Memorandum submitted by BAA plc
1. INTRODUCTION
1.1 BAA is the world's leading airports
operator. In the UK, BAA owns, develops and operates seven airports:
Heathrow, Gatwick, Stansted, Southampton, Edinburgh, Glasgow and
Aberdeen. Overseas we either manage contracts at, or have interests
in, airports in the USA, Australia and Italy.
1.2 This submission focuses on the areas
of the Committee's interest where BAA's expertise can add most
value, particularly the incorporation of aviation into emissions
trading at a European and global level and the objectives that
the UK should pursue in its EU and G8 Presidencies to help deliver
that goal.
2. SUMMARY
2.1 In keeping with the emphasis placed
by a sustainable development framework on policy integration,
the debate on aviation needs to recognise both the realities of
environmental limits and aviation's socio-economic benefits.
2.2 At a European level, BAA has two main
interests in climate policy: we are a major energy user and a
major player in the aviation industry. We are committed to making
a significant contribution to reducing greenhouse gas emissions
arising from energy use at our seven UK airports, by reducing
our total CO2 emissions by 15% over 1990 levels by 2010.
2.3 BAA has played a leading role in the
debate over aviation's climate impacts and supports the UK Government's
leadership position on climate change. BAA recognises the importance
of effective international action to address this issue. We support
the delivery of targets adopted by Governments within the framework
of the Kyoto Protocol, and favour the mainstreaming of all aviation
within EU public policy on climate change, noting that at present
only climate change emissions by airports and domestic air transport
are included within the Kyoto targets; international air transport
emissions are not currently included.
2.4 Industrial climate change impacts are
most effectively dealt with by harnessing market mechanisms and
corporate self-interest, where possible, since these are powerful
drivers and are likely to produce faster, better results than
blunt regulation. BAA rejects policy approaches for aviation which
are aimed simply at reducing demand by raising the cost of flying
through taxes and charges, the revenue from which simply flows
to Government and is not hypothecated to addressing the impacts.
The right approach, as in all industries, is to target the impacts
of the activity, rather than the activity itself. We recognise
that the consequence of a regime of smart, well-targeted instruments
for aviation may be higher costs and reduced demand.
2.5 EU-level action can provide an effective
interim policy response, as a first step towards the development
of more co-ordinated global frameworks. In particular, we believe
that partial integration of intra-EU flights with an environmentally-credible
EU Emissions Trading Scheme (where airlines can buy EU emissions
allowances from the open EU market, but not sell to that market)
is deliverable by 2008, and that full integration (where both
buying and selling are allowed) is achievable by 2013. We very
strongly support the UK Government's stated objective to make
aviation's incorporation into the EU ETS a priority for its 2005
Presidency.
2.6 In this context, we welcome the recent
statement by the ICAO General Assembly that ICAO has not ruled
out the EU pursuing action on emissions trading at a European
level prior to ICAO developing guidance on this issue at an international
level. We welcome the role played by the UK Government in negotiating
the ICAO statement and ensuring that freedom to act on climate
change was not restricted at a regional level prior to global
consensus being reached.
2.7 We also acknowledge the IPCC assessment
that aviation's total climate impact is some 2.7 times that due
to CO2 alone, due mainly to the climate-warming effects of NOx
and water vapour emissions (contrails) in the atmosphere and to
cirrus cloud enhancement effects. We are not in a position to
comment on the robustness of this assessment, noting the scientific
uncertainty relating to elements of it, particularly the extent
of the contrail and cirrus impacts. However, we accept that aviation
should address its total climate change impacts and we would welcome
greater clarity on the elements which are currently scientifically
uncertain. We also urge a smart, targeted approach to addressing
aviation's climate impacts, which may require a mix of measures,
to avoid unintended consequences of a measure adopted to tackle
one impact (CO2) leading to increases in another (NOx), where
there is a known technological trade-off.
2.8 BAA has therefore suggested that, for
the 2008-12 phase, aviation should be linked with EU emissions
trading on the basis of both aircraft CO2 and NOx emissions. Provided
airlines were prevented from selling Aviation Allowance Units
into the open EU trading market, the targeting of both CO2 and
NOx would not compromise the EU Emissions Trading Scheme's compatibility
with the Kyoto Protocol.
