Examination of Witnesses (Questions 340
- 359)
TUESDAY 13 MARCH 2007
MR ALAN
BUCHANAN AND
MR ANDY
KERSHAW
Q340 Chairman: We have heard from
one of those airlines recently.
Mr Buchanan: There is plenty of
scope for improvement and I wish you well on that project.
Q341 Mr Hurd: Would you anticipate
continuing to offer offsets once aviation is inside the ETS?
Mr Buchanan: When the ETS is initially
formed it will apply only to intra-EU flights, so there is definitely
a role for voluntary offsetting in relation to flights that leave
the Community. There will be an ongoing awareness role and there
will be customers who just want to do that, whether they choose
to do it through a scheme offered by the airlines or whether they
choose to use other schemes. For example, the RSA has a carbon
initiative at the moment and it invites you, as an individual,
to assess your entire year's emissions in relation to travel,
heating and all that sort of thing and to pay a one-off once a
year offset and many people would find that much more attractive
than an airline scheme on a per flight basis. Yes is the answer
to your question.
Q342 Mr Hurd: In relation to the
ETS some concerns have been expressed to this Committee that you
will be in a situation in the future where you will be buying
EUAs from people who have either been over-allocated their allowances
or have been able to make efficiency cuts. It has been put to
us that in terms of environmental benefits those will be much
less than a requirement for mandatory offsetting through VERs.
Do you have any view on that?
Mr Buchanan: To work properly
an emissions trading scheme has to be well run. Behind your question
may be an implied criticism of Phase I.
Q343 Mr Hurd: Phase I has not reduced
emissions at all so there is a concern that if the mechanisms
roll into Phase III we are going to miss a great opportunity as
far as your industry is concerned.
Mr Buchanan: I think if the allocations
were appropriate this scheme would be more effective. In order
to be effective the guiding minds behind it have to get the allocations
right, in which case if you can create a perfect market then emissions
trading will work extremely well and it will drive down emissions
by eliminating the lowest cost way of doing that.
Q344 Mr Hurd: A final question on
emissions trading. I think this Committee is aware that British
Airways has been a leader within Europe in terms of pushing for
emissions trading as a solution. Could you update the Committee
on what you sense the state of play is within Europe in terms
of consensus with the French and Germans in particular? Finally,
do you have a view on the issue of whether allowances should be
auctioned to your industry?
Mr Kershaw: We are very pleased
with the progress that the European Commission has made in putting
forward proposals to include aviation in the EU Emissions Trading
Scheme and that includes setting out a sensible set of design
elements, many of which we fully support. In terms of the political
environment, the French Government for a long time has recognised
emissions trading as the most effective tool for aviation in terms
of addressing climate change. Certainly German industry recently
came out with a piece that said they now felt that emissions trading
was the most appropriate instrument and I believe the German Government
is more sympathetic than it may have been in the past on emissions
trading. There are a lot of positives on emissions trading. We
need to not lose sight of the importance of emissions trading
and the fact that the UK has taken such a leading position, which
is only in our favour, and we must continue to press for the introduction
of aviation as soon as we can in emissions trading with practical
application.
Q345 Mr Hurd: What about auctions?
Mr Kershaw: I am sorry, I missed
the auction question. In our view, auctioning really does not
add to the environmental effectiveness of emissions trading. It
does, however, introduce high financial burden wherever it is
applied. I know the UK is keen on auctioning going forward into
the future and there are plans by some Member States to introduce
an amount of auctioning into the allocations. I believe the UK
in Phase II is planning seven% auctioning. The current proposal
for aviation includes the possibility that auctioning would be
applied on an average of Member States auctioning them out, so
we take an average of what is applied in Phase II and perhaps
apply that to aviation. That seems to be an approach that is fair
and consistent in terms of the approach to other sectors, but
we remain to be convinced that there is any benefit environmentally
to these auctions.
Q346 Chairman: What you are hoping
for is a great big bonanza when they are allocated?
Mr Kershaw: Not at all. We expect
there is a need to have stringency, as Alan mentioned, on emissions
trading. Aviation should be no different, there should be stringency
for aviation. It means that by 2011 in the current proposals we
will probably have to purchase in the order of between 20 and
30% of the allowances that we need. That is already running into
many millions of pounds that we will need to spend on purchasing
allowances. I would not agree that there is any free lunch in
this, we will have to bear costs in emissions trading.
