The green growth dilemma

Feb, 2007

The UK’s environmental policy is slowly emerging as one of the most progressive in the world. The country has also established itself as a leading hub for air transport. While this has brought enormous economic benefit to the nation, it is also a source of tension. Although the government fully supports enhancing the UK’s air transport capabilities, there are mounting questions over the role aviation should play in a future Britain. How these issues are resolved may well impact the entire aviation industry. Alex Derber reports.

The debate on aviation’s environmental impact will rumble on for the foreseeable future. In order to gain an understanding of its nuances and future permutations there is no better country to study than the UK. About 15 per cent of international air travel passes through Europe’s busiest hub each year, accounting for one quarter of its visible trade by value. In addition, aviation supports 200,000 British jobs directly and many more indirectly.

As a signatory to the Kyoto Protocol, Britain is committed to a cut in its carbon dioxide (CO2) emissions of 12.5 per cent below 1990 levels over the period 2008-2012. In its 2003 Energy White Paper the government adopted a longer-term goal of a 60 per cent cut in such emissions by 2050, meaning that by that date the country expects to be emitting no more than 65 million tonnes of CO2 per year.

The combination of a progressive approach to climate change and a massive, growing aviation industry is a volatile one. Adding the catalysts of a vocal press, outspoken government ministers and a voracious low-cost sector makes for an extremely lively debate — one which exemplifies better than any other the issues surrounding aviation and the environment.

Aviation and Britain’s future

Passenger traffic in the UK is rising by six per cent a year. This is putting enormous strain on the country’s airports, especially those around the capital which are now operating at the limits of capacity. Although IATA states that “the UK government is well on its way to making the London airports sufficiently unattractive for travellers to avoid using the UK as a hub altogether,” the recent Eddington Review — a major government-commissioned transport study — expressed support for increasing capacity at major airports. It put the direct economic benefits of expansion at Heathrow and Stansted at GBP24 billion. Such projects would allow 270 million more passengers per year to travel through Britain’s airports, according the 2003 White Paper ‘The Future of Air Transport’. This is from a current total of roughly 200 million.

Alongside its support for expansion, the Eddington Review states: “In line with the Stern Review, prices across all modes [of transport] should reflect the true cost to society, including congestion, overcrowding and environmental impacts — through appropriate fiscal, regulatory, pricing or trading instruments”. Using a Department for Environment, Food and Rural Affairs (DEFRA) figure of GBP70 per tonne of carbon, Eddington backed analysis estimating the environmental cost of projects at Heathrow and Stansted to be GBP3-5 billion, around GBP20 billion less than the benefits.

George Monbiot, an environmental writer described by the chairman of British Airways as “the archpriest of anti-aviation commentators”, responds that Eddington used the Stern Review “as a license to take a crudely and absurdly reductionist approach to the costs of climate change”. He continues: “It’s this narrow business/economist approach which means that anything that cannot be measured is excluded from the measurement. And yet all the most important impacts of climate change affect things that cannot be measured in financial terms.”

Perhaps the most serious impact of aviation’s growth in the UK, though, will be on the country’s ability to meet its 2050 goal of 65 million tonnes of CO2 emitted. Currently, aviation accounts for 5.5 per cent of Britain’s carbon emissions, more than twice the global average. However,  the government admits that “by 2030 CO2 emissions from UK aviation will amount to some sixteen to eighteen million tonnes of carbon, of which some 97 per cent would be from international  flights. This could amount to about a quarter of the UK’s total contribution to global warming by that date.” This figure is based on Department for Transport research which includes optimistic targets for technological and operational improvements and does not take into account the effects of radiative forcing (explained in the previous article). The most recent study, a DEFRA-commissioned report by Owen and Lee, puts 2030 aviation emissions at a minimum of 18.4 million tonnes and estimates 2050 emissions to range from 29.4 to 44.4 million tonnes - between half and two-thirds of the UK’s total carbon allowance by that time. This is also likely to be an underestimate as the study only took scheduled flights into account.

That aviation will contribute so vastly to a country’s greenhouse gas emissions — whatever the improvements in technology or air traffic management — elevates the seriousness of the debate in the UK. Moreover, it is a debate that  will soon be of concern to many other nations, especially those in Europe where environmental awareness is high but aviation is booming.

“The Government recognises that because of its blunt nature, air passenger duty is not the ideal measure for tackling the environmental impacts of aviation.”
—2003 White Paper:‘The Future of Air Transport’

However, Paul Marston, spokesman for BA, believes environmentalists are mistaken in using the UK as the cornerstone of their argument. “They are looking at it from the wrong end of the telescope, frankly,” he says. “You can’t do anything about global warming unless you do something about emissions globally and that’s something you need to focus on. There’s just no point in obsessing about individual countries or individual sectors. If you closed down UK aviation tomorrow you would reduce global CO2 emissions by 0.1 per cent.”