2.9 From 2013, BAA would also like to see
aviation's contrail and cirrus impacts directly, separately, and
fully integrated into EU emissions trading. BAA would therefore
welcome and support UK and EU leadership on the international
climate change negotiations for the 2nd commitment period ("Kyoto
2"), due to begin in 2005, to:
— Prioritise the full legal allocation
of international aviation's climate change impact to country governments.
While negotiations need to begin soon, the legal allocation could
take effect from 2013, so as not to put legal compliance with
the "Kyoto 1" budget period at risk.
— Prioritise the legal designation
of aviation's non-CO2 impacts, as a step towards enabling their
direct and separate integration within EU/international emissions
trading from 2013.
— Prioritise investment in scientific
research, including on the development of a predictive system
capable of assessing the contrail and cirrus impact of any given
flight. Such a system would be necessary to enable the smartest
possible direct and separate integration of aviation's cirrus
and contrail impact within EU/international emissions trading
from 2013.
2.10 Linking intra-EU flights with EU emissions
trading must be seen as a first step towards including all aviation
within a global system of open emissions trading addressing aviation's
total climate change impact. As such, we welcome the recent decision
by Russia to begin the process of ratifying the Kyoto Protocol.
Russian ratification will mean that Kyoto enters into force and
will add political momentum to the negotiations over the Kyoto
2 compliance period, which are due to begin in 2005. BAA also
welcomes the UK Government's declared intention to use its Presidency
of the EU and G8 to press for further international progress on
the climate change agenda. We hope that both of these developments
will lead to non-EU nations taking a more constructive, international
approach to resolving the issue of aviation's climate change impacts.
3. CONTEXT: BAA'S
APPROACH TO
SUSTAINABLE DEVELOPMENT
3.1 BAA is committed to continuing to understand
and improve its performance with respect to sustainable development.
Like many companies we work within the UK Government's policy
approach which entails meeting four objectives at the same time:
— maintenance of high and stable levels
of economic growth and employment;
— social progress which recognises
the needs of everyone;
— prudent use of natural resources;
and
— effective protection of the environment.
3.2 As identified in BAA's Sustainable Development
Policy, [2]we
also recognise that other stakeholders define the concept of sustainability
in terms of the capacity of the natural environment to accommodate
social and economic growth into the future. In this context we
believe it is important that choices about how best to control
the impacts of social and economic activity should be made with
the widest public support. We see this as a dynamic and continuous
process of change and negotiation, the objective of which is to
find solutions which provide the most benefit for society overall.
3.3 Responsible air transport and airport
growth should take place only where it is in accordance with the
sustainability objectives above. BAA further accepts that there
are certain known environmental limits, such as the earth's capacity
to handle greenhouse gases, which demand a clear and specific
response (discussed in more detail below).
3.4 However, in keeping with the emphasis
placed by a sustainable development framework on policy integration,
the debate on aviation needs to recognise both the realities of
environmental limits and aviation's socio-economic benefits. Economically,
aviation plays a crucial role in promoting the high-knowledge
and high-value-added industries, such as electronics, pharmaceuticals,
insurance, and finance. Socially, air travel is a facilitator—for
people to visit friends and family scattered around the world,
to seek new cultural experiences, to learn, to visit parts of
the world inaccessible to their parents or grandparents. Sustainable
development rightly places emphasis on improving quality of life
for all. In this context, the fact that aviation is now accessible
to most people, at least in the more prosperous countries, is
both significant and welcome.
3.5 BAA regards policy integration as fundamental,
and we therefore reject approaches to tackling aviation's environmental
impacts which are aimed simply at reducing demand by raising the
cost of flying through taxes and charges. However, we do recognise
that the consequence of a regime of smart, well-targeted instruments
may be higher costs and reduced demand. Nevertheless, we strongly
believe that each environmental impact should be targeted individually,
with the objective of reducing or mitigating its impact, using
the most effective policy instrument. That could be a planning
condition, local or national regulation, economic instruments
or voluntary action. Where the policy tool is an economic instrument,
any payment should be proportionate to the scale of the impact
and the revenue raised should be used to reduce the impacts. This
approach—of targeting the impacts rather than the activity—is
the right approach to demand management.
