have at present. It will also benefit
innovators and ensure that those who do not innovate fund reductions
elsewhere. That will guide the practicalities of our actions. The
situation that the hon. Gentleman describes was not envisaged in the
operation of the emissions trading scheme. Inclusion of aviation in the
ETS is an exciting opportunity for the EU and the UK to lead the world
in capping aviation
emissions.
Mr.
Jenkin:
May I press the Minister further about the type of
scheme that she envisages? I appreciate that the issue goes beyond the
question of principle. Assuming that she wants to cap aviation
emissions effectively and fairly, will she at least acknowledge that
the system that was adopted under the existing trading scheme has been
desperately unfair on British business? It relies on a top-down state
planning approach, which, by its nature, must ultimately be dictated by
bureaucrats rather than the fairness of the market system. As the
Minister for Climate Change and the Environment said,
“the results across the EU do
raise questions about the stringency of the caps in some Member
States.”
Would not a
system of auctions obviate the need for any arbitrary allocations,
which would inevitably be determined
by—
The
Chairman:
Order. Questions should be
brief.
Gillian
Merron:
I can assure the hon. Gentleman that the cap will
be EU-wide and ensure consistency. I do not intend to see a scheme set
up with built-in inconsistencies. If the hon. Gentleman feels as
strongly as he appears to, he can make a speech in the debate and make
his views known in the consultation. It would be helpful if he also
made it clear whether he supports the inclusion of aviation in the EU
ETS. To answer his question about the UK allegedly doing more than
other member states, I say that we support the Commission in its
efforts to improve the scheme. I hope that, if the scheme has any
shortcomings, we can learn from them and ensure that the difficulties,
where we find them, are not repeated.
Mr.
Brazier:
Is nitrogen dioxide to play any role in the
scheme, even in the long term? Obviously, there are considerable
concerns about that gas, which is the most serious emission from a
local point of view.
Gillian
Merron:
I welcome that question. One thing that the UK
will put forward to the EU—I hope that the hon. Gentleman will
support us—is that we will want a clear timetable for dealing
with non-CO
2 emissions. I support the hon.
Gentleman’s point about the impact on the environment,
particularly in respect of aviation.
Mr.
Carmichael:
The Commission’s proposal envisages
exemptions for state aircraft, which are defined as
including
“military
aircraft, customs and police
flights”.
That is fair
enough, but the definition goes on to
include
“flights
exclusively for official missions, Heads of State and Government and
Ministers.”
Various
Ministers have had quite a lot to say recently about those whom they
might wish one day to be Head of State or Government. Does the Minister
think that it is consistent to support a policy that seems to encourage
preferential treatment for the
elite?
Gillian
Merron:
I am flattered to be called the elite, but I
remind the hon. Gentleman that the Government were the first to agree
to offset ministerial and official air travel. Indeed, the Prime
Minister took a lead in that. The exemptions are one area on which we
are consulting, because we want a scheme that encourages
confidence.
Mr.
Chope:
To return to the question about legality, does the
United States accept that its flights from the US to Europe will be
legally subject to the emissions trading scheme? What effect does the
Minister think that that will have on the balance of competition
between flights emanating from the US and those from elsewhere outside
the EU?
Gillian
Merron:
Clearly, a requirement of trading with the EU will
be to stick by EU requirements. The US is well aware of developments in
the EU, and I reassure the hon. Gentleman that the Commission is
confident of its legal ground. Of course, any scheme will need to
comply with the legal framework for international aviation and be able
to stand up to challenge. There can be no other
way.
Mr.
Brazier:
May I ask where safety comes into all of this? As
the proposals stand, not all necessary testing of aircraft is excluded
from the trading system, and many in the aviation sector believe that
there is a need for amendments to tackle that point. Testing, as I
understand it, is exempted for air traffic management purposes only.
Does the Minister agree that it is essential that the eventual package
exempts all essential safety
testing?
Gillian
Merron:
The discussion is about the EU emissions trading
scheme, a cap on emissions of CO
2 and improving the
environment; it is not about safety. I assure the hon. Gentleman that
safety is paramount, as he knows, in all our dealings with the aviation
industry, which works closely with us to ensure that safety is the No.
1 priority, but it is not directly relevant to today’s
discussion.
Mr.
Carmichael:
One of the excluded categories concerns
aircraft with a maximum take-off weight of less than 5,700 kg. That
sort of common-sense approach is welcome, but 5,700 kg is still a low
threshold. Do the Government support that threshold and can she explain
to the Committee the basis for choosing it?
Gillian
Merron:
I regret that I am not able to explain it. It is a
Commission proposal and the UK will respond once we have the results of
our consultation. I shall take the hon. Gentleman’s comments on
that question and his previous question into
account.
Mr.
Jenkin:
May I assure the Minister that I am in favour of a
rationing system that would help to reduce carbon emissions throughout
the EU? However, will she explain why we are introducing a scheme to
raise costs for airline passengers in the hope of reducing carbon
emissions, when there is no evidence as yet that the marginal raising
of costs for tickets will reduce airline emissions at all? The House of
Lords Select Committee on the European Union says that that will have
no impact on more efficient aircraft. The EU is still subsidising the
production of £5.6 billion-worth of coal. Where does that fit
into this rational scheme to reduce carbon emissions in the
EU?
Gillian
Merron:
Unless we have coal-fired aircraft, I am
afraid that I do not feel suitably qualified to comment on that, but
the inclusion of aviation in the EU’s emissions trading scheme
is key to the UK’s agenda on tackling climate change. That is
why we have been at the forefront and why we will continue to push for
its early inclusion in an effective scheme. While the provision is a
major contributor and, in my view, the best way to deal with an
international problem, there are other means, including economic
instruments.
