Examination of Witnesses (Questions 284-320)
MR ROGER
WILTSHIRE, PROFESSOR
RIC PARKER,
MR IAN
JOPSON, MR
MARK BROWNRIGG
AND MR
ROBERT ASHDOWN
21 OCTOBER 2009
Q284 Paddy Tipping: You have heard some
of the discussion and I think you will know some of the things
we are going to pursue with you, but we have limited time. Perhaps
I could start by saying that the aviation sector and the shipping
sector have been perhaps, if I can put it like this, whipping
boys for the darker, stronger green lobby. Is that a fair criticism?
Mr Wiltshire: Good morning and
thank you very much indeed for inviting us. I am Roger Wiltshire
from the British Air Transport Association, but here with colleagues
from the Sustainable Aviation coalition. Yes, I think it is true
that we have been unfairly criticised. I believe we have a reasonably
good, in fact I believe we have a very proud record of improving
our fuel efficiency over the last 40 years with some 70% improvement
in fuel efficiency over the last 40 years and we intend to continue
that into the future. I hope today we can explain, or that we
have done with our written submission, how we are going to go
about doing that through technology and other means, and I believe
we can make a very full contribution to the need to reduce climate
impacts and improve the efficiency of transport without at the
same time undermining the nations and the international ability
for people to travel by air.
Q285 Paddy Tipping: And the shipping
sector—an opening headline statement?
Mr Brownrigg: We acknowledge that
we are emitters, strong emitters, albeit in proportion, and that
we have to respond. We believe that we too have made significant
progress over the years in terms of fuel efficiencies for good
commercial reasons as well as other reasons and, as I say, we
are prepared to look forward and work constructively with all
parties.
Q286 Dr Turner: You all know about
the Government's Green Stimulus scheme. It did not do much for
your industries, did it? What would you have liked to have seen
in that stimulus package for your industries?
Professor Parker: We did actually
get some benefit from that. Lord Mandelson, at the beginning of
the summer, announced a scheme for Rolls-Royce, Silhouette, which
was £45 million towards research for low-emission engine
technology. We would obviously like to see not just a one-off
stimulus scheme, but a continued investment in the technology
we need for the future to be able to deliver lower-carbon air
transport, and there has been a significant increase in that since
the Aerospace Innovation and Growth Team first reported in 2003.
I should say I am also Chairman of the Aerospace Technology Steering
Group that came out of that Aerospace Innovation and Growth Team.
In those days, the Government's funding was limited to a scheme
called CARAT, it was only £20 million a year and we are now
up to about £70-80 million a year of support for industry
to pull through these key technologies, but it does need to be
still more. Whether that is under the heading of a low-carbon
stimulus scheme, I actually hope it will be a more lasting and
sustained investment in the UK industry over the next 20 years,
not just a flash reaction to a recession.
Q287 Dr Turner: Mr Brownrigg, what
is your answer from the point of view of the shipping industry?
After all, shipping has only relatively recently started to come
under the spotlight for its emissions and technologically, it
seems, it is starting from a long way back compared with the aviation
industry and aviation engines. What would you have liked to have
seen done to promote greener shipping?
Mr Brownrigg: That is a different
question from Green Stimulus packages; it is a broader question.
Q288 Paddy Tipping: Answer them both
then.
Mr Brownrigg: No problem. I do
not think we would accept your point about technology, and we
can come on to that in whatever detail you wish, but fuel costs
are in the order of 30-plus per cent of an operation for a shipping
company and you can be sure that that, for very good, as I said
earlier, commercial reasons, has been focused upon the importance
of fuel efficiencies and reducing that bunker fuel budget cost
line, so that is the starting point. In terms of the Green Stimulus
packages themselves, as we understand it, that is essentially
a national focus. We are not manufacturing, as you will have realised,
we are shipping companies, so I can only speak from our viewpoint.
We understand that that should have been a national focus and
accept it. We do see a need for increased input into R&D for
the future, but how that ties in between a balance of national
and international engagement, I think, we have yet to bottom out.
Q289 Dr Turner: You also have the
problem of poor air quality contributions from the shipping industry
in the WHO Report. What are you doing to address that because
there does not seem to have been that much progress?
Mr Brownrigg: Can I separate that
out completely because I think one can talk about various pollutants
as opposed to carbon emissions, and the IMO has adopted a very
strong and firm timetable for the strong reduction of levels of
sulphur and other pollutants from shipping emissions into the
future.