4. EU MEASURES
TO ADDRESS
AVIATION'S
CLIMATE IMPACT:
2005-12
4.1 In this section we focus in particular
on the incorporation of aviation within the EU ETS. We fully support
the Government's goal to incorporate aviation by 2008 and believe
that it should be a major focus of the UK's 2005 EU Presidency.
In Section 5 of our evidence we focus on EU policy post 2012,
and in Section 6 on the international framework to succeed Kyoto
and in particular on the role of international emissions trading
systems, which is a key focus of the Committee's Inquiry.
4.2 BAA has two sets of interests in EU
climate change policy. We have substantial energy interests, as
one of the UK's top 20 consumers of industrial energy, and are
also a major player within the aviation industry.
4.3 BAA supports the leading role that the
UK Government and has played on climate change position on climate
change and recognises the importance of effective international
action to address this issue. BAA notes the EU's publicly stated
long-term climate change policy objective:
"a long-term objective of a maximum global
temperature increase of 2° Celsius over pre-industrial levels.
. .In the longer term this is likely to require a global reduction
in emissions of greenhouse gases by 70% as compared to 1990, as
identified by the Intergovernmental Panel on Climate Change (IPCC)"
[3]
4.4 BAA supports the delivery of targets
adopted by Governments within the framework of the Kyoto Protocol
and we are committed to making a significant contribution to reducing
greenhouse gas emissions arising from energy use at our seven
UK airports. Our aim is to reduce absolute CO2 emissions from
energy consumption by 15% by 2010, compared to 1990 levels. This
objective is particularly challenging in the face of passenger
numbers rising substantially over the same period and represents
a step change in targets from the company's previous commitment
of a 5% reduction on 1990 levels. BAA has also registered three
sites for inclusion in the EU Emissions Trading Scheme from January
2005, and would like to register a fourth site (Terminal 5) for
entry into the scheme during 2005-06.
4.5 As a major player within the aviation
industry, we favour the mainstreaming of all aviation within EU
public policy on climate change, noting that at present only climate
change emissions by airports and domestic air transport are included
within the Kyoto targets; international air transport emissions
are not currently included.
4.6 While aviation's current climate impact
is significant (11% of the UK's total climate impact), it is nevertheless
still smaller than the climate impact arising from other sectors
of the economy, such as power generation (29% of UK's total climate
impact in 2000). However, BAA recognises that aviation's climate
impact is set to grow, and grow significantly, while a UK economy-wide
total reduces in line with the requirements of the earth's global
environmental capacity, and that, in line with the precautionary
principle, aviation must accept its responsibility to address
the climate effects of this growth. In addition, as recognised
by Governments at the Johannesburg Sustainable Development Summit,
the priority to meet key human development needs such as clean
water, food, and sanitation (in both developed and developing
countries) will rightly use up a significant proportion of the
earth's environmental capacity.
4.7 There is a powerful economic and social
case for aviation to take up some of the remaining capacity, given
the absence of short-term technological solutions within the aviation
sector, compared with the availability of solutions in other sectors
of society. Importantly, this would only be permissible by users
of aviation paying for emissions reductions (clean development)
in other economic sectors—in developed countries, in transition
economies, or in developing countries. [4]
4.8 Industrial climate change impacts are
most effectively dealt with by harnessing market mechanisms and
corporate self-interest, where possible, since these are powerful
drivers and are likely to produce faster, better results than
blunt regulation. BAA rejects policy approaches for aviation which
are aimed simply at reducing demand by raising the cost of flying
through taxes and charges, the revenue from which simply flows
to Government and is not hypothecated to addressing the impacts.
We believe the right approach, as in all industries, is to target
the impacts of the activity, rather than the activity itself.
We recognise that the consequence of a regime of smart, well-targeted
instruments for aviation may be higher costs and reduced demand.
