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Air Transport White Paper Progress Report 2006

2. The global challenge of climate change

Introduction

2.1 Climate change is the biggest single issue that we face. Aviation contributes to global warming through the emission of greenhouse gases. As well as carbon dioxide these include oxides of nitrogen (NOx) and water vapour which can form condensation trails (contrails) and cirrus clouds.

2.2  The Government is committed to responding effectively to the threats and challenges that climate change poses. We must act now to mitigate the environmental impacts that it will cause and to prepare for future sustainable economic growth.

Aviation and Kyoto - the international context

2.3 Agreement of the Kyoto Protocol in 1997 was an important landmark in global efforts to tackle the overall impact of climate change. The Protocol sets out targets for a global reduction in greenhouse gases based on 1990 emission levels and describes what contribution different countries should make to this.

2.4 The Government has been a consistently strong advocate and supporter of the Kyoto agreement. The UK has led by example through its implementation of its Kyoto commitments. In 2004 (the last year for which figures are available), it is estimated that total UK greenhouse gas emissions were 15.1 per cent below 1990 levels. Emissions of carbon dioxide were about 5.6 per cent lower than in 1990[7].  The UK is currently one of only two EU member states on track to meet its Kyoto objectives on time.

2.5 However, specific Kyoto targets are based on a series of national commitments by certain countries to reduce emissions of greenhouse gases. Although domestic aviation emissions are included within these targets, international aviation emissions are not. This was because of the perceived difficulty in allocating emissions from international flights on a national basis. International aviation is not included in longer term UK domestic targets such as the goal to reduce emissions by 60 per cent by 2050.

2.6 Instead, work on the environmental impact of international civil aviation is managed through the International Civil Aviation Organisation (ICAO), a United Nations (UN) body with 189 member countries. ICAO has been in place since the birth of international civil aviation at the end of the Second World War, and its role is set out in the 1944 Chicago Convention, the international treaty that governs civil aviation. Over the years, ICAO has delivered a firm foundation for the development of the aviation industry by setting the basis for the operation of international air services, safety and technical standards, as well as facilitating work in other important areas, such as aviation security.

2.7 However, despite a number of revisions, the Chicago Convention is in many ways now very out of date. This is particularly true in relation to the environment. ICAO has been considering since 1998 how best to respond to the issue of aviation emissions. While some constructive action has been agreed, overall progress has been too slow. Although the last ICAO Assembly in 2004 agreed a resolution on environmental policy, many countries still see aviation only as a very minor part of the global problem of climate change and are concerned about the potential impact on the industry of measures such as emissions trading. The Convention itself also stands as a barrier to action. While we have obtained formal recognition for our view that provisions such as fuel tax exemptions are anomalous, it has not yet been possible to reach consensus within ICAO with regard to specific economic instruments. We have, however, been working within ICAO's Committee on Aviation and Environment Protection to develop guidance on emissions trading schemes. If agreed, this would be published in 2007.

2.8 We will work energetically, together with our European and international partners, to press for the modernisation of the Chicago Convention and ICAO. The ICAO Assembly in 2007 should be the starting point for meaningful work to equip international civil aviation with a structure and legal framework that effectively maintains ICAO's good work on safety, security and technical co-operation while taking account of the economic and environmental realities of today's world.

Building an effective approach at EU level

2.9 In the meantime, progress has already been made within the EU on establishing a clear policy for tackling the climate change impacts of aviation in line with The Future of Air Transport White Paper. There is now a stronger consensus among EU countries on the need for action.

2.10 The Government continues to believe that this can best be done by emissions trading. This mechanism - which already operates across the EU in other sectors - should be extended to the aviation sector at the earliest possible opportunity. Inclusion of aviation in the emissions trading scheme is the most efficient and cost-effective way to ensure that the sector plays its part in tackling climate change. This approach was endorsed by Sir Nicholas Stern's recent report on the economics of climate change, which strongly supports carbon pricing to ensure that economic decisions fully reflect social and environmental costs.

2.11 Since The Future of Air Transport White Paper we have made significant progress in arguing for the inclusion of aviation in the EU emissions trading scheme. With our encouragement the European Commission supported a study which was completed in 2005.[8]  During our Presidency of the European Union in the second half of 2005, the UK secured the agreement of our European partners that the Commission should be invited to draw up a draft Directive. Since then, the Government has continued to work with the European Commission to develop detailed proposals for bringing aviation within the existing EU emissions trading scheme. We expect these proposals very soon, and call on the German and Portuguese Presidencies to make agreement of the necessary legislation a high priority during 2007. Our approach to these negotiations will be to ensure that the full climate impact of aviation is addressed.

2.12 The focus on an EU emissions trading scheme does not preclude consideration of additional economic instruments to ensure that aviation plays its part in meeting the challenge of climate change. The 2006 Pre-Budget Report announced a doubling of the rates of air passenger duty with effect from 1 February 2007.