Q290 Dr Turner: Yes, but so far there
is very little impact given that, if you just take my own county,
shipping emissions probably account for about 10,000 deaths a
year because of respiratory illnesses related to shipping pollution
because the world's busiest shipping lane is 10 miles off the
coast, so is there not a need for some urgency here?
Mr Brownrigg: I entirely accept
that there is an urgent need to reduce pollutants, and I would
remind you again that it is pollutants and not carbon, but in
that context I think it is extremely difficult to separate out
what comes from land-based sources and what comes from the sea.
Leaving that to one side, as I say, the international community
has acted strongly on this and there is a very firm timetable
to reduce sulphur emissions both in the EU territories and also
more broadly.
Q291 Dr Turner: What is the future
of marine propulsion technology? Is the shipping industry going
to continue to use the ultimate leavings of the refinery process
which bunker fuel represents, or are you going to look for something
cleaner?
Mr Ashdown: Our approach is to
adopt a way forward which delivers the best net environmental
benefit and, in order to do this, we need to balance the issue
of pollutants with the issue of carbon. There was a move only
two or three years ago when we were negotiating the international
convention which deals with air pollution and the question was
put very firmly, "Well, why doesn't the industry move to
distillate fuels?", and a lot of research was done and the
conclusion was that, by moving an individual ship to distillate
fuels, it would improve its carbon burn by about 3-4%, so there
is a very minor improvement in carbon by burning distillate fuels
as opposed to residual fuels. However, in order to deliver the
additional distillate fuel stock needed for the global industry,
they would now require a much greater refining intensity at the
refineries with the result that the net carbon emissions would
rise by about 10 to 15%, so it was decided that an overnight move
to distillate fuels would not strike the appropriate balance between
the need to reduce pollutants and the need to reduce carbon.
Q292 Dr Turner: As a general question
to both sectors, how do you see your role in a future low-carbon
economy?
Mr Wiltshire: From the aviation
point of view, we think it is very important that the role of
aviation or the role of international air transport or international
transport links is maintained, but the industry has to address
its environmental impact and it has to do so responsibly. We recognised
this some five years ago when we put Sustainable Aviation together
and brought together all the good work that is going on in the
industry and tried to promote not only that work, but also, going
forward, what needs to be done, hence the support for a global
sectoral arrangement for aviation as part of a post-Kyoto deal
subsequent to the Copenhagen Summit, so we believe it is important
not only for the technology that is developed, but for the economic
and fiscal framework, if you like, to be right to encourage that
technology to be brought through.
Mr Brownrigg: Our challenge is
of course that shipping worldwide carries something like 80-plus
per cent of world trade and it also, into this country and out
of this country, carries something like 92%, so, if you like,
our ability to respond is very much linked to society's demands
in terms of what it wants to see on its high street and what energy
supplies it wishes to deliver to this country, so our starting
point is that it is important that any legislator takes this into
account and bears in mind the role that we play for the small
amount that we emit, which is, according to the IMO's latest figures,
between 2.7 and 3% of manmade emissions, so you have got to put
those figures together to see the challenge. What I would say
is that, as we read it, we are by far, by a long way, the least
carbon-emitting transport mode, 10 times less than road and significantly
less than our friends on my left, so we are willing to play our
full part and we have engaged, as you have seen from our discussion
paper, in a real way to address this issue, but it is important
that we do not find that solutions that we face lead to transfer
to other transport modes which would then turn the equation in
the other direction.
Paddy Tipping: We will pursue those issues
in a little while, Mr Brownrigg.
Q293 Mr Anderson: This is a social
question. We have talked mainly about ships and planes, but what
about the associate things? Is there any work being done in airports
and ports and are you involved in that, about reducing their emissions
and their pollutants?
Mr Ashdown: From the shipping
side, obviously the ship-to-shore interface is an important part
and yes, work is going on. A lot of our member companies are involved
in something called "virtual arrival" which changes
the way that ships are forced to arrive in port in order to meet
their charterer's requirements, so it allows you to set a virtual
arrival time rather than a specific arrival time. This reduces
port congestion and it also reduces the ship's speed en route
to that port, all of which have a beneficial environmental impact.
There are other opportunities out there, for instance, increasing
port capacity in this country would reduce port congestion, again
speeding up port turnaround times. That would be helpful and it
would avoid wasted hours in the fairways to ports where of course
ships are still burning their engines because they are effectively
still out at sea, although waiting to come into port, so yes,
the relationship between the port and the ship is an important
element of reducing overall emissions.