Critics of a UK-centric approach also counter that any cutbacks made will be compensated for by increases in other countries, incurring zero change in net emissions, but reduced economic benefit for Britain. They are correct: unilateral action cannot succeed. Nevertheless, Monbiot  observes:  “Everybody currently is pointing the finger at everybody else... there’s this perfect circle of buck-passing taking place and that is a circle which has to be broken

and the only way it can be broken is for some governments, preferably in the rich nations, to take the lead and show that they are deadly serious about cutting their carbon emissions. Then we are in a position to start negotiating with countries such as China and India.”

Measures of control

The ‘Future of Air Transport’ White Paper stated: “The Government recognises that because of its blunt nature, air passenger duty is not the ideal measure for tackling the environmental impacts of aviation.” Three years later the Government’s 2006 Pre-Budget Report announced “an increase in all rates of air passenger duty, with effect from  1 February 2007, in recognition of the environmental costs of air travel”.  The APD raise, from GBP5 to GBP10 for short- haul flights, has been roundly condemned by airlines and environmentalists. The industry feels it is purely a revenue-raising measure with no environmental benefit, while the green lobby scorns an increase it believes will be totally ineffective.

In fact, the UK’s government is pinning

most of its hopes on the EU Emissions Trading Scheme (EU ETS) which it describes as “the most efficient and cost- effective way to ensure that the sector plays its part in tackling climate change,” according to ‘The Future of Air Transport Progress Report’ published in 2006.

However, as demonstrated in the previous article, the EU Commission does not expect membership of the EU ETS to have any significant impact on airline  ticket  prices or air transport growth. The hope is that aviation, as a net buyer of emission allowances, will compensate for the growth of its own carbon footprint through subsidising deeper reductions in other sectors. The government is also backing carbon offsetting, which, again,  is discussed in the lead feature.

There is a rising call in the UK — albeit one largely ignored by the government — to impose VAT on air tickets. Dr Chris Jardine of Oxford University, a contributor to the research paper ‘Predict and Decide: Aviation, Climate Change and UK Policy’, comments: “You don’t pay VAT on public transport, but you do for a car and I think we have to have aviation considered more like cars as a form of personal transport where personal choice is involved as opposed to a form of public transport.” Considering that leisure travel now accounts for 60 per cent of all flights to  and from the UK, it is becoming increasingly difficult to tag air transport with the traditional description of ‘necessity’ that VAT exemption demands.

What the future holds

In its 2003 Aviation White Paper the government explains that a “reduction in greenhouse gas emissions across the economy does not, however, mean that every sector is expected to follow the same path”. In practice this is an acknowledgement that aviation is the only sector with no plans to reduce its emissions in absolute terms.

Considering that the UK is committed primarily to the EU ETS as a means of tackling aviation’s climate change impact and given that no-one expects the scheme to inhibit the growth of air transport, it follows that the government is happier to let aviation emissions grow to a quarter of the country’s total output by 2030 than impose demand-side measures.

The effects of such a policy on other industries are outside the remit of this article. Nonetheless, an overall 60 per cent reduction in CO2 emissions by 2050 is already seen by many as extremely challenging and critics argue that allowing aviation to grow unchecked will necessitate greater cuts than are practically achievable in other areas. Stabilising aviation emissions at their current level leaves them at 10 per cent of the 2050 allowance.

It follows that at some point soon Britain will have to choose between its emissions targets and aviation’s expansion. Although the Stern Review proclaimed the possibility of ‘green growth’,  it is difficult  to apply that theory credibly to an  industry expecting to increase its greenhouse gas emissions year on year for the foreseeable future.

So, if targets are to be met, measures to reduce the demand for, or availability of air transport will have to be imposed. This leaves two scenarios: either the government will one day come knocking on aviation’s door; or, when it comes to the crunch, national policy will favour  the  industry over its climate change objectives. Backing the latter instance is quite a gamble to take.

One final point should, however, be made. Such prophecies assume that all other sectors go a significant way towards achieving their reduction targets. Emission goals will be made a mockery of anyway if some of the larger  polluting  industries such as power and road transport do not make real progress. It would be unwise, though, for aviation to rely on this  outcome. Firstly, those industries have alternatives to fossil fuels. Secondly, the environment looks set to become the dominant issue of this generation. As awareness grows, the public becomes more willing to make sacrifices. What are people likely to relinquish first: their electricity, their cars or their flights?