Emissions trading

In his recent report, [9]Sir Nicholas Stern sets out his strong belief that market mechanisms are the most effective way of reducing carbon emissions. He identifies carbon pricing and the removal of barriers to behavioural change as key issues in this.

The Government's preferred way of introducing these incentives in relation to carbon emissions from aviation is through a well-designed emissions trading scheme. For an international industry, an international trading scheme is the best solution and we are therefore pursuing this in ICAO. But until a truly global solution can be found, the existing EU Emissions Trading Scheme (the largest carbon trading market in the world), represents the best multilateral option available. This is why we are focusing on including aviation within it as soon as possible.

The purpose of emissions trading is to create a market for reductions in carbon so that those companies who innovate to reduce emissions more quickly than expected can benefit, and those who find it more difficult can contribute to reducing emissions by funding reductions made elsewhere.

The market trades in a fixed number of carbon allowances, which is equivalent to the amount of carbon that can be emitted overall. Each company is allocated a certain number of allowances. Those companies who can reduce their emissions below their allocation can sell their unused allowances for a profit. Those that want, or need, to increase their emissions have to buy allowances to allow them to do so.

In this way, a carbon trading scheme introduces incentives similar to a carbon tax. It introduces a direct cost, proportionate to the amount of carbon emitted. But a trading scheme also encourages further efficiencies and incentivises good behaviours by the companies within it (i.e. the 'tax' is only paid by those who do not change behaviour):

• A trading scheme delivers a market price of carbon, which can be tied to the specific environmental outcome that the market is created to deliver.
• This then encourages companies to develop their own strategies for managing their carbon emissions, by providing a monetary incentive for them to do so.
• And by including different sectors of industry in one system, it encourages efficient behaviours and establishes a cost of carbon that reflects true demand across the whole economy. This contrasts with the alternative of industry-specific carbon targets which can constrain growth and be arbitrary and inflexible.
• It also establishes a direct link between the cost of carbon abatement and the price companies pay for permits.

Emissions trading or alternative market-based mechanisms provide cost-effective ways of reducing carbon emissions while responding to the strong demand for air travel.

National work to reduce the impact of aviation on the climate

2.13 In parallel with our work internationally, we have made good progress since 2003 on taking national measures to address the problem:

• creating a clearer national policy framework;
• supporting work by industry to reduce emissions, and helping improve the research base for this; and
• taking a lead in offsetting the impacts of aviation emissions from air travel by central Government.

Creating a clearer policy framework

2.14 In 2006, the Government published its revised Climate Change Programme,[10] which outlined the progress made to date in achieving our Kyoto and medium-term domestic goals. This set out the important role that Government, industry and individuals have to play in order to lessen the UK's environmental impacts. The Energy Review built upon this work and considered how we can achieve our longer-term climate change goals whilst protecting the security of our energy supplies.

2.15 The 2006 Queen's Speech underlined the Government's determination to address climate change by committing to undertake legislation, including measures to create an independent Carbon Committee in this session of Parliament. We will consult on the details of this legislation in 2007.

2.16 The Government has already strengthened inter-departmental co-operation on climate change issues though the establishment of an Office of Climate Change (OCC). The OCC is intended to support Ministers as they decide future UK strategy and policy on domestic and international climate change. For example, this will be done by consolidating existing analysis to develop a cross-government consensus on current progress and outstanding issues. The OCC will also promote understanding of climate change across government and support departments in considering how their policies respond to climate change challenges.

Supporting work by industry

2.17 Effective policy development and environmental action by Government and the aviation sector rely on sound research, evidence and knowledge transfer. A key area of baseline work is to improve our scientific understanding of the climate change impact of aviation.

2.18 The UK hosted, with Government support, a major academic conference in Oxford in June 2006 on Transport, Atmosphere and Climate Change. This provided a platform for an international information exchange on the current status of our knowledge of the impact of transport on the composition of the atmosphere and the climate. The UK also supports the EU-led QUANTIFY project. This is a five-year project starting in 2006 to improve assessment of the environmental impact of polluting emissions from global transport systems, including aviation.

2.19 To strengthen the academic contribution to action, the Government has committed £5m through the Higher Education Funding Council to a new knowledge transfer network called OMEGA (Opportunities for Meeting the Environmental challenge of Growth in Aviation). OMEGA will define specific areas where further work is needed, facilitate inter-disciplinary research and support strategic longer-term thinking. The Government intends that this initiative will improve our evidence base on aviation science, technology, operations and economic issues in ways that will help deliver sustainability.