Mr Brownrigg: Perhaps I could
just add briefly to that to say that we are currently beginning
to work in much greater closeness with the port sectors on a whole
range of issues under a maritime services cluster, Maritime UK,
and the environment, including emissions, is clearly one area
of focus, but it is rather early days for that yet.
Mr Wiltshire: Aviation came together,
as we did, five years ago, recognising the fact that airports,
air traffic control and airlines need to work closely together,
and perhaps, Ian, you can update us on that.
Mr Jopson: NATS, the UK air traffic
service provider, also provides air traffic service at 15 of the
largest airports in the UK. Last year, we became the first air
traffic control organisation in the world to set stretching targets
on our climate change performance, our CO2 performance.
What that has led us to do is to benchmark the system as it is
now, the airports and the rest of the air traffic network, which
stretches obviously all the way over the UK land mass, but then
out to half-way across the north Atlantic, so we have benchmarked
that system in terms of its CO2 performance and we
have set ourselves targets by area of the network, airports en
route and oceanic, to reduce the fuel burn in each of those sectors,
so we are working very hard and we have a target of reducing ATM,
air traffic management-related, issues by 10% by 2020.
Q294 John Robertson: Shipbuilding
has a particularly bad name, and I am sorry about that as it is
the main employer in my constituency. They have a reputation of
dumping at sea and cleaning their oil tanks out at sea and basically
large pollution, but companies also register in tax havens to
avoid, one, paying tax and, two, the rules that we set them in
the UK. Can you tell me what has been done internationally to
try and make sure that you are dealing properly and that it is
not just the ships that come into the UK which are looked at portside,
but also that those which are registered with the UK are adhering
to what goes and how you can pressurise these companies which
leave the UK and register their ships in other countries?
Mr Brownrigg: I think there are
a number of questions there. Firstly, there are strong international
rules, and I do not acknowledge the perception that you put forward
there; I think it is one that is in the past essentially now.
There is a strong rule-set within the International Maritime Organisation
which provides both for dumping at sea and for a whole range of
standards for ships of all flags on the high seas and entering
port, so, from the UK position, not only do we have control over
our own fleet, but we have an ever-strong reputation for control
as a port state for all ships coming through UK waters, and really
I believe that these are standards which are current, constantly
updated and are vibrantly implemented.
Q295 John Robertson: And the context
internationally?
Mr Brownrigg: Well, that is how
it works. Port state control operates not just in one country,
but actually across the whole of Europe through something called
"the Paris Memorandum". The UK fleet, as it so happens,
is one of the top performers within that, but in terms of implementation,
that means that there are different parts of the globe where port
state control is very actively applied, so all ships trading between
the major trading destinations are subject to that, and that includes
detention, if necessary, if defaults are found on board.
Q296 John Robertson: Moving on to
our colleagues on the aviation side, as somebody who regularly
flies from Glasgow to London, I know what it is like to be stacked
up over Heathrow. Now, when you are flying down in a plane from
Glasgow to London, the pilot will always say, "We expect
to arrive on time, if not before, subject to circling around Heathrow".
Now, I have a problem in that that seems to be part of the everyday
occurrence and that you cannot say on a basis that it is weather
or it is just all the flights coming in at the same time because
you know this is happening on a day-to-day basis, so how do we
get stacked up every single day and always round about the same
times?
Mr Wiltshire: An airport like
Heathrow is so full that it effectively is having on the ground
and in the air some congestion, especially at peak times, in order
to make maximum use of very limited runways.
Q297 John Robertson: Excuse me, but
this is not a motorway, this is in the air, and the pollutants
are coming out of these planes all the time. I have got to say,
you know this is going to happen and you can plan for it because
it happens every single day, so why do you allow it to happen?
Mr Wiltshire: Perhaps Ian can
explain why that is necessary in order to make maximum use of
the two runways.
Mr Jopson: The practice that you
refer to of stacking is airborne holding which, in particular,
in this example of Heathrow, as Roger pointed out, is because
the runways are operating at maximum capacity and we need to have
a reservoir of aircraft to ensure that we service those runways
in the most safe and efficient way to get as many movements on
to the runways as possible, but we do realise that there are significant
inefficiencies in that method of operation.
Q298 Paddy Tipping: And carbon emissions.
Mr Jopson: Absolutely, and we
are able now to quantify those because we have developed tools
to quantify the strength of those emissions in our system, so
we are aware of that and we are putting tools in place to try
and reduce the amount of stacking. We currently have, what we
call, an "inbound speed trial" which is really trying
to slow aircraft en route to the hold, to slow them down so that
we can reduce the time they spend in the hold. We have also recently
introduced an aircraft control tool called "A-man",
an arrivals manager, which allows us to better sequence the aircraft
in order to get them through that holding situation and on to
the ground as safely and as efficiently as possible and, as a
result, reduce carbon emissions.
