Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 60 - 79)

TUESDAY 23 JANUARY 2007

MR ROGER WILTSHIRE, MR ANDY KERSHAW, MR ANDREW BARKER AND MR BARRY HUMPHREYS

  Q60  Mr Todd: But you could apply a direct tool that imposed differential charges on airport usage for some of the clattering old bangers that run on freight-only activities, for example. We do not have a pure freight operator here to defend its corner, but presumably you may have some sympathy for that view.

  Mr Wiltshire: The British Air Transport Association represents one pure freight operator based in the East Midlands, which is DHL. I think that it supports the approach on emissions trading and realises that its operation like that of any other operator would be caught up in that. Therefore, its efficiency in terms of emissions per payload tonne would be an important factor in whether it cost it a lot or a little to be part of the scheme.

  Q61  Mr Todd: Or you could simply approach it through regulation by saying that no aircraft of a certain kind would be permitted to fly into airports in this country?

  Mr Humphreys: I think it is just a question of efficiency. What is the best way to achieve the objectives that we all have? Overall, ETS seems the best way to do it. Undoubtedly, there are other ways, but in our view the most efficient is ETS.

  Q62  Mr Todd: You were about to outline your thoughts on hypothecation.

  Mr Humphreys: We have already mentioned that we would be far happier with the APD if the money collected by the Chancellor was used for environmental purposes. The principle of hypothecation on that tax has already been accepted by the Treasury, because 20% of the money goes to African development funds. At the moment there is no element of incentive and the public cannot see any environmental benefit directly from that tax.

  Q63  Mr Todd: One of the submissions suggested that additional support should be provided for research into more environmentally friendly aeronautic technologies. Should you not be doing that yourselves?

  Mr Barker: We are doing that, and we invest very heavily every year. Over the past six weeks I have spent time with Airbus at Toulouse and Boeing in Seattle, and I am spending the rest of this week with Rolls-Royce in Derby, effectively co-operating with them on the development of their next technologies. Therefore, we are spending management time on this matter and also investing capital every year to buy the latest technology.

  Q64  Mr Todd: What is the profile of your industry on R&D in this area? After all, most of the aircraft that you operate are, presumably, leased rather than bought and you do not directly engage with aeronautic manufacturers and engine suppliers, do you?

  Mr Barker: We directly engage with and buy our equipment from manufacturers.

  Q65  Mr Todd: Do you fund R&D with them?

  Mr Barker: Yes.

  Q66  Mr Todd: To what extent? You mentioned one activity which involved a visit.

  Mr Barker: I do not have the Airbus number in my head, but last year Boeing spent on civil R&D $1.3 billion.

  Q67  Mr Todd: I entirely accept your point as far as concerns manufacturers.

  Mr Barker: That cost is priced onto the planes. Therefore, if we buy the latest aircraft effectively we are paying for their R&D.

  Q68  Mr Todd: But you do not do any yourselves?

  Mr Humphreys: It is not a very big number.

  Q69  Mr Todd: Should you?

  Mr Wiltshire: The matter in which we are interested is the atmospheric research mentioned earlier. One of the solutions to some of the non-CO2 impacts may be an operational one which is directly where airlines would be involved, for example avoidance of the creation of condensation trails which is a fairly straightforward procedure. At the moment that would cost us in fuel which in turn would mean more CO2 emissions. Until we have a much better quantification of that impact it would be wrong to take such an operational measure. But operational measures are important. Research and development of the technology of the aircraft are very much at the heart of what the manufacturer puts before us. It is important that they get the right research and development investment and, where necessary, support for what I may call the further out technologies, that is, technologies that are just about on the horizon now but may be pulled into the industry and need that incentive. I think that is where governments across the world can be more helpful.

  Q70  Mr Todd: We are familiar with the difficulties of imposing a global tax on aviation fuel. What steps are you aware of to address some of the issues that currently confront its introduction?

  Mr Kershaw: As we said earlier, we believe that emissions trading is a far more effective policy measure to address aviation emissions than taxation. At the international level through the International Civil Aviation Organisation there is a piece of work that looks at emissions trading at international level. The guidance for that has just been developed and hopefully will be adopted in the near future. UK industry is heavily involved in supporting that work and taking forward those steps to build the framework to be able to bring aviation into emissions trading.

  Q71  Mr Todd: But we have already heard that there are objections to that concept from major American airlines.

  Mr Kershaw: There are difficulties in terms of climate change policy globally, aviation and other sectors included. We believe that the appropriate approach is to demonstrate effective policy and technology measures to the rest of the world and in doing so hopefully those states will accept that such measures are cost-effective, workable and sustainable.

  Q72  Mr Todd: Which would be more difficult—to introduce a global ETS or to agree amendments to ICAO rules to create flexibility in the taxation of aviation fuel?