I have
already mentioned one such instrument, which involves a change to the
Chicago convention, which is some 60 years-plus old and needs to be
revised, particularly in respect of our environmental objectives. We
need to achieve the international taxation of fuel, rather than the
Opposition’s proposals on the taxation of domestic fuel. It is
important to consider air passenger duty as a way to influence not only
behaviour but awareness. Government policy has a role to play in
helping people to make choices about how they
travel.
Mr.
Carmichael:
May I draw the Minister’s
attention to page 13 of the bundle of papers provided for the
Committee? The paragraph immediately above the bold heading
“Legal Basis”
states:
“Special
consideration to the treatment of air services to remote or isolated
regions, which are particularly dependent on air transport services,
can best be given within the framework of existing measures such as
public service obligations and aid having a social character under
Article 87(2) of the
Treaty.”
Presumably, the
Scottish Executive’s air discount scheme would come under the
latter provision. What discussions has the Minister had with the
Scottish Executive in relation to that
paragraph?
Gillian
Merron:
I can confirm that the Scottish Executive have
raised the issue of including lifeline service flights in the scheme.
We are considering the
impact of including or excluding such flights. That
links with my earlier reference to what should be in and what should be
out of the provision.
Mr.
Chope:
Does the Minister accept the report by
Environmental Data Services in 2007
entitled
“Aviation to
come under EUETS from
2011”?
Does she accept
the conclusion that the scheme will knock off just 0.1 per cent. of the
projected growth in air travel, and does she think that it is worth the
candle?
Gillian
Merron:
I take it that the hon. Gentleman does not
think that it is worth the candle; I believe that it is. The scheme is
about putting a cap on aviation emissions in the most effective,
cost-effective and practical way that we can as the European Union. It
is not an instrument to tell people whether or not to fly. If the hon.
Gentleman feels that we should do that, I am sure that he will put that
forward.
Mr.
Carmichael:
Further to my earlier question, may I suggest
to the Minister that provision could be made by the simple raising of
the exclusion from 5,700 kg maximum take-off weight to something in the
region of 13,000 or 14,000 kg? That would not have a massive effect on
the amount of carbon caught by the cap, but it would have a significant
impact on those communities for whom lifeline air services are very
important.
Gillian
Merron:
Perhaps I can reassure the hon. Gentleman by
saying that I very much take his point. We have not reached a
conclusion on the merits of specified weight or any other exclusion,
but we are aware of the circumstances that he described. We shall take
those into account, but I again invite him to make clear
representations through the
consultation.
Mr.
Chope:
I welcome the Minister’s statement that it
is not Government policy to try to constrain demand for air travel, but
how is that consistent with the use of air passenger duty, which
purports to be designed to achieve just
that?
Gillian
Merron:
I believe that I was clear in my opening remarks
that it is not the role of this Government to tell people whether or
not to fly, although perhaps the hon. Gentleman disagrees. However, it
is the role of this Government to inform, raise awareness and encourage
thought about how people operate. Despite the suggestion that people
can be told what to do by the Government, that is certainly not this
Government’s
policy.
The
Chairman:
If no more hon. Members wish to ask questions,
we shall proceed to the debate on the motion.
Motion made, and Question
proposed,
That the
Committee takes note of European Union Document No. 5154/07, Draft
Directive amending Directive 2003/87/EC so as to include aviation
activities in the scheme for greenhouse gas emission allowance trading
within the Community; welcomes the work of the European Commission in
developing proposals to address the climate change impacts of aviation;
and supports the Government’s approach of pressing for the early
inclusion of aviation into the Emissions Trading
Scheme.—[Gillian Merron.]
The
Chairman:
I have allowed a fair amount of latitude during
questions, but I hope that the debate will not refer to coal-fired
aircraft or air passenger duty to any great
extent.
5.16
pm
Mr.
Brazier:
I shall, of course, be guided by you,
Mr. Taylor. There are some quite complicated interactions
between the document and a number of other recent EU initiatives,
particularly the recently announced open skies proposal, but I shall
try not to test your patience in covering some of that
ground.
Aviation is an
important sector of the economy. It is the fifth largest sector,
directly employing 200,000 people, with a further 600,000 UK jobs
indirectly dependent on it. The opportunity for people to travel and
broaden their horizons that aviation offers is beyond the dreams of
earlier generations. What we are discussing is a measure designed to
address a real international concern. The Stern report reminded us of
the importance of tackling climate change and came as no surprise to my
party.
Passenger
kilometres increased by 150 per cent. worldwide between 1986 and 2005,
but increased by 230 per cent. for UK airlines. Passenger numbers
increased from 51 million in 1982 to 189 million in 2002, increasing by
7 million in one year alone. More than 2 million tonnes of freight went
by air in 2002. The Government estimate that there will be
nearly 500 million air passengers by 2030—indeed, the
Minister has repeated that estimate today—and the industry is
widely predicted to grow at about 5 per cent. a year. The industry
contributes only slightly more than 2 per cent. of emissions now.
However, given that the best that can be achieved in emissions is a
saving per passenger mile of only 1.5 per cent. a year, it is predicted
that by 2012 aviation could offset more than a quarter of the
environmental benefits of the reductions agreed in the
Community’s target under Kyoto, as the explanatory memorandum
makes
clear.
It
might seem counter-intuitive to want to curtail a growing and thriving
industry, but what we are seeking to do through the proposal, which the
Opposition support in principle, is constrain the growth of the
industry’s CO2 emissions, without strangling the
golden goose. As I made clear at the beginning of the debate, I welcome
the principle of the ETS, but the detail leaves me fairly unenthused.