Paddy Tipping: What we are going to do
is focus a little bit on aviation, then on shipping and then in
the final session we will talk about international agreements
and international frameworks.
Q299 Charles Hendry: I am still trying
to get my head round the concept of a reservoir of aircraft! How
many domestic flights are there within the UK in any particular
year, and how many of those could be avoided if there were a genuine
high-speed rail network in place?
Mr Wiltshire: I don't have anything
absolutely, but I know that domestic flights amount to something
well less than 10% of the total emissions from so-called UK aviation,
flights routing within the UK.
Q300 Charles Hendry: Would a figure
of 100,000 be reasonable?
Mr Wiltshire: That may be the
figure, yes. We know that, of the routings within the UK, some
80% are either over water or to places the high-speed rail is
not due to touch or that the high-speed rail plan touches, and
that accounts for 60% of the passengers on domestic routes, so
some 40%, if you like, of passengers on domestic flights are exposed
to the possibility of an alternative through high-speed rail.
Having said that, there are certain routes, high-density domestic
routes, such as Manchester to Heathrow and Glasgow, Edinburgh
and others, where a large percentage of those passengers are actually
wishing to travel somewhere else not in the UK and their objective
is not London, it is to some other part of the world and they
are changing planes at Heathrow, and these passengers, in order
to move to rail, would require a well-integrated, smooth operation
of the rail service into the airport. Now, we support a good,
integrated transport system in the UK which could include rail
and bring air and rail together, and we very much support that,
but we do recognise the limited amount of substitutability areas
between rail and air into the future, and we note that in many
other countries of the world which have very good high-speed rail
systems, such as Japan, Germany and France, they still retain
strong domestic air routes between their major cities.
Q301 Sir Robert Smith: But, if you
fly Lufthansa, the inflight map includes the rail high-speed network
as part of the network.
Mr Wiltshire: That is a classic
example of, what I call, "integrated transport" where
that could be an opportunity if the rail and the air services
are brought together so that you have a railway system underneath
the airport. Now, at Heathrow we already have tunnels underneath
Heathrow delivering rail services, albeit limited numbers of rail
services, just to central London and there is an opportunity to
go and cover a greater swathe of the South East very soon if people
support the air traffic proposal, and we would support the integration
of the rail network to a much larger part of the UK from Heathrow.
Q302 Charles Hendry: Is it true that
there are some planes, some flights which take off with either
no passengers or virtually no passengers on board simply to preserve
landing slots, and is it an absurdity that we have a system which
allows that?
Mr Wiltshire: If there are, then
I know of none at the moment. If there are, then it is perverse
and it is wrong. It points to the need for greater capacity, I
think, in airports in the South East if airlines are doing that.
As far as I know, that is not taking place at the moment, but
there are other inefficiencies on the ground caused by a lack
of runway capacity which we are addressing in the absence of mixed
mode which at Heathrow would have allowed us the opportunity to
significantly reduce the airborne holding that Ian has talked
about and it would significantly reduce the congestion on the
ground.
Mr Jopson: Just to come back on
your question about domestic air traffic, our calculations show
that domestic air traffic represents around about a fifth of the
2.4 or so million movements that we handle as NATS in the UK every
year, but that actually only accounts for 14% of the CO2
emitted in the system, so those flights are operated by relatively
efficient twin-engine aircraft, so their emissions are less than
the proportion of the traffic, if you see what I mean.
Q303 Charles Hendry: They are shorter,
so would you not expect the emissions to be less?
Mr Jopson: To some extent, yes.
Q304 Sir Robert Smith: Although take-off
and landing, is that not a big part of the emissions?
Mr Jopson: The vertical profiles
for the take-off and landing is an important part and, in particular,
the departure in fact where 40% of all the emissions in the UK
airspace system is emitted by aircraft in departure, so that is
why we are looking very closely at how we get those climb profiles
as smooth as they possibly can be to reduce those emissions. What
we do find in terms of our system performance is that, when we
have control of the aircraft throughout their flight, then we
can deliver those profiles that are as smooth and as energy-efficient
and as CO2-efficient as possible.