4.9 Effectively addressing climate change
requires action at all levels—local, regional, national,
EU and international. While climate change is a global problem
and unified global action is the ideal, BAA recognises that regional
political and trade blocs such as the EU have a key role in shaping
public policy on climate change, and BAA is pleased that the EU
is engaging seriously and constructively on the issue of aviation
and climate change. In particular, EU-level action can provide
an effective interim policy response prior to the development
of more co-ordinated global frameworks.
4.10 The UK aviation industry, most notably
BAA and BA, has led the EU debate on aviation's climate change
impacts and obligations, and BAA believes that industry co-operation
should be built on by policy-makers and Governments.
4.11 EU-level action can provide an effective
interim policy response, as a first step towards the development
of more co-ordinated global frameworks. We believe that the EU
is an appropriate level for action, since unilateral action by
individual EU Member States would raise market distortion and
competitiveness issues. We believe that action on aviation at
an EU level is a priority between the launch of the ETS in January
2005 and the beginning of its second phase in 2008.
4.12 In this context, we welcome the recent
statement by the ICAO General Assembly that ICAO has not ruled
out the EU pursuing action on emissions trading at a European
level prior to ICAO developing guidance on this issue at an international
level. We welcome the role played by the UK Government in negotiating
the ICAO statement and ensuring that freedom to act on climate
change was not restricted at a regional level prior to global
consensus being reached.
4.13 Partial integration of intra-EU flights
with an environmentally-credible EU Emissions Trading Scheme (where
airlines can buy EU emissions allowances from the open EU market,
but not sell to that market) is deliverable by 2008, and that
full integration (where both buying and selling are allowed) is
achievable by 2013.
4.14 An environmentally-credible emissions
trading scheme should embrace a number of key principles, and
these should guide EU public policy on addressing aviation's climate
change impacts. These principles include deliverability, environmental
effectiveness, economic efficiency and equity.
4.15 As such, BAA very strongly supports
the UK Government's objective to try to extend the EU Emissions
Trading Scheme, by linking intra-EU flights within the scheme
by 2008, and we welcome the Government's intention to make this
a priority for the UK's EU presidency in 2005. This will help
to bring aviation within the club of climate-responsible industries.
All intra-EU flights should be linked with the EU Emissions Trading
Scheme, irrespective of the nationality of the airline (including
EU and non-EU airlines).
4.16 We also acknowledge the IPCC assessment
that aviation's total climate impact is some 2.7 times that due
to CO2 alone, due mainly to the climate-warming effects of NOx
and water vapour emissions (contrails) in the atmosphere and to
cirrus cloud enhancement effects. We are not in a position to
comment on the robustness of this assessment, noting the scientific
uncertainty relating to elements of it, particularly the extent
of the contrail and cirrus impacts. However, we accept that aviation
should address its total climate change impacts and we would welcome
greater clarity on the elements which are currently scientifically
uncertain. We also urge a smart, targeted approach to addressing
aviation's climate impacts, which may require a mix of measures,
to avoid unintended consequences of a measure adopted to tackle
one impact (CO2) leading to increases in another (NOx), where
there is a known technological trade-off.
4.17 BAA has therefore suggested that, for
the 2008-12 phase, aviation should be linked with EU emissions
trading on the basis of both aircraft CO2 and NOx emissions. Provided
airlines were prevented from selling Aviation Allowance Units
into the open EU trading market, the targeting of both CO2 and
NOx would not compromise the EU Emissions Trading Scheme's compatibility
with the Kyoto Protocol. It should be noted that this is true
even though NOx is not yet legally designated as a greenhouse
gas within the Kyoto Protocol basket.
5. EU MEASURES
TO ADDRESS
AVIATION'S
CLIMATE IMPACT
POST-2012
5.1 From 2013, BAA would also like to see
aviation's contrail and cirrus impacts directly, separately, and
fully integrated into EU emissions trading. BAA would therefore
welcome and support UK and EU leadership on the international
climate change negotiations for the 2nd commitment period ("Kyoto
2"), due to begin in 2005, to:
— Prioritise the full legal allocation
of international aviation's climate change impact to country governments.