The scheme has become the Government’s main instrument for
reducing the impact of aviation on the environment. The Minister
suggested that it would play an important role, although that is mostly
because there is not a great deal else. We are talking about a measure
that will, according to the Commission’s projections, reduce the
level of emissions by about only one year’s worth of growth over
that long period, yet it will raise the price of airline tickets
significantly and involve the industry in significant
bureaucracy.
We heard
references during questions to the considerable problems of grandfather
rights that are allocated in the first instance. We must be clear that
there is a real problem; we have seen it already, as a number of my
hon. Friends pointed out, in the existing carbon trading scheme. Some
countries take such a generous view with their own industries that they
have simply handed them a money-spinning option, rather than a real
incentive to reduce their CO2 emissions.
The interaction with the
recently announced open skies agreement—that, too, is a measure
that we favour in principle—is complicated. I do not want to
test your patience, Mr. Taylor, by saying what a bad deal
that agreement is for Europe, but its interaction with the ETS measure
is complicated because, as the Minister knows and as she stressed in
her answer, the decision on who to allocate permits to will have to be
fair, and the only obvious basis for fairness is to look at
airports’ existing use and access.
Mr.
Bernard Jenkin (North Essex) (Con): I hope that my hon.
Friend will forgive me for interrupting the flow of his comments, but
does not that raise another question? Is the EU trying to make aviation
more expensive for civil airlines so that they try to reduce supply, or
is it trying to make it cheaper so that more people fly backwards and
forwards across the Atlantic? There seems to be a disconnect between
the two policies.
Mr.
Brazier:
I understand my hon. Friend’s point, and
Jacques Barrot’s announcement about the huge increase in the
number of passengers sits ill with the ETS instrument, but in principle
there is no clash between wanting to have a cap on carbon emissions on
the one hand, and wanting to maximise value for money on the other
hand. The problem that the Committee must deal with is that the effect
of this frankly lousy deal is that over the next three years, the
pattern of who uses our airports and particularly who uses the crown
jewel, Heathrow, will change rapidly. That is the background against
which the allegedly fair allocation of permits will take place. It may
be a temporary background, because it will be reviewed in three years
to see whether the Americans have shown a corresponding willingness to
open up their markets, but frankly no one should hold their breath
waiting for that.
I
want to explore whether the main vehicle should be airports or
airlines. The Minister said that the obvious reason for focusing on
airlines—it is clear in the Commission documents—is that
airlines are the users of fuel. They decide which aircraft to buy and
which routes to run. However, surely it is obvious that if they are
coming in to or out of the EU, all airlines—using any aircraft
on any route—must land or take off from an airport, so we would
be catching exactly the same group if we chose airports as the vehicle
for the policy.
If
airports had to trade, they would have the incentive through their
charging levels to try to minimise emissions from the airliners landing
and taking off. Such a policy would have three huge advantages.
Airports would have an incentive, first, to sort out the 10 or even 15
per cent. of fuel that is wasted through incompetent air traffic
management, and secondly, to sort out the shambles on the ground in
some airports. Indeed exploring the long-term scope for interacting
with other sectors—transport to and from airports—might
be a longer-term aspiration. The most important reason for looking at
that as a serious option—I urge the Minister to do so—is
that it sets completely on one side the legal and administrative
problems of what to do with foreign
airlines.
The Minister
quoted the legal advice to the Council, which was the result of one
independent study. It said that there was no legal problem. However,
she must
have picked up other voices who suggest that there is a significant
potential legal problem. American airlines, and indeed some of the
newer airlines operating from the Gulf, which have much deeper pockets,
may take a different legal view, and we may find that this important
scheme simply runs into the sand in the courts. There certainly is one
difference: every airport is located in a particular country; whereas,
with changing patterns, foreign airlines may be able to point to the
country with which they do the most business and there may be obvious
reasons for their wanting to be controlled by a country that takes a
more generous view than another. We do not want to offer the option of
divide and rule to our foreign competitors.
I have two final points to
make. First, the environment sector’s overwhelming view is that
the directive is a disappointment. I took the trouble to ask the
Tyndall Centre for Climate Change Research—arguably the leading
experts in the field—for its thoughts. The stand-out sentence in
its response is:
“In short, the proposed
Directive does not reflect the urgency and time-critical nature of the
climate problem”.
The
directive will make relatively little difference, despite its creating
a great deal of burdensome bureaucracy.
Secondly, it is time that the
Government gave us their thoughts on the subject in the round. There
are considerations regarding airport expansion, the open skies
agreement and the Civil Aviation Act 2006, which did almost nothing at
all. It hinted at differential charging regimes, which airports can
undertake anyway, but it did not seek to monitor or encourage them.
There are also considerations regarding the scheme before us. Each
issue will be debated separately, but we need the Government’s
overall view on the point at which they envisage our striking the
balance between the needs of an important industry and the requirement
to constrain the growth of CO2 emissions, and indeed of NOx
emissions. We will have to have that debate in another forum, but it is
overdue.
5.28
pm
Mr.
Carmichael:
The Minister said that this is a timely
debate, and she is absolutely right. It is not the first time that the
Committee has been around the course, and I suspect that in years to
come, we shall look back on today’s debate as an important but
intermediate stage in the whole debate.
Like others, my party and I are
very supportive of emissions trading. When I took over as my
party’s transport spokesman almost a year ago, I was pleasantly
surprised by the number of airlines in particular which were
enthusiastic about the inclusion of aviation in the emissions trading
scheme. Looking back, I might have been more forensic in my scrutiny of
the motivation in those early days, because it is clear that a number
of airlines regard it as a substantial earning opportunity. That in
itself is not a barrier to the scheme, but in the minds of the people
who are responsible for its constitution, it should set a few alarm
bells ringing about whether the scheme will achieve the reduction in
carbon emissions that we hope it will.