Professor Parker: Although it
is 14% of CO2 in our local airspace, if you look at
the total CO2 impact of flights originating from, and
coming to, the UK, it is a minute percentage that is UK domestic
travel, much less than 5%, so it is important to think outside
this little UK box and creating a few CO2 molecules
around the UK, but it is where these flights finish up and where
then does the CO2 finish up.
Q305 Sir Robert Smith: Your own analysis
indicates that we can return by 2050 to 2000 levels after reaching
a peak at 2020. As you have already indicated, the industry has
been driven to be efficient. It is a low-margin industry where
fuel is a big part, so, even without any environmental impacts,
the incentive has been there to be efficient. Following on from
John's question, quite often we sit on the ground in Aberdeen
because you know we are not going to be able to land at Heathrow,
so you do not let us take off, which obviously becomes a more
efficient way. Given all that, what government policy is needed
to actually achieve what you think can be achieved by 2050?
Professor Parker: The particular
graph in the pack we have sent you looks at the impact of technologies
and the impact of biofuel over that period, so it does not take
into account any impacts of carbon trading or anything else, but
it is purely how much more efficient could aircraft be over that
time. Government does have a strong role to play in that, as I
said earlier. I think that government partnership with industry
both at the European level and at the UK level to bring forward
these technologies is vitally important. Some of these will be
incremental technologies, improved combustion, improved materials,
lighter aircraft, but some of them are potentially step-change
technologies. We are looking at the moment at contra-rotating
open rotors, going back to very efficient propellers. Now, these
can be 15% more fuel-efficient than even the best enclosed jet
engines today, but this is technology which none of us has touched
since the 1980s when we thought the world was going to end because
oil had reached $30 a barrel and then, as soon as it went down
again, everybody dropped it because there was not the link to
environmental concerns. However, to launch the programmes necessary
to bring those open rotor-powered aircraft needs a huge and co-ordinated
investment that the industry alone certainly cannot afford, notwithstanding
the recession, but even before the recession we could not afford
that level of investment, so it does need government intervention,
as I say, both at a UK level and a European level. I think the
other thing to bear in mind is that, if you look at fiscal measures
in the UK, they can only touch this 2% of air travel that starts
or finishes in the UK. If you look at the UK industry, there is
a huge gearing factor. We have the wings from Airbus, we have
Rolls-Royce engines and we have air traffic management systems
all exported from the UK all over the world. By investing in that
technology, you are touching 70% of future aircraft all over the
world, so there is a huge gearing worldwide from investing in
the technology base of UK industry, not to mention the economic
benefits of doing so.
Q306 Sir Robert Smith: You may have
touched on this in suggesting that your graph is just purely to
do with what could happen with engine efficiency because IATA
members, of which most of you are members at the moment, are committed
to zero emissions by 2050.
Professor Parker: There is a figure
of 50% net by 2050 relative to 2000, ie, half of what is on the
graph, so half of the benefit on the graph will come from technology
and biofuels and, if you want to get below 2020 levels, ie, down
to 50% of 2020 levels, then the rest has to come from incentives,
such as carbon trading, and it will not come out of pure technology
and pure aircraft systems.
Paddy Tipping: Let us focus on the shipping
sector now.
Q307 Dr Turner: In recent times,
shipping has started to adopt various measures which should help
to reduce emissions, like engine improvements, fleet management
techniques, cold-ironing and reducing steaming speeds. What level
of emissions reduction do you think these can achieve when they
are fully operated?
Mr Ashdown: I think the first
point to make here is that all of these technologies that you
have alluded to do exist and can be implemented, but the nature
of the industry means quite often that the person who has control
over the application of those methods might not necessarily be
the shipowner, it could well be the charterer, so, for instance,
steaming speed, route, et cetera, is entirely in the hands
of the charterer rather than the shipowner, and that is an important
point about the motivational factors which would drive companies
to use these technologies. To answer the question directly, industry
assessment is that these existing technologies rolled out to their
maximum might yield an improvement generally of between about
15 and 25%. Of course, it depends what you take as your baseline
ship and that will not be on a ship built last year, but on a
ship, say, delivered in the mid-1990s that would be the percentage
that we would see.
Q308 Sir Robert Smith: That is a
saving well worth having.
Mr Ashdown: Indeed.
Q309 Sir Robert Smith: How effective
are the means of cajoling or enforcement of the use of these technologies?
Is there anything more we can do by way of regulation, for instance,
to insist that these technologies might be used to the maximum?
