Memorandum submitted by the Airport Operators
Association
1. The Airport Operators Association (AOA)
is the trade association that represents the interests of British
airports. Our membership comprises of 71 airport companies, representing
all of the nation's international hub and major regional airports
in addition to many serving community, business and general aviation.
2. In 2008 AOA member airports handled more than
228 million passengers, nearly 2.5 million tonnes of freight and
over 2.3 million air transport movements.
3. Aviation adds value to the UK economy
and society. Oxford Economic Forecasting (2006) demonstrated that
the industry contributed £11.4 billion to the UK's GDP in
2004, which alone represented 1.1% of the overall economy. The
aviation industry directly and indirectly supports more than 500,000
jobs.
4. The AOA accepts that aviation needs to
cover its environmental external costs if the industry is to achieve
permission to grow. Aviation provides vital international connectivity.
It permits business and private travel. It underpins other economic
sectors. The key, then, is balancing the social and economic need
for aviation with a means of mitigating its climate impact.
5. In summary:
(a) Climate change is a significant challenge
to modern societies and economies. The AOA and its members strongly
believe that a post Kyoto framework, being discussed at Copenhagen
later this year, should include aviation.
(b) Aviation generates 2% of global greenhouse
gas (GHG) emissions. In the UK the aviation share is approximately
5% of all CO2 emissions.
(c) AOA supports aviation's inclusion within
EU ETS: it is an international cap and trade solution which allows
the industry to grow whilst ensuring that net emissions across
the economy continue to fall.
(d) Aviation is a growing industry with a strong
track record in fuel efficiency improvements. For example, the
fuel efficiency of jet aircraft has improved by over 70% since
the introduction of civil jet airliners.
(e) In September 2008 DfT published its Emissions
Cost Assessment (ECA). The total external cost of aviation was
calculated as £1.8 billion. This compares with a tax take
from Air Passenger Duty of £2 billion in 2007.
(f) AOA supports the view expressed in the Stern
Review, that market solutions based upon a price for carbon represents
the most effective means of ensuring that climate change external
costs are internalised. By "pricing-in" carbon, the
market will naturally incentivise lower-carbon activities and
technologies.
OVERVIEW
What is the potential contribution of international
emissions trading to delivering a global greenhouse gas stabilisation
target?
6. Aviation generates 2% of global greenhouse
gas (GHG) emissions. In the UK the aviation share is 5% of all
CO2emissions. (Source: Institute and International Energy Agency)
7. Whilst the Kyoto Protocol (1997) set out commitments
to reduce global emissions, international aviation was left outside
the framework. Recent developments in climate science, political
awareness and public interest have made aviation a focus for action
on climate change.
8. Carbon dioxide (CO2) is the emission from
aircraft that is considered to have the greatest long-term effect
on climate change. The quantity of CO2 emitted is directly related
to fuel burn and the understanding of its environmental effect
is good. There is a clear need for further research to advance
our scientific understanding of other aviation climate effects.
9. Aviation is a growing industry with a
strong track record in fuel efficiency improvements. For example,
the fuel efficiency of jet aircraft has improved by over 70% since
the introduction of civil jet airliners. Nonetheless, the success
of civil aviation has resulted in growth in overall fuel consumption
and in emissions of CO2 outpacing improvements in technology.
10. The figure below illustrates the Sustainable
Aviation Programme view of future emissions from the UK aviation
industry. Sustainable Aviation is a cross industry initiative
aimed at tackling aviation's environmental impacts, whilst maximising
the economic and social benefits from aviation.
11. The uppermost, red, line indicates predictions
of growth (without any changes in fleet composition or technology
level) and has been derived from projections in passenger numbers
published by the UK DfT in November 2007. The yellow area indicates
the impact of engine and airframe technology developments, meeting
ACARE targets by 2020 with further advances thereafter. It takes
20 years for technology changes to penetrate the entire fleet.