2.20 The Government welcomed the aviation industry's Sustainable Aviation initiative, launched in June 2005, as a mark of greater commitment to address aviation's environmental impacts. A key early achievement has been to lodge sustainability firmly at the forefront of the sector's strategic planning. All players in the industry, from manufacturers to airport operators and airlines, have a key role to play in tackling climate change.

How industry is delivering:

• adopting a target to improve fuel efficiency by 50 per cent per seat kilometre in new aircraft in 2020 compared to 2000;
• ensuring common reporting of CO2 emissions and fleet fuel efficiency to improve transparency of industry performance;
• continuing to improve the fuel efficiency of operations, for example by ensuring aircraft are well maintained and operate efficiently, encouraging aircraft to taxi using only single engines where possible and to take off without engines operating at full thrust; and
• promoting the Continuous Descent Approach, by which aircraft descend steadily under minimum power to landing, which, combined with low-power, low-drag techniques, can save about 1 per cent of total fuel (and CO2) per aircraft. Already over 80 per cent of aircraft movements at Heathrow do so.

Energy efficiency and use of renewable sources at airports

2.21 A number of airports have also set themselves targets for energy efficiency and use of renewable sources. We welcome these activities and encourage all airports to take similar action to tackle their local as well as global environmental impacts.

Energy Efficiency - Examples of Best Practice at Airports

• BAA airports - BAA is one of the UK's top 20 industrial consumers of energy and already participates in the EU Emissions Trading Scheme. It has a group objective to achieve a 15 per cent reduction in absolute CO2 emissions from fixed sources by 2010 compared to 1990.
• Manchester Airport - has set a target to reduce CO2 emissions from its energy plant by 10 per cent. In addition, the airport has a target that, by 2010, 25 per cent of its energy supply will be from renewable sources.
• East Midlands Airport - has set a target to make its operations carbon neutral by 2012. Last year the airport generated 10 per cent of its electricity from renewable sources. The airport also plans to use biomass fuels to heat its extended passenger terminal.
• Bristol International Airport - has converted its airport fleet to biodiesel.
• Luton - the proposed new south terminal building will be designed for maximum energy efficiency. The airport intends to use solar panels and generate electricity, heat and possibly cooled air from airport waste.

Taking a lead in offsetting existing climate change emissions

2.22 As well as Government taking action, individual citizens can help to mitigate the climate change impact of their activities - whether this is from air travel, domestic energy use or other areas of their life - by using an offsetting scheme. This involves making a financial contribution to schemes that reduce CO2 production elsewhere by an amount equivalent to the CO2 generated by that individual. There are companies who specialise in offering offsetting services to individuals and companies. Typically the cost of carbon-only offsetting for a short-haul return flight has recently been around £5, for a transatlantic return flight £10, and for a return flight to Australia around £30.[11]

2.23 From April 2006, emissions attributable to central government official and ministerial air travel have been captured by an offsetting scheme. The Government Carbon Offsetting Fund is expected to offset up to 100,000 tonnes of CO2 per year, at a cost of around £1 million. The fund will purchase Certified Emissions Reductions generated by small-scale renewable energy and energy efficiency projects that reduce carbon emissions in developing countries. More and more British businesses are now taking a similar approach, in order to take responsibility for the impact of their air travel on the environment.

2.24 We welcome the steps some airlines and travel agents have taken to offer customers the opportunity to offset emissions from air travel. The Office of Climate Change, in its governmental co-ordinating role, has been working with airlines to encourage the promotion of offsetting schemes for airline passengers. This is linked to the development of a proposed Government standard for carbon offsetting supported by a voluntary code of best practice. Consultation on this standard is expected to be launched in due course.

Predicting and pricing emissions

2.25 Our policy approach to aviation and climate change is described above. This is based on our understanding of the nature of the challenge facing us.

Aircraft emissions

The Future of Air Transport White Paper acknowledged that aviation emissions arising from the combustion of kerosene include:

• carbon dioxide;
• water vapour (which leads to the formation of contrails and cirrus cloud at altitude);
• nitric oxide and nitrogen dioxide (or NOx, which forms ozone, a greenhouse gas, at altitude);
• particulates (soot and sulphate particles);
• other compounds including sulphur oxides, carbon monoxide, hydrocarbons and radicals such as hydroxyl.

Understanding of the impacts of carbon emissions is relatively good. For other emissions there are greater uncertainties, although the impacts of NOx emissions are better understood than other non-CO2 emissions. Further research is ongoing - for example through the EU QUANTIFY project - to understand better the effects of these other emissions at altitude. These 'radiative forcing' impacts were estimated by the Inter-Governmental Panel on Climate Change (IPCC) in 1999 to be 2-4 times greater than that from carbon dioxide alone (excluding cirrus cloud enhancement). More recently the total radiative impacts were estimated, by the EC TRADEOFF project,  to be approximately twice those of CO2, once again excluding cirrus. Separately, the upper limits of cirrus impacts have recently been estimated to be potentially twice those estimated by the IPCC in 1999.