Mr Ashdown: Yes, I think that
the International Maritime Organisation is doing some very useful
work here in this area because another difficulty with delivering
these new technologies for new ships, especially when the economy
is growing strongly, is that shipowners find it very difficult
to go and buy the most efficient ships because the shipyards hold
the whip-hand and they will build a ship which is most convenient
for their production platforms, so you may be allowed to choose
the colour, but little else, so it is very important that we incentivise
the shipbuilders to deliver the most efficient ships. The way
that the IMO is addressing this is through something called the
"energy efficiency design index" which is mandating
new standards for every new ship to be built to. We were very
much hoping, from an industry perspective, that that would be
a mandatory requirement, but at present, because of the sensitivity
of international negotiations around carbon, some of the nation
states of the IMO have held that back and it is just voluntary
at the moment, but I would not be surprised if that was made mandatory
within the next sort of six to 12 months.
Q310 Sir Robert Smith: What scope
do you see for the future application of other technologies, and
wind power is a particularly promising one for routes going through
the trade winds and so on, and other forms of power, nuclear possibly,
hydrogen, electric propulsion and so?
Mr Ashdown: Well, all of these
technologies are at a prototype stage for land-based sources,
let alone ships, and I think it is fair to say that in almost
all of these instances these should be viewed upon as supplementary
power sources rather than as the prime power mover. I do not think
that you would ever wish to go back to a situation where you had
a VLCC powered solely by the wind and we are always going to need
the main engine there for when the wind stops blowing or for when
it blows in the wrong direction perhaps, so these are very much
supplementary power sources and the question is: how can they
be used most efficiently? We have seen some interesting trials
of sea kites, and the difficulty there is again they are fairly
useful where the trade winds can blow, and we have seen some interesting
research being done, but they are less useful in congested traffic
zones certainly around northern European waters because of course
the ship needs a degree of manoeuvrability. I think the point
with all of these technologies is that we welcome them, we are
looking at them, but they need to be proven and robust before
they are likely to be rolled out across the fleet.
Q311 Sir Robert Smith: I have a company
that does ship-routing from my constituency and it does seem that
efficient routing of a ship does offer quite a lot of improvements
in weather management and that sort of thing, but yet there seemed
to be some frustration that people even now are still not fully
sold on the benefits.
Mr Brownrigg: Well, again this
will come through to the bottom line of bunker consumption ultimately,
so, if you are in control of those elements of the operation,
and Robert has already mentioned that you may not be because it
may be the charterer who is, if you are, then you will be maximising
what you can, but there is significant scope for improving.
Q312 Sir Robert Smith: We do a lot
of freight transfer north-south in this country, so is there more
scope or are there any incentives or anything holding back using
more coastal routes of shipping which actually reduces the emissions
from road transport?
Mr Brownrigg: Only the commercial
viability of this. There are initiatives which promote shipping
on the short sea routes, whether it be around our coast or indeed
from the near continent, to take cargoes off the road in particular,
and we entirely support those and we would hope that the Government
would continue to do so.
Q313 Dr Whitehead: Firstly to Mark
Brownrigg and Robert Ashdown, you have mentioned in your report
on capping and trading to reduce carbon emissions from international
shipping that the most important outcome of Copenhagen could be
a defined objective for international shipping. What might that
defined objective be and how might you define it?
Mr Brownrigg: I think we have
to be realistic as to how much airtime shipping is going to have
in Copenhagen. We all know the pressures, and you, as a committee,
will know these far better than us, which are on the Government.
We imagine that the airtime for shipping, and aviation presumably
as well, will be rather small and that the most that we will see
is the inclusion of our sector in the post-2012 regime. Now, what
that means has yet to be defined. We would be very happy for either
the UNFCCC to set a target for shipping or for it to require the
IMO to set a target for shipping, and, from our viewpoint, in
many ways the latter fits well because the IMO is well-versed
in the realities and practicalities of international shipping.
Certainly any questions of trajectory for achieving any target
should remain within the specialist agency, the IMO, as far as
we are concerned.
Q314 Dr Whitehead: Although certainly
the amount of airtime, as you say, will not be enormous, nevertheless,
assuming there is a reasonable deal at Copenhagen, then it is
likely that shipping and aviation will be in that. How prepared
do you think both the aviation and shipping industries will actually
be to accommodate those sorts of challenges?