Q347 Chairman: I apologise, I have
got to catch a train rather than a plane. Before I hand over to
Joan Walley, can I just reiterate my appreciation to you for coming
and there are a lot of issues on BA's papers that regretfully
we do not have time to cover.
Mr Buchanan: Thank you for the
opportunity.
In the absence of the Chairman, Joan Walley
was called to the Chair
Q348 Joan Walley: I think we are
almost through anyway but there are just a couple of questions
remaining. Climate Care is your offsetter of choice. It would
be useful for the Committee to have some idea why it was that
you chose Climate Care and whether it is to do with the reputation
of the projects or the reputation of the seller?
Mr Buchanan: At the time that
the scheme was first set up in September 2005 Climate Care had
the best track record for dealing with consumers. They have an
informative website, they give clear information about the projects
that they run and the costs of running them, and they give financial
accounting which means people can find out as much as they want
to about the costs. One of the other reasons, before I move on,
was that they were one of the first of these agencies to move
away from afforestation, so now it only accounts for 15% of their
portfolio and I believe they have plans to reduce that even further.
They are very good at communicating with consumers, so if you
go to their website and look at their Honduras project, for example,
they have been replacing old-fashioned wood burning stoves in
the houses of people with specific stoves that reduce the emissions
but also have a huge health benefit because they reduce the smoke
in the atmosphere and they have been fantastic for the homebound,
the mothers, children and old people who live there. They are
well described, there are short videos that make them very appealing
and people can really understand what is happening and the benefits.
Q349 Joan Walley: In terms of your
work with them, do you choose specific projects or do you just
go along with their portfolio?
Mr Buchanan: They have a committee
of, I hesitate to call them wise men, but—
Q350 Joan Walley: Some wise women
as well, I hope.
Mr Buchanan: They have a committee
of half a dozen or so people who scrutinise and choose the projects
and allocate the funds between them.
Q351 Joan Walley: So you do not have
any say in choosing which ones your customers go to?
Mr Buchanan: No. We have allowed
Climate Care to do that because they are expert at it and we are
not.
Q352 Joan Walley: You mentioned their
website just now, in terms of the way that it works, do you make
any commercial profits from the offsetting service that you offer
through Climate Care on your website?
Mr Buchanan: No, we do not; absolutely
not.
Q353 Mark Lazarowicz: Can I just
be clear about that. Every single penny that someone pays to you
through the offsetting on the website goes to Climate Care?
Mr Buchanan: They do not actually
pay us, they pay Climate Care direct. We never see the money.
Q354 Mr Chaytor: The cost of offsetting
a return flight to Johannesburg on your website is £13.30.
That seems incredibly cheap if we consider the Stern Review's
estimates of the cost of carbon or the current price of carbon
on EU trading exchanges. What is the basis of these calculations?
Mr Buchanan: The basis of calculation
is that they have taken average British Airways fuel burn data
and applied it to each of the flights. I cannot tell you whether
it is—
Mr Kershaw: Broadly the number
that you found on the website is right. Obviously there is a calculation
of the carbon emissions but the price is something which is set
by the project cost and currently that is £7.40 per tonne.
Q355 Mr Chaytor: Sorry, £13.50
per tonne?
Mr Kershaw: £7.50 per tonne
of carbon dioxide. That is the price that customers pay through
the Climate Care website.
Q356 Mr Chaytor: £7.50 per tonne
of CO2 abated?
Mr Kershaw: Correct.
Q357 Mr Chaytor: That is the working
assumption.
Mr Kershaw: So if Johannesburg
is almost 15, it is somewhere just short of two tonnes of carbon
dioxide, which sounds about right to me.
Q358 Mr Chaytor: The price quoted
on your website is actually different from the price quoted on
the Climate Care website apparently.
Mr Buchanan: That would be right
because in relation to the British Airways scheme we have used
British Airways flight data and fuel burn whereas on their general
scheme they have calculated differently.
Q359 Mr Chaytor: Okay. What about
the impact of radiative forcing? What assumptions do your calculations
make about the multiplier effect of radiative forcing? This is
a huge area.
Mr Kershaw: We do not apply a
multiplier factor. We are advised by the scientific community
that multiplier factors are inappropriate science. We can talk
more about that if you would like but the headline would be that
we do not apply a multiplier because it is not scientifically
robust.
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