While negotiations need to begin soon, the legal allocation could
take effect from 2013, so as not to put legal compliance with
the "Kyoto 1" budget period at risk.
— Prioritise the legal designation
of aviation's non-CO2 impacts, as a step towards enabling their
direct and separate integration within EU/international emissions
trading from 2013.
— Prioritise investment in scientific
research, including on the development of a predictive system
capable of assessing the contrail and cirrus impact of any given
flight. Such a system would be necessary to enable the smartest
possible direct and separate integration of aviation's cirrus
and contrail impact within EU/international emissions trading
from 2013.
5.2 BAA understands that the balance between
auctioning and free allocation of emission allowances (eg by grandfathering
against historical or future projected emissions levels) is a
key issue to Government, industry, and NGOs. BAA believes the
key issue here is one of equitable integration alongside other
business sectors within the emissions trading regime.
5.3 In this context, BAA notes that, under
the provisions of the EU Greenhouse Gas Emissions Trading Directive,
EU Member State Governments will be allowed to auction up to 5%
of emission allowances from 2005, and up to 10% of emission allowances
from 2008. The remainder will be given away free of charge, within
the framework of the National Allocation Plans. It is important
that, as far as practicable, aviation receives equitable treatment
alongside other participants in emissions trading. BAA would also
welcome discussion on the potential for other transport modes
to be incorporated into EU/international emissions trading frameworks.
5.4 Consistent with the principle of equitable
integration, aviation should be given equitable access alongside
other business sectors to emissions reduction opportunities in
transition economies and developing countries. Accordingly, BAA
would like to see aviation, as far as practicable, granted equitable
access to the Clean Development Mechanism (CDM) and Joint Implementation
(JI) flexibility mechanisms of the Kyoto Protocol. BAA notes that
the European Commission has already published a proposal for a
Directive linking the EU emissions trading regime to the CDM and
JI flexibility mechanisms, and understands that the link is expected
to increase market liquidity. [5]
5.5 All industries should meet the external
costs of their activities—but only once. Therefore, once
smart, effective policy instruments (such as the EU Emissions
Trading Scheme), which are targeted at reducing aviation's specific
impacts, enter into force and cover aviation's external costs
over time, the existing blunt instruments, such as the UK Air
Passenger Duty (APD), should be phased out, as they are currently
intended to capture some or all of aviation's external costs.
5.6 We strongly oppose alternative policy
instruments of blunt taxes and charges, where the revenue raised
flows into the public purse for general government expenditure
and is not exclusively and entirely hypothecated to purchasing
emissions reductions in other parts of the economy. Such instruments
offer limited positive environmental benefit, impact negatively
on competitiveness, and essentially act to tax away demand and
the positive benefits that aviation brings.
6. INTERNATIONAL
MEASURES TO
ADDRESS AVIATION'S
CLIMATE IMPACT
6.1 The debate is moving in the right direction
in the EU. The EU should continue to focus on the wider international
arena and that linking intra-EU flights with EU emissions trading
must be seen as a first step towards including all aviation within
a global system of open emissions trading. At an international
level, we welcome the recent decision by Russia to begin the process
of ratifying the Kyoto process. Russian ratification would mean
that Kyoto enters into force and would build political momentum
around the negotiations over Kyoto 2. Parallel pressure should
continue to be brought by EU member states on the US and other
non-EU regions across the whole climate change agenda, including
on aviation.
6.2 BAA welcomes the UK Government's declared
intention to use its Presidency of the G8 to press for further
international progress on the climate change agenda, and hopes
that this will lead to non-EU nations taking a more constructive,
international approach to resolving the issue of aviation's climate
change impacts.
6.3 BAA also recognises the valuable role
played by the International Civil Aviation Organisation (ICAO)
in facilitating the exchange of information and in the provision
of guidance, both on environmental matters and more widely. We
note that the recent ICAO General Assembly which in October 2004
agreed to continue to endorse the role of emissions trading as
part of a package of measures to address aviation's environmental
impact and to provide guidance on how an international system
might function.