The light blue area indicates the contribution from ATM and operations
towards meeting the ACARE targets by 2020. The dark blue area
indicates the contribution of fuels from renewable and sustainable
sources. Overall SA's judgement is that cumulative improvements
from these technologies will reduce CO2 emissions from the UK
aviation industry to below present levels by 2050.[4]
Source: Sustainable Aviation Programme
12. In the near term, emissions trading,
principally EU ETS, forms the most effective basis for minimising
aviation's net climate impact, whilst accommodating the growth
required to meet the needs of the economy and society. All carbon-intensive
activities, including aviation, have an environmental impact.
Global, cross-sectoral schemes are needed in order to cap, control
and curb the costs that these activities have on the environment.
The AOA and its members strongly believe that a post-Kyoto framework,
being discussed at Copenhagen later this year, should include
aviation.
Whether, and under what circumstances, should
emissions trading be supplemented or replaced by tax or regulation?
13. AOA supports the view expressed in the
Stern Review, that market solutions based upon a price for carbon
represents the most effective means of ensuring that climate change
external costs are internalised. By "pricing-in" carbon,
the market will naturally incentivise lower-carbon activities
and technologies.
14. The AOA accepts that aviation needs to cover
its environmental external costs if the industry is to achieve
permission to grow. This is particularly evident in the UK's context,
where the debate on climate change is heavily aviation-focussed.
The Emissions Cost Assessment, published by DfT in 2008, demonstrates
that aviation in the UK is already covering its environmental
costs through existing taxes (see below).
15. Environmental taxes without any form
of hypothecation, whilst they play a role in allowing a sector
to internalise its external costs, are ineffective as they divert
money away from investment in abatement. Given the overall logic
of a trading scheme, it is wrong for auction revenue to accrue
to the member states as a form of tax, as this prevents the use
of the revenue to fund abatement.
16. AOA believes that taken together, the cost to
aviation of Air Passenger Duty and Emissions Trading should be
equal to the environmental external cost of aviation. As the "take"
from ETS increases, then the level at which APD is set should
be reduced. Passengers should not fly once, but be taxed twice.[5]
THE EU EMISSIONS
TRADING SCHEME
What are the effects of the expansion of the EU
ETS to encompass aviation?
17. In September 2008 DfT published its
Emissions Cost Assessment (ECA). Based on a carbon cost per tonne
of £25.50 (Government Shadow Price of Carbon: equates to
£93.33 per tonne of CO2) and aviation emissions of 10.2 million
tonnes of carbon in 2005 (including a multiplier of 1.9 to cover
non-CO2 externalities such as noise and NOx emissions), the total
external cost of aviation can be calculated as £1.8 billion.
This compares with a tax take from Air Passenger Duty of £2
billion in 2007.
18. From 2012 aviation will be included within
the EU Emissions trading Scheme- a market mechanism which allows
sectors of the industry to trade for permits to emit carbon, and
in so doing, fund carbon abatement projects elsewhere in the economy.
Redistribution through an emissions "cap and trade"
scheme offers the opportunity for net carbon emission reductions
across an economy, whilst allowing industries where abatement
opportunities are expensive or technologically challenging to
continue to grow, by funding abatement elsewhere in the economy.
19. The EU have recently completed legislation
to incorporate aviation in the EU ETS from 2012. This sets the
following conditions:
— All departing and arriving flights are
included.
— The cap in 2012 is set at 97% of average
emission in 2004-06, falling to 95% from 2013.
— 15% of allowances will be auctioned from
2012.
— Auction level and the cap will be reviewed
again in 2014.
20. In UK terms, auction revenues from EU
ETS from aviation will raise £98.7 million in 2012. The total
UK ETS cost will be £352.6 million per year. Auction revenues
would rise to £495.6 million by 2020 (assuming a carbon cost
of £20.83 per tonne of CO2 and 100% auctioning), and the
total cost of ETS to UK carriers will be £1.1 billion. This
represents a real incentive to minimise emissions, whilst keeping
the cost of mitigation to a level where aviation will continue
to be able to deliver economic and social benefits (AOA 2008).