Now that we have the commitment
in principle, the debate must inevitably move into the realms of the
detail of the scheme’s construction. If there is any frustration
with today’s debate, it is that we are at a very early stage, so
the Government cannot yet let us know the full size, colour and nature
of the beast.
I have
two principal concerns. First, there is the question about
interoperability with other sectors in the scheme. Once Governments
start to interfere in the market at any level, there is a danger of a
market distortion that may end up being unhelpful in some other area. I
see the law of unintended consequences coming down the
track.
My other
substantial concern is about where we should draw the line between the
allocations given under a simple grandfather rights system, based on
emissions in 2004 to 2006, and the allocations that will be auctioned
off. One thing that struck me was the Minister’s insistence that
we have to be fair to everyone. I am concerned that a system without a
significant proportion of auctioned-off credits would not be robust or
fair to everyone; in effect, the aviation market would be frozen at the
point when the scheme was introduced. In recent years, the economic and
social benefits of increased access to aviation have generally been the
product of new entrants to the marketplace. If, by favouring existing
operators—especially the significant ones, such as the big flag
carriers—we make life much more difficult for subsequent new
entrants, I am concerned that there will be a market distortion in
years to come.
I
share some of the concerns articulated by the hon. Member for
Canterbury on the legality of a system that includes flights destined
for or originating from points forth of the European Union. Clearly,
the European Union can claim legitimate jurisdiction within EU
airspace. However, I am interested to know the extent—or what is
intended to be the extent—of the carbon emissions on which the
EU scheme will charge. For example, does the Minister envisage a scheme
in which 25 per cent. of the carbon produced by a flight that is
roughly 25 per cent. in EU airspace is taken into account when
determining the allowance, or is there to be a rather more
sophisticated
system?
The Minister
enjoined us on a number of occasions to consider the purpose of
emissions trading schemes, and she was right to do so. However, the
points that I raised about remote or isolated regions have particular
carbon implications. Aviation is very often the most carbon-efficient
way of taking a small number of people a long distance—certainly
much more carbon-efficient than a three-quarters-empty train or a
series of cars. In what is obviously a bit of special pleading for my
constituency, I encourage the Minister to take the position of
communities in such regions particularly seriously. The planes used are
generally much smaller and fly much lower, so they emit much less
carbon than the larger planes predominant in the industry. I hope that
the Minister will seriously consider making a proper assessment of the
impact of raising the exemption level for a maximum take-off weight to
the sort of figures that I have suggested—about 14,000 or 15,000
tonnes.
I am told
that the small Islander aircraft, with eight passenger seats and two
pilot seats at the front, that make inter-island flights in my
constituency have a maximum take-off weight of about 3,000 kg, well
within the 5,700 kg limit. The Saab 340s that serve my
constituency from Glasgow, Edinburgh and Inverness have about 33
passenger seats, so they are not large aircraft by any stretch of the
imagination. They fly at about 13,000 ft instead of the normal 30,000
or 33,000 ft, but they have a maximum take-off weight of about
13,000 kg and so would be helped if my suggestion were taken up. It
would be an important way of ensuring that we are not, on the one hand,
helping aviation in those areas through schemes such as the Scottish
Executive’s air discount scheme while, on the other hand,
clobbering them with emissions trading when such a use of aviation is
the most carbon-efficient way of carrying people and goods
around.
5.36
pm
Mr.
Jenkin:
If there is a rational and fair way of increasing
the cost of emitting carbon dioxide to the extent that it will begin to
curb the growth of such emissions and then reduce them, that must be a
good thing. That is true whether or not one believes in global warming.
I tend to accept the consensus of scientific opinion about the man-made
contribution to global warming. We want to reduce the dependence on
fossil fuels of the economy as whole and of particular industries.
However, I am determined to remain sceptical unless we have a rational
system.
Today’s debate is about
aviation joining the existing ETS, so it is fair to consider how the
existing ETS is operating and whether it provides a model that we want
to pursue in other sectors. I pointed out in an earlier question that
because the number of permits allocated has been negotiated between the
member states, the system does not require member states to make equal
sacrifices. The United Kingdom makes a far greater sacrifice than any
other member state. The Minister has pleaded departmental demarcation
as a perfectly legitimate reason for failing to explain the situation,
but it is worth examining the figures. In the first year of the scheme,
UK firms had to buy £470 million worth of carbon emission
permits from other member states that have been allocated a surplus. It
is legitimate to ask the Minister how we are to prevent such a scenario
from occurring should allocations be made on the same basis under an
aviation scheme.
My
second point about the current system is that because loose targets
have been set in a large number of member states, permits were
allocated for 1.829 billion tonnes of CO2 in the first year
when in fact only 1.785 billion tonnes of it were emitted. The
ETS is not biting to reduce carbon emissions, except in very few member
states. In our case it is biting, but it is doing so in an arbitrary
way.
The hon. Member
for Orkney and Shetland used the term “grandfather
rights”. I thought that he made a good point about how increased
aviation costs could disadvantage further flung parts of the United
Kingdom that are already lagging far behind London and the south-east
economically. If we stick with the system of grandfather rights, we
will be carrying out a 1960s-style national allocation plan, rather
like the way in which the National Enterprise Board used to try to plan
the British economy in the bad old days of Britain’s economic
decline.