Mr Brownrigg: Well, we entirely,
as I said, accept that shipping should be in certainly for measurement
purposes from now on. How prepared are we? I think the IMO is
beginning to put itself in a position to carry this work forward
with despatch and with depth of consideration. It has set itself
a programme of work, if that is allowed by the UNFCCC decisions,
which will take it through next year to a decision in 2011 on
the precise way forward, but, in order for that to be achieved,
it is intending to look at the various options for economic or
market-based solutions as from March through the middle of next
year, so I think both the industry and the IMO, as the regulatory
body, are prepared for this debate and increasingly so. Of course,
we do have alongside that process the position of the EU. The
EU is being very responsible and awaiting the outcome at the worldwide
international level, which is quite correct, but it will require
the IMO and the industry to have met that timetable of 2011 if
the EU is not to go it alone.
Mr Wiltshire: From an aviation
point of view, we sent you this week the joint industry submission
to the International Civil Aviation Organisation's high-level
meeting a week or so ago, which was a fairly detailed proposal
for the way in which aviation should be dealt with, a global sectoral
arrangement for aviation to ensure it is part of the post-Kyoto
structure. That proposal was not accepted in full by the ICAO,
which, as you know, is a state-representative organisation. The
developing world, in particular, objected to them being dragged
into a detailed proposal for aviation in advance of the discussions
at Copenhagen, and I think I agree very much with what Mark has
just said, that both maritime and aviation will probably not get
much airtime at Copenhagen. It is pretty clear to us that the
world needs to decide what the global structure is for climate
change, full stop, to start with and then we believe in aviation
that we have a readymade proposal from the industry ready for
the ICAO to take its responsibilities in this area, but, first
of all, we need a global, if you like, deal on climate change
itself.
Q315 Dr Whitehead: Assuming that
those two events happen and that your industries are both reasonably
geared up to react positively, what do you think the impact on
prices is then going to be in terms of passenger travel and, in
the case of the shipping industry, in terms of box costs, bulk
transport costs and what-have-you?
Mr Wiltshire: Aviation, as you
know already, we are due to be part of the European Emissions
Trading Scheme from 2012 and we are already aware of these issues.
We know that there will be a carbon premium added to the price
of the fuel that actually we are burning and that adds greater
emphasis to the need for more fuel efficiency. What impact it
will have on prices will obviously depend on the carbon price
and on the way in which we can improve efficiency within the industry.
It is a very competitive industry that we operate in and others
will be trying to make themselves more efficient both in terms
of fuel use and in terms of the carbon premium that they recognise
they will be paying in the future.
Mr Brownrigg: Perhaps I may just
say that we too in the maritime context have felt the winds of
politics quite strongly within the IMO in the last year when we
have been discussing this because of Copenhagen lying ahead, so
the major emerging economies have not been willing to enter the
debate at all during that period, so the IMO timetable is distinctly
predicated on that being loosened. In terms of costing, this is
very difficult to know because there are two systems that are
being considered and basically one is a straight tax arrangement,
and no one knows at what level that might be set, and the other
one is cap and trade, which no doubt we will come on to look at
in more detail. Equally, no one knows, if we go down cap and trade,
how an individual company will react to that and the degree to
which they will be able to manage their own costs. We have done
some initial work on costs, and I will ask Robert to explain that.
Mr Ashdown: If you look at today's
figures where a tonne of carbon is roughly €13.5 and where
bulk prices are $450 per tonne and if you took a mythical shipping
company running, say, five very large crude carriers, then there
would be about a 6.5% increase on the fuel costs to pay the carbon,
so that gives you some indication. Of course, going forward, we
expect the fuel price to rise into the future and we also expect
the carbon price to rise, and the degree to which they rise in
parallel will determine the percentage increase on the cost of
the fuel.
Q316 Paddy Tipping: Could you just
talk to me for a minute about the relationship between price and
demand management. It is something that the aviation sector has
done some work on, but, in order to have some real effect, you
need some fairly steep increases in prices.
Mr Wiltshire: I do not have any
figures with me, but I will do research, if you wish, on this.
All I can say in general is that people normally travel somewhere
to meet somebody or to do something and the actual air journey
is a means to an end, so they will be taking, I presume, a price
decision based on the total, if you like, trip cost which might
include accommodation, meals, et cetera, as well as the actual
journey. Certainly, different types of reason for travel have
different, what companies call, "elasticities of demand"
and IATA, I know, do have some figures for this and, if you are
interested in that, we will provide for you what is available
in the public domain.
Q317 Paddy Tipping: That would be
very helpful if you could let us have that, but it seems to me
that we all are aspirational and we want to travel in many ways
and we ought not to restrict people, but clearly we are going
to have to reduce carbon emissions and a steep increase in price
may be one way of doing it.