What are your views on the allocation or auctioning
of EU ETS credits, and the use of auctioning revenues?
21. The UK Government announced changes
to Air Passenger Duty in its Pre Budget Report of November 2008.
HM Treasury argues that the tax will allow aviation to cover its
fair share of the public finances, as well as helping aviation
to meet its environmental costs.
22. In September 2008 DfT published its Emissions
Cost Assessment (ECA). Based on a carbon cost per tonne of £25.50
(based on DfT's estimates) and aviation emissions of 10.2 million
tonnes in 2005 (including a multiplier of 1.9 to cover non-CO2
externalities such as noise and NOx emissions), the total external
cost of aviation can be calculated as £1.8 billion. This
compares with a tax take from Air Passenger Duty of £2 billion
in 2007.
23. In 2009 APD will raise around £2.5
billion. There will be a further increase in 2010, raising the
"environmental tax" take to £2.9 billion.
24. Diverting EU ETS auction revenues into
the Exchequer without any form of hypothecation, whilst playing
a role in allowing a sector to internalise its external costs,
is ineffective as an environmental measure as it diverts money
away from investment in abatement opportunities.
25. Given the overall logic of a trading
scheme, it is wrong for auction revenue to accrue to the member
states as a form of tax, as this prevents the use of the revenue
to fund abatement. Only the UK and Germany plan to use EU ETS
revenues in this way.
DEVELOPMENT OF
A GLOBAL
CARBON MARKET
How do you view the progress of cap and trade
schemes in other countries (notably, the United States), and the
prospects for, and practicalities of, linking between them?
26. Aviation is an international sector,
and whilst it represents only 2% of GHG emissions globally, it
is a growing sector. As argued above, the logic behind a cap and
trade solution to limiting the climate change impacts of human
activity is especially strong for aviation, given the technological
barriers to abatement in the near term.
27. Given the international nature of aviation,
international solutions are key. AOA strongly believes that the
Copenhagen negotiations this year should include agreement on
an international approach to mitigating emissions from aviation.
What are your views on the robustness and effectiveness
of "offset" schemes (ie those without a cap), such as
the Clean Development Mechanism (CDM), and the issues around linking
them to cap and trade schemes?
28. Under the ETS, emitters are able to use the
Clean Development Mechanism (CDM) to achieve abatement. CDM is
an arrangement under the Kyoto Protocol allowing industrialised
countries with a greenhouse gas reduction commitment (called Annex
1 countries) to invest in projects that reduce emissions in developing
countries as an alternative to more expensive emission reductions
in their own countries. A crucial feature of an approved CDM carbon
project is that it has established that the planned reductions
would not occur without the additional incentive provided by emission
reductions credits, a concept known as "additionality".
29. The CDM allows net global greenhouse gas
emissions to be reduced at a much lower global cost by financing
emissions reduction projects in developing countries where costs
are lower than in industrialized countries. The CDM mechanism
is potentially open to abuse in some circumstances, where it is
used to fund projects of "virtual" rather than "real"
climate benefit.
30. AOA believes that the Post Kyoto discussions,
culminating in the Copenhagen conference (December 2009) should
review the Kyoto CDM mechanism in order to ensure that money used
for abatement under ETS funds real carbon reductions, rather than
"virtual" projects with little real benefit. Indeed
an effective global solution would eliminate the need for CDM.
UK CARBON BUDGETS
31. AOA welcomes the Climate Change Act
2008 for the emphasis it places on climate change, and the leadership
the UK Government is showing. Aviation is, however, ultimately
an international industry. Multilateral solutions such as EU ETS
are the most appropriate way to deal with aviation's climate change
impact. We strongly support aviation's inclusion in a post Kyoto
deal at Copenhagen in December 2009.
3 March 2009
4 Sustainable Aviation, CO2 Roadmap (December
2008) http://www.sustainableaviation.co.uk/images/stories/key%20documents/sa%20road%20map%20final%20dec%2008.pdf Back
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Appendix 3: AOA Position on Environmental Taxation. Back
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