Such an
approach will inevitably lead to a lot of arbitrary decisions about who
gets the permits and whether they are tasked fairly. For example, the
Queen Elizabeth medical centre in Birmingham had to buy £93,000
worth of permits. I am not sure whether that is what we pay taxes to
the national health service for, but it seems a rather arbitrary
outcome. St. James’s university hospital in Leeds bought
£62,000 worth of permits and the university of Manchester had to
buy £92,500 worth, but, because of the grandfather rights
system, BP Oil sold 1.4 million tonnes of carbon permits, thus amassing
a profit of nearly £18 million from its grandfather rights. Is
that what we are going to do in the aviation system? Esso sold 120,000
tonnes worth of permits, amassing a profit of £10.2 million, and
Shell made a profit of £20.7 million. All that came just in the
first year of the trading scheme. I am therefore very sceptical about
the rationale of the grandfather rights system. The sincerity of my
commitment to reducing CO2 should not be questioned because
I make that point.
There are other problems with
the existing scheme. The price in the secondary market has been
extremely volatile. If we ask businesses such as airlines to make
long-term investments based on the available economic information, we
will be introducing a new economic variable for them to deal with in
addition to others such as currency and fuel prices. In about May 2006,
in the secondary market for EU trading scheme permits, the price
crashed from £30.50 to £9.25 almost overnight. I do not
know why that happened—perhaps the Minister can explain
it—but I suspect that it was because there was a sudden
realisation that there are far more permits in the market than are
required to generate the EU’s total emissions.
The
scheme’s inflexibility is another problem. It does not allow
emitting companies to offset their emissions in the way that the
Government claim to do, so a coal-fired power station cannot buy and
protect rainforest in Brazil or invest in a renewable energy project to
offset. That seems rather arbitrary. If we are trying to get better
economic and less polluting behaviour from the scheme’s
participants, why is it so inflexible?
There is an incredible lack of
rigour in the existing scheme, which is inevitable given that is
bureaucratically driven and is run by all the different member states.
In its first year of operation, data were available from only 21 of the
25 participating member states. Poland, Cyprus, Luxembourg and Malta
could not measure what was happening with their carbon allocations
because they did not have registries that followed the allocation of
permits in the secondary market. Technical problems in the national
registries of other countries also caused problems in the Czech
Republic, Slovakia and, inevitably, France, which, of all the member
states, complies least with European directives. Therefore, accurate
data are available from only 18 of the 25 participating member
states.
How are we to
prevent similar problems from emerging if we include aviation in the
scheme? All of those problems were known about before the scheme was
launched. When she was the Secretary of State for Trade and Industry,
the right hon. Member for Leicester, West (Ms Hewitt) wrote to the then
President of the European Commission, Romano Prodi, to complain about
the lack of rigour among other member states. She pointed
out:
“Allocations beyond need
are in effect gifting companies a free asset, which their competitors
in other countries will not receive. Any over-allocation will also mean
there is little or no incentive for industry to change behaviour and
reduce emissions.... We also believe there is also a very real
risk that over-allocation will mean that little or no trading occurs
(who needs to buy?). Trading will be limited and there will be little
emission reductions.”
She
also threatened that the credibility of the scheme would be in doubt. I
put it to the Minister that the credibility of the existing scheme is
certainly in
doubt.
Finally, the
Minister has said persistently that aviation will join the emissions
trading scheme, but because there will be no trading between the two
schemes, we are in fact setting up a separate scheme. It is possible
that the price of carbon in one scheme will be radically different from
the price in the other. Philosophically, that is very damaging and
suggests an element of economic interference in the allocation of
resources in a market economy. That is likely to lead to great
inefficiencies.
We all
know that the visibility of aviation, concern about aviation emissions,
and the green lobby’s preoccupation with it is very strong. The
green lobby wants aviation to be targeted in particular. I think that
it has picked on aviation because it is an easy target. It is a growing
sector and tends to be confined to the better-off, rather than the
poorest in society. That happens to be a fact. It is like 4x4 vehicles:
the green lobby picks on them even though an old Morris Minor produces
far more pollution than a modern 4x4 vehicle. But that is beside the
point. One sees stickers on the back of Morris Minors reading:
“Nuclear Power, No
Thanks!”
The
crunch is this: we want a scheme that will encourage a more rational
allocation of resources and to bear down on the overall emission of
carbon dioxide in the European Union. That means that we should have a
cap on nation states’ overall emissions, such as that set by the
Kyoto treaty, and not bear down on individual sectors. That means also
that we must allow trading between sectors. It might be that the only
way in which the aviation industry can grow will be to increase carbon
dioxide emissions. For example, we know that we can expand power
generation in this country and at the same time reduce carbon dioxide
emissions by switching from coal-fired power stations to ones that use
carbon capture or alternative renewable fuels and resources, or by
placing greater emphasis on nuclear
power.
We want a
system that allocates carbon emissions to the parts of the economy
where they are most needed—where demand is highest. I come back
to the same point: if we remain on our present course, we will end up
with a system of differential carbon pricing between the sectors so
that even if prices in the aviation sector are five times what they are
in the other scheme, there will be no way that that demand could be
reflected. What is the point of pricing carbon from a power station at
a fifth of the price of that coming out the back of an aircraft? That
is not a rational way in which to reduce carbon dioxide
emissions.
The real
killer is that grandfather rights will have the same result as in the
existing scheme. They will feather-bed the vested interests of
established airlines at the expense of new entrants, as the hon. Member
for
Orkney and Shetland said. Let me explain what that means. New and
growing airlines, such as Ryanair and British Midland, which have
modern fleets of aircraft, which they fill, and which, therefore,
operate with maximum efficiency, both economically and in their use of
carbon dioxide, will be punished because as they grow they will have to
buy more of their
allocation.