Mr Wiltshire: We certainly believe,
and we have done ever since we got together as Sustainable Aviation,
that the right way forward economically is the measure of cap
and trade where the industry's emissions are capped within an
international, preferably, and, even more preferably, a global
arrangement. You will be paying for carbon and any increase in
activity and in demand will require an equal reduction in carbon
emissions elsewhere within a capped process, so you are ensuring
the environmental outcome, but the price may well go up, but that
is one of those things we have to deal with. We accept that that
is the best route forward, but we also accept that it is the best
route forward not just for our industry, but for the world getting
its carbon emissions down in the most cost-effective way, in other
words, to ensure that, wherever the carbon is being paid for,
we are finding the lowest angle of route at any point in time.
Q318 Paddy Tipping: Mr Whitehead
was asking you about the discussions about cap and trade. It is
hard to see into the future and, if we could see into the future,
we would all be wiser people, but when do you think a robust cap
and trade system might be introduced in both sectors? What is
your best estimate?
Mr Wiltshire: Well, all we can
do is reflect on the European arrangement for aviation in 2012
which is that the cap is at 2004/05 levels, the emissions will
be capped at that level, and aviation will be able to have access
to some other carbon markets. We believe it is important that
aviation and other sectors get full access to all carbon markets
around the world to ensure that again we get the most efficient
way forward on climate change generally.
Q319 Paddy Tipping: And in shipping?
Mr Brownrigg: We are, as you have
seen, an advocate of cap and trade. We believe it can work. We
have looked particularly at the experience in the United States
on sulphur which was drawn to people's attention not least through
the Lazarowicz Report. This reported ahead of time and at remarkably
lower cost than envisaged and we take that as an encouraging sign
for capping and trading. This of course is a much longer perspective.
One exchange suggested this was a 75-year perspective instead
of a 20-year perspective, so one does not underestimate the challenges
that arise as a result of that. We believe that cap and trade
offers greater environmental certainty. We believe that it has
all the challenges in a fairly close way to the other options
that are on the table at the moment and all those governance and
structural challenges are going to be there, but we believe it
is the way forward in terms of environmental certainty and in
terms of the need that we perceive for a separate solution for
international shipping because it does not fit the other models.
We do not, and I emphasise, do not advocate in any way insertion
of shipping into the EU ETS. That cannot work, it will be abused
immediately, et cetera. We want a global regime worked up under
the aegis of the specialist UN agency, the IMO. We entirely accept
the two degree challenge in general terms, but how that translates
into specifics we have yet to see.
Q320 Dr Whitehead: I wonder if I
could just clarify a little your suggestion on cap and trade.
The suggestion, as far as shipping is concerned, as far as I understand
it, is that at the point of bunkering essentially a credit would
be handed over presumably on a worldwide basis. Would you consider
in the shipping industry that it would be relatively easy or possible
to remove, shall we say, rogue bunkering around the world, that
is, shipping disappearing off to a place which is not regulated
and taking on essentially illegal bunkering? Assuming it would
be possible, would you be certain that under those circumstances
the logistics of actually keeping the ships going around the world
could be reliably achieved?
Mr Brownrigg: At the moment there
are relatively few bunkering centres. Of course, you can get bunkers
anywhere but the major ones are relatively few. There is this
system called the bunker delivery note which is already up and
running and can be used, and indeed is advocated by all the different
options that are under consideration, whether it be a levy/compensation
fund or whether it be trading and that is a system that is well-monitored
and well-covered. We believe that that is the way to approach
it and whether you buy your credits ahead of time or as you go
it is an option that is out there for discussion at the present
time. As for the nature of rogue bunkers or bunker suppliers or
the possibility of displacement to potential rogue centres, I
do not know if you have something to say.
Mr Ashdown: This is an area that
has given us concern because of course as responsible operators
it in no way benefits us to have a system that permits people
to gain the system. There are methods by which you can eliminate
that risk, certainly for those ships which may trade into countries
which are signatory states to any agreement that has been developed.
What is less easy to control or perhaps could not be controlled
is the very limited trade that takes place between two non-signatory
parties. We would never capture that direct trade and that would
have to be let go, but certainly any ship that ever wished to
trade into an Annex 1 country or non-Annex 1 country that had
signed up to the agreement would be caught. It is probably worth
bearing in mind that once you have the US, Europe and Japan in
any scheme then you have captured roughly 80% of world trade.
Paddy Tipping: Thank you for all the
information you have given us. Mr Wiltshire, you are going to
drop us a note about prices and that will be very helpful. Thank
you for keeping us to time. This is a big issue and I did not
think we were going to meet our time constraints. Thank you all
very much.
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