  Mr Kershaw: I believe that it would be easier to implement global emissions trading purely on the basis that that would be seen as a far more cost-effective solution. The ICAO analysis of taxation of aviation demonstrated that a tax focused on aviation to meet hypothetical targets related to Kyoto would cost the industry in 1992 US$245 billion a year in 1992 dollars, whereas open emissions trading where aviation would be able to buy and sell outside the aviation sector was estimated to cost between US$1 billion and US$60 billion. The range reflects the fact that one can make different assumptions within emissions trading, but the basic point is that taxation at international level would be hugely more costly. Equally, it would take away from the industry funds that it would be able to invest in new technology. In addition, with emissions trading the money would be flowing to where environmental improvements could best be made globally. At international level the focus is to bring aviation into emissions trading, and the UK and EU have a unique opportunity to demonstrate emissions trading as a practicable solution to address air transport climate change impacts.

  Q73  Peter Viggers: Has anyone ever suggested emissions trading for military aircraft?

  Mr Kershaw: It has been suggested. I do not know what conclusions have been drawn, but I believe that the current Commission proposal does not include military aviation.

  Q74  John Thurso: It has been mooted. When I was a transport spokesman I had the pleasure of meeting many of you in the aviation industry. It seemed that when we discussed these issues you always expressed great concern, and it was always followed up by stressing the market mechanisms, with which perhaps I was broadly sympathetic, and finally the need for anything to be done on an international basis. If one takes market mechanisms and the international basis together it always strikes me that it is a recipe for masterful inactivity because one is unlikely to see anything in the short term. Given that we do need to do something real in the short term, why should we not consider an airplane departure tax as opposed to a passenger departure tax which would have the benefit of pulling in freight aircraft, which currently pay absolutely nothing, and putting that tax cost directly onto the industry rather than the passenger and, therefore, the more people one put in the aircraft the less tax per passenger?

  Mr Wiltshire: In a way, that is a small step towards something much more sophisticated like emissions trading. Although it perhaps would capture a different range of aircraft it still does not create an incentive for airlines to invest in better technology. It is really moving around the deckchairs.

  Q75  John Thurso: It would if one based the tax on the carbon emissions of the particular aircraft, which would be very easy to do?

  Mr Wiltshire: That is a further step towards emissions trading; one is getting closer to the fundamental of emissions trading which is that airlines measure and report their emissions and have the price of carbon built into them. That is exactly what the UK airlines have done in their report Sustainable Aviation in the past two months. That is a way of explaining to the rest of the industry the way forward as far as their environmental costs are concerned.

  Q76  John Thurso: As an industry would you prefer an airplane departure tax to a passenger departure duty?

  Mr Wiltshire: We prefer a mechanism based on the emissions from the aircraft which is dealt with like other emitters of CO2, which is the same whatever the source.

  Q77  John Thurso: I return to the Chairman's question about radiative forcing. The Royal Commission on Environmental Pollution estimated that radiative forcing was about 2.7. I believe that was the multiplier it used for the impacts of CO2. In your answer you said that you really needed to study all the other gases, but it also pointed out the fact that all the other gases—methane, NOx, ozone and water vapour—could quite easily be converted to a carbon equivalent. If we in this country are serious about something in the order of a 60% reduction in CO2 by around 2050, excluding aviation, we are looking at a fall from 168 to 67 metric tonnes of carbon. Over the same period aviation is forecast to rise from 4.6% to 17.4%. If one then puts in the multiplier of radiative forcing one goes from 4.6% to 17.4%. One has a situation where the country as a whole is aiming for 67 metric tonnes of carbon and aviation is responsible for the equivalent of 43.5 which is 80% of the national level of carbon emissions. Does that not put into perspective the current claim that you are responsible for only 0.1% of global emissions?

  Mr Wiltshire: The last figure you gave is accurate.

  Q78  John Thurso: Does that imply that the other ones are not?

  Mr Wiltshire: No. In the global sense we are 0.1% of CO2 emissions. We recognise the non-CO2 effects of aviation but not the easy mathematical ability to multiply those to come to some sort of carbon equivalent. They are so different as effects that one needs to understand each of the individual impacts. You mentioned methane. We absorb methane; we are a good thing from a climate change point of view when it comes to methane. Aircraft emissions reduce methane. Methane has a certain lifespan. Ozone which is the culprit, if you like, for Nitrogen oxides emissions, has a shorter lifespan. How are we to compare and contrast those two effects from the Nitrogen oxides emissions? That science needs to tell us and at the moment it cannot do so. The science tells us that radiative forcing is a very inappropriate and mathematically incorrect way to do that; it is worse than adding together apples, pears and oranges.

  Q79  John Thurso: In that case, why would the Royal Commission on Environmental Pollution have made so much of it?

  Mr Wiltshire: I think they used the IPCC diagram which implied that these things could be added up and came up with radiative forcing. The important issue is not radiative forcing but the climate change impact. The radiative forcing is not the metric used to describe, for example, the effect of CO2 on the climate or the temperature of the earth. A different metric is used and as yet no use is made of that for other impacts.


 
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