The
grandfather rights, however, will be given to the existing fat cats of
the European airline industry, which typically include Air France and
Alitalia—the state-subsidised dinosaurs of the 1960s. They will
continue to chunter around Europe with fleets of old aircraft, belching
out far more carbon dioxide than is justified, and with half-empty
aircraft, because they provide a lousy service, are not competitive and
charge too much for their tickets. As they decline, they will sell off
their permits and make a profit at the expense of the new, efficient,
clean airlines that have to buy them. The system is crazy.
Today’s
vote is irrelevant, because we are still consulting. However, the
Minister should give us an assurance that we are seeking a rational
system that will allocate carbon emissions according to where there is
economic demand. The objective of an overall carbon trading scheme is
to bear down on the emissions produced by the European Union as a
whole. We should get rid of the outdated, state planning pork-barrel
type allocation of carbon trading permits, which will only become the
latest version of the common agricultural policy or the allocation of
steel or fishing quotas. The European Union pretends to be very good at
such things, but it is actually corrupt, inefficient and bad for the
economic well-being of its people.
5.51
pm
Mr.
Chope:
It is a pleasure to follow my hon. Friend the
Member for North Essex who has, as usual, brought intellectual rigour
to the debate. The inevitable conclusion to be drawn from what he has
said is that he should join the sceptics on this subject. As he says,
the proposed scheme smacks of the problems that we have experienced in
the European Union in relation to quotas for fishing, milk and
set-aside. Now we have the problem of a carbon quota
which—surprise, surprise—will affect one of the United
Kingdom’s most successful industries. Our aviation and aerospace
industry will bear the brunt of the scheme, which will discriminate
heavily against existing efficient airlines and even more against new
entrants that bring in new, clean, efficient aircraft and manage their
affairs more efficiently.
I welcome the Minister’s
statement that UK aviation is to grow from 228 million to 490 million
passengers by 2030. The quality of life of all those people will be
enhanced as a result. I am delighted that the Minister has confirmed
that the Government are not attempting to use the emissions trading
scheme to constrain that demand. The view of some of the people who
participate in debates about aviation is coloured by the fact that they
do not want their local airport to expand, or because they will still
be able to afford to fly and they do not mind if the cost goes up even
if it means that fewer people will be able to fly or the predicted
increase will not come about.
I welcome the
Government’s commitment to enabling as many people to fly as
want to do so.
However, I am concerned about the impact of the
process. Paragraph 6.6 on page 66 of the impact assessment shows that
at the moment
“aviation
accounts for approximately 3 per cent. of the EU's carbon dioxide
emissions.”
If all
flights with a high allowance price of €30 were to pay that
carbon price, it would have only a minimal effect on overall demand
growth. That is reflected in those figures, but as I said
earlier—and I shall not go any further—it is totally
inconsistent with the line that the Government have been using to
justify the doubling of air passenger duty.
I also wish to take issue with
what the Minister said about the legal situation. When we last debated
this matter in November 2005, the hon. Member for Lewes asked the then
Minister for Climate Change and the Environment, the right hon. Member
for Scunthorpe (Mr. Morley):
“Have the Americans
accepted that and does it raise a legal issue in relation to
international
agreements?”
The Minister
replied:
“There
is certainly a legal issue for aircraft departing from their nation of
origin. We could not apply the carbon trading scheme in that
case.”
That seems to be a
pretty unequivocal assertion by a Minister that as far as UK legal
advice was concerned, we would not be able to apply the carbon trading
scheme to flights emanating from, for example, north America. The
Minister went on to
say:
“With
regard to aircraft departing from the EU, our legal advice is that the
Commission would be within its legal rights to apply carbon trading to
all departures from the EU. The principles of carbon trading were
discussed in ICAO... The Americans are well aware that we are in
the process of drawing up such ideas and are keen to advance them in
the European Union.”—[Official Report, European
Standing Committee
,
24 November 2005; c.
22.]
I hope that the
Minister will explain why the legal advice that she quoted earlier is
different from the unequivocal legal advice articulated only 18 months
ago by the then Minister for Climate Change and the
Environment.
Is this
another example of the great European Union engaging in wishful
thinking by believing that it can browbeat the Americans and other
countries? We should not forget that we are talking about people in
Europe putting on a hair shirt, despite the fact that most
CO2 emissions emanate from outside the continent. Aviation
emissions within Europe represent only 3 per cent. of EU CO2
emissions, which in turn are significantly less than a quarter of total
global emissions, so tackling such emissions is small fry in terms of
having an impact on the overall amount of CO2 emitted into
the atmosphere. I suspect that the measures are motivated by people who
would like to create a new bureaucracy centred on what sounds like an
attractive trading scheme. On the face of it, anyone who believes in a
free market would say that it must be a good idea to create a trading
scheme. Unfortunately, the way in which this particular scheme is being
set up suggests that it will not be an open market, but the
reverse.
Mr.
Brazier:
My hon. Friend is making a powerful point, which
is further accentuated by the interaction of the scheme with the open
skies agreement. Britain
stands to lose Heathrow slots under the agreement
while American airlines will now have another option: they can either
get what they want in America or go down the route of offering legal
challenges to carbon trading. They are in a position to have it both
ways with Britain being a potential loser.
Mr.
Chope:
I know that you do not want us to discuss the new,
so-called open skies agreement, Mr. Taylor, but the
Conservatives believe that it was a really bad deal for the UK. We
support my hon. Friend when he says that we are engaging in double
jeopardy for UK airlines and aviation interests as a result of the
agreement and the proposals that we are debating.