6.4 We are aware that many stakeholders
emphasise the practical difficulties in delivering aviation's
integration in international emissions trading and that some even
perceive the industry's interest in emissions trading as a ploy
for postponing the day when aviation will have to deal with climate
change. In particular, aviation's special treatment under the
Kyoto Protocol is often highlighted. In this context, we note
that a range of stakeholders strongly challenge the credibility
and practical feasibility of legally allocating international
aviation emissions to ICAO.
6.5 BAA's interest is in promoting aviation's
integration in an environmentally effective, deliverable emissions
trading regime at the earliest opportunity. In this context, we
suggest, as noted in the preceding section, that international
aviation emissions should be legally allocated to existing "Kyoto
Parties" (ie country governments), as is normal procedure
for greenhouse gas emissions from other sectors of society. We
welcome the work within UNFCCC and, more specifically, SBSTA,
the UNFCCC subsidiary body on scientific and technical advice,
to consider how best to allocate international aviation emissions.
6.6 BAA's position is driven both by pragmatism
for early action and a desire to see aviation mainstreamed within
the international climate change negotiations, to improve the
likelihood of aviation receiving equitable treatment with other
business sectors. So long as aviation is positioned as receiving
special treatment, we believe the risk of UK/EU blunt taxation
is heightened.
6.7 However, if it could be robustly demonstrated
that legal allocation of international aviation emissions to ICAO
would deliver aviation's rapid participation in emissions trading
on terms that are both environmentally credible and provide for
aviation's equitable treatment with other business sectors, we
would be prepared to give further consideration to this aspect
of the aviation/climate change debate.
6.8 For wider international aviation, in
order to get broad international agreement, emissions trading
should begin with CO2 and move towards addressing total climate
change impact as quickly as possible over time. Long term, BAA
would like to see all aviation inside a global emissions trading
system covering total climate change impact.
6.9 In context of moving towards effective
global action, BAA would underline the need to engage the US in
the debate over climate change, including in relation to aviation's
climate change impact. In this context, the following suggestions
are therefore offered, not as fully formed proposals, but as ideas
to stimulate further debate:
— Payment of a proportion of APD in
the currency of emissions allowances. This would hypothecate part
of the current revenue in such a way as to guarantee climate change
benefit.
— A two-tier approach to APD—ie
a higher and lower rate—with those international flights
generating a substantially reduced contrail and cirrus impact
eligible for the lower rate.
6.10 As with intra-EU aviation, the integration
of wider international aviation within emissions trading should
be, as far as practicable, on an equitable basis with other participants
in the trading regime. This is an important point generally, and
more specifically in relation to the extent of emission allowance
auctioning and access to the Clean Development (CDM) and Joint
Implementation (JI) flexibility mechanisms.
7. CONCLUSIONS
7.1 Aviation has a small, but significant
and growing impact on climate change, and this must be addressed.
7.2 Aviation should be brought within the
mainstream of industry and climate change policy within the UK
and the EU, as quickly as practicable. The most effective way
of achieving this is for intra-EU flights to be linked with the
EU Emissions Trading Scheme from 2008.
7.3 EU policy to address aviation's climate
change impacts is a welcome and necessary first step to global
solutions, but the UK Government and the EU must vigorously pursue
this agenda internationally through the G8 and other bodies.
28 October 2004
2 BAA Sustainable Development Policy, October 2003.
See: http://www.baa.co.uk/main/corporate/sustainable_development/our_policies/sustainable_development_policy_frame.html Back
3
Article 2, the 6th EU Community Environment Action Programme,
adopted in co-decision in 2002. Back
4
The Kyoto Protocol (KP) provides for three "flexibility
mechanisms", to assist Annex B countries (those taking on
legally binding emissions reduction targets) to deliver against
their targets. These flexibility mechanisms are: Joint Implementation
(article 6 of the KP), the Clean Development Mechanism (article
12 of the KP), and Emissions Trading (article 17 of the KP). It
is recognised that the JI and CDM mechanisms will help facilitate
clean development in transition economies and developing countries. Back
5
CEC COM(2003) 403 final, 23 July 2003. Back
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