I remain of the view that the
ETS proposal is based on two false premises: first, that it will
achieve any significant reductions in CO2 emissions and,
secondly, that those CO2 emissions are the cause of global
warming. That is a dubious premise on which to base policies such as
the ETS. I hope that the Minister will be able to stand back from the
hype that surrounds the issue and look at some of hard evidence. I hope
that having done so, she will conclude that we are dealing with a
dubious area of science. There are different hypotheses, each of which
is plausible. As with all matters scientific, a hypothesis stands until
it can be disproved. There are lots of competing hypotheses about the
causes of global warming and the involvement of CO2
emissions. Given that, why are we engaging in a ludicrously
bureaucratic and ineffective scheme such as the
ETS?
6
pm
Gillian
Merron:
I should like to reflect on some of the points
raised in the debate and following on from the question-and-answer
session. However, I emphasise that we are launching a consultation
shortly, and the views that have been expressed today will certainly
feed into it. I had hoped, in truth, that Opposition Members would show
a greater appreciation of the Government’s openness on this
matter and of the fact that a consultation document will be available
in but a few days. I am surprised that they did not welcome that
warmly.
Including
aviation in the EU emissions trading scheme is a long-standing ambition
of the UK Government. We welcome the ambition of the
Commission’s proposals, and we will work hard in the
negotiations to ensure that the ETS produces the environmental
outcomes that we are aiming for. Perhaps it would be helpful and of
benefit to
some—
Mr.
Brazier:
Will the Minister give
way?
Gillian
Merron:
If the hon. Gentlemen would care to wait a moment,
I should just like to remind Opposition Members that, not long ago, the
right hon. Member for Witney (Mr. Cameron)
said:
“We’ve
also got to look at all the things we can do in terms of air travel.
Let’s make air travel a part of the emissions trading
scheme.”
That is a rather
more interesting, supportive comment than some of those declared today
by Conservative Members.
Mr.
Brazier:
The Minister just said that she was in favour of
including aviation in the EU emissions trading scheme. The documents do
not propose that; they propose setting up a separate scheme. That is
what my right hon. Friend the Leader of the Opposition called for and
that is what we as a party support. Is that what she is saying, or
not?
Gillian
Merron:
I am happy to clarify that the Leader of the
Opposition
said:
“Let’s
make air travel a part of the emissions trading
scheme.”
I would not
concur with the views that have just been expressed, but I am happy to
refer to them just to clarify the position for the hon. Member
for Canterbury. However, perhaps I can deal with some of the other
matters that he
mentioned.
I was
surprised to hear the hon. Gentleman say that we have no overarching
strategy or debate on aviation. I refer him to the air transport White
Paper, which outlines the Government’s strategy for aviation. I
remind the Committee that the Government published the air transport
White Paper progress update in December 2006, which clearly deals with
a number of more general issues that we are not attending to
today.
The question of
support for this move has been raised. It is supported by all our
stakeholders within the aviation industry and by most—I stress
“most”—environmental lobby groups. In the
industry, there is support from stakeholders such as BA, BAA Virgin,
easyJet and the CBI. However, people have various views on the detailed
proposals, which is why we are conducting the
consultation.
There
has been a suggestion that the ETS will do little to reduce aviation
emissions. That is not a view that I could share. However, for clarity,
emissions trading does not fix arbitrary limits on the aviation
industry: the focus is on emissions reduction in the economy as a
whole. That will be the reason why it
succeeds.
There was
considerable talk about the disconnect between cost reductions due to
the EU-US discussions and about the allegedly increasing costs due to
EU ETS. The EU-US agreement is the best deal for the consumer. I am
sure that consumers throughout the country will be interested in that.
I re-stress that the EU ETS will ensure that the environmental
costs of flying are covered to a greater extent—something that
is not available to us now. There is some confusion about the
situation, as hon. Members have
mentioned.
Mr.
Chope:
On the consultation with the aviation industry, is
not it fair to say that industry welcomed the emissions trading scheme
as an alternative to air passenger duty, not as an
addition?
Gillian
Merron:
As I stated earlier, we believe that inclusion in
the EU ETS is our strongest hand in putting a cap on emissions. It is
but one possibility, and APD is another. I spoke about other economic
measures, and I know that Opposition Members have a range of economic
instruments that I would consider to be somewhat blunt and not in the
interests of the UK economy. The Government seek to deal with the
environmental challenge, which is global and international, by
international agreement.
Mr.
Jenkin:
I emphasise that the Minister is contemplating
setting up a separate scheme, not joining the existing scheme, because
the two schemes will not be able to trade with each other. Would not
the rational answer be a simple aviation fuel tax applied on the whole
transatlantic area? After all, the United States already taxes aviation
fuel for its domestic flights. In the EU, we could agree to tax
aviation fuel for our domestic flights, and we could then agree to tax
aviation fuel for all transatlantic flights. That would deal with a
significant proportion of the global aviation
sector.
Gillian
Merron:
That is an interesting exposÃ(c) of
Conservative thought. I have explained that it would require a change
in the Chicago convention to tax fuel internationally. If we were to
tax domestic flight fuel, as the Conservatives propose, it would
encourage the purchase of fuel from other countries, thereby making us
less competitive and driving down our economy. It is not a suggestion
that I am prepared to accept.
The
Chairman:
Order. I have allowed considerable references to
the taxation of aviation fuel, and I should now like the Minister to
focus on the early inclusion of aviation in the emissions trading
scheme and for other members of the Committee not to deviate from that
core, too.
Gillian
Merron:
Thank you for your guidance, Mr.
Taylor. I am happy to agree with it.
On airports, perhaps I can
reassure the hon. Member for Canterbury that BAA is already part of an
emissions trading scheme, because it is one of the UK’s top 20
industrial consumers of energy. The BAA airports are among a number of
airports that have also set themselves targets for energy efficiency.
Far from being excluded, BAA is included.
Mr.
Brazier:
The Minister knows that that is not the point.
BAA is included for the purpose of its ground arrangements, as others
are, but not for the purposes of air traffic control. The legal and
other administrative arrangements remain, with airlines rather than
airports as the main vehicle for this separate trading
scheme.
Gillian
Merron:
Probably the best thing that I can do is to take
that as a response to the consultation. I am sure that it will produce
interesting results.
On constraining demand, I am
not sure whether Opposition Members propose that the Government should
tell people whether or not to fly. Perhaps some clarity would have been
welcome. Let me make it clear. I refer hon. Members back to the air
transport White Paper, where we rejected a predict-and-provide approach
and promoted better use of airport capacity. That seems to be the
right, balanced approach.
The hon. Member for Canterbury
referred to the Tyndall report. In my view, it paints an
over-pessimistic picture. The report’s forecasts differ greatly
from the air transport White Paper in that the Tyndall projections for
aviation are produced on the centre’s own forecasts for demand
and emissions and are well in excess of those in the White Paper. The
Tyndall centre also had a more conservative assumption about fuel
efficiency.
Therefore, in my view, the conclusions were not made on the right basis
for looking ahead.
I
shall now turn to the points that were made by the hon. Member for
Orkney and Shetland about his constituency and similar constituencies.
I am sure that hon. Members will accept that, when we consider regional
aspects and special situations, we must do so with the proviso that we
have to ensure that exemptions do not undermine the scheme’s
environmental and market efficiency. We have not come to a conclusion
on exemptions, so I look forward to the hon. Gentleman reinforcing his
points in that debate.
There have
been a lot of references to grandfathering rights. For the benefit of
the Committee, I confirm that allowances will be allocated through
benchmarking and auctioning, not through grandfathering. I hope that
that provides reassurance. The hon. Member for Orkney and Shetland
referred to the contribution of alternative forms of transport, as did
other hon. Members. It is worth noting that rail travel, for example,
is not always a more environmentally sustainable option than short-haul
flights. The benefits of rail travel accrue from high occupancy.
Research shows that at a conventional speed, a train emits one third
less CO2
than a short-haul flight, but as train
speeds increase, so do carbon emissions. In some parts of the country,
such as the constituency of the hon. Member for Orkney and Shetland,
train travel is not an option. The alternatives to air travel should be
considered, but it is important that we understand what they
produce.
The hon.
Member for Orkney and Shetland raised the issue of new entrants. The
scheme will be designed so that new entrants will not be prevented from
entering the market. They will be able to buy allowances, either by
auctioning off the initial allocation if it occurs or on the market
from airlines or other sectors. I hope that that provides some
clarity.
The hon.
Member for North Essex focused his contribution on how to avoid the
difficulties of the current system and included a clear criticism of
the ETS. In making those comments, I hope that he did not lose sight of
where we need to get to. I shall deal with some of his points. Phase 1
involves learning by doing; as we continue, we are learning ways to
improve. We support that, as there are lessons to be learned. We must
ensure that there is sufficient scarcity in the market, for example,
when we make decisions on the phase 2 national allocation plans. It is
important to note that the aviation cap will be set not at member state
level, but at EU level, and I hope that that will overcome some of the
difficulties to which the hon. Gentleman referred.
I re-emphasise that allocations
will not be based on an airline’s historical emissions. We are
sympathetic to the proposal of allocation through benchmarking and
auctioning. For the benefit of the Committee, I stress that the measure
involves the inclusion of aviation in the EU ETS. It is important to
give that reassurance. It will be an open scheme, which will enable the
aviation sector to buy from and sell to other sectors, but I suspect
that, early on at least, that is unlikely to happen.
The hon. Member for North Essex
talked about ensuring that member states have the ability to collect
required data, which is important. Airlines are already obliged to
collect many of the data that will be required, and European airline
representatives have also agreed to support smaller airlines in
implementing any extra procedures that might be required in advance. I
hope that, in dealing with those points, I have covered most of the
issues
raised.
Mr.
Chope:
I am not sure whether the Minister has covered the
legal advice given by her former ministerial colleague and the position
today.
Gillian
Merron:
I am grateful to the hon. Gentleman for reminding
me. I apologise for not making additional reference to that issue, but
we covered it earlier during questions. The Commission would clearly
not go ahead if it was not confident of its legal base; nor would we
want it to do so. The hon. Gentleman asked what had changed. Time has
changed things. It has been more than a year since the last such debate
in Committee. I have talked about the feasibility study that has been
conducted, which gives an assurance. I remember a discussion earlier in
the debate about lawyers rubbing their hands. I suspect that lawyers
have been rubbing their hands for some months and have come to
conclusions that can lead us in a certain direction.
We are not cavalier about the
proposal, which is about ensuring that we do the right thing. The right
thing to do—I wish to close on this point—is to deal with
the environmental performance of the whole economy and to have an
incentive to reduce emissions, so that we do not cause more damage than
we need to. It is estimated that the proposal will nearly halve the
CO2 emissions by 2020. That seems to me a prize worth
having. I hope that the Committee is prepared to support the motion and
our way
forward.
Question
put and agreed to.
Resolved,
That
the Committee takes note of European Union Document No. 5154/07, Draft
Directive amending Directive 2003/87/EC so as to include aviation
activities in the scheme for greenhouse gas emission allowance trading
within the Community; welcomes the work of the European Commission in
developing proposals to address the climate change impacts of aviation;
and supports the Government’s approach of pressing for the early
inclusion of aviation into the Emissions Trading
Scheme.
Committee
rose at seventeen minutes past Six
o’clock.