In taking forward our approach to ensure that aviation reflects its external costs, we seek to take account of the full range of climate effects.

2.26 Chapter 4 of this report sets out in detail our revised forecasts for the future growth of aviation.

2.27 We have provided information to the Environmental Audit Committee (EAC)  on the relationship between domestic aviation emissions and the UK's goal of a 60 per cent reduction in emissions by 2050. In line with the goal, UK carbon emissions would reduce from 152.2 million tonnes in 2000 to 65.8 million tonnes in 2050. Within that total, domestic aviation emissions rise from 0.8 to 1.6 million. This means that in 2050 domestic aviation would represent 2.4 per cent of UK carbon emissions.

2.28 As explained earlier, international aviation is not included in the UK's domestic targets. However, we track emissions from international aviation as well, and have reported on this also to the EAC. There is no agreement on how to score individual countries' share of international aviation emissions. But, as an illustration of one methodology, we project total 2050 aviation carbon emissions of 17.4 million tonnes for all departing flights. This estimate excludes the radiative forcing consequences described above, in the box on aircraft emissions.

2.29 This is why we are pressing for the modernisation of the Chicago Convention and are leading the way on the inclusion of aviation in the European emissions trading scheme. This would mean that the aviation sector would be paying for reductions elsewhere in the economy if its emissions continue to grow, to secure an economy-wide reduction. It would also strengthen incentives for the sector to play its part in reducing emissions, to the extent that this is the most cost-effective way to reduce overall emissions. As discussed earlier in this chapter, emissions trading schemes help reduce overall emissions in the way that imposes the lowest cost on the overall economy.

2.30 As in the 2003 White Paper, the passenger forecasts in this progress report assume that after 2010 aviation passengers will face an additional cost linked to their climate change emissions. Sir Rod Eddington's Transport Study[14] makes clear that, while global connectivity underpins international trade, and infrastructure development needs to keep pace with globalisation, he agrees with the Stern Review that economic development must go hand in hand with meeting the global challenge of climate change. Hence, in line with Eddington's recommendation, we have tested the sensitivity of our forecasts to the Department for the Environment, Food and Rural Affairs (Defra) range of carbon costs. Chapter 4 provides more information on the carbon cost assumptions and forecast results.

A new emissions cost assessment

2.31 The Future of Air Transport White Paper set out the Government's support for the sustainable development of aviation capacity in a way that meets both environmental and economic goals.

2.32 This progress report shows how we are already taking action to ensure that the aviation sector meets its external climate change costs. The Government has consistently pressed for inclusion of aviation in the multilateral EU emissions trading scheme as the most efficient and cost-effective way to ensure that the sector contributes to tackling climate change. We will continue to do so, but recognise that other economic instruments also have a part to play.

2.33 We are also clear that major decisions on increases in airport capacity need to take account of not only their local environmental effects, but also the wider context of aviation's climate impact.

2.34 In accordance with a key conclusion of both the Stern Review and Eddington Study, the Government therefore proposes to introduce a new emissions cost assessment to inform its decisions on major increases in aviation capacity. This assessment would consider whether the aviation sector is meeting its external climate change costs.

2.35 We will consult on the development of this emissions cost assessment in the first half of 2007. We will also draw on the recommendations of the Eddington Study, in particular the cost-benefit analysis revisions to further enhance our consideration of climate change costs alongside economic benefits when appraising new airport capacity. We shall also consider how an emissions cost assessment could be applied in the shorter term.

2.36 This approach will reinforce the need to make progress at international and national levels for the aviation sector to meet fully its external climate change costs in areas of operations, technology and economic instruments. The benefits of further gains in fuel efficiency and the use of carbon by the aviation industry will help us to meet our environmental obligations.

Next steps

2.37 In summary, we anticipate work being taken forward in the following areas over coming years:

We will continue to work towards:

• international agreement on a way to bring international aviation emissions within the wider post-2012 framework, following up the Kyoto Protocol;
• the removal of barriers preventing the emergence of international aviation emissions trading schemes, including the modernisation of ICAO and the Chicago Convention;
• inclusion of aviation within the European Emissions Trading Scheme as soon as is practicable. We want to see a scheme that applies to all flights departing from any airport in the EU;
• building on the progress made to date in promoting offsetting to airline passengers;
• introducing an emissions cost assessment to inform future decisions on major increases in airport capacity;
• publishing revised emissions forecasts in 2007.

In addition:

• we would recommend that all airports follow the example of Manchester and Luton airports and plan to become carbon neutral;
• we invite airport operators to publish an environmental statement alongside their master plans, setting targets for recycling, reducing carbon emissions and improving the energy efficiency of their business operations, with the aim of achieving carbon neutrality as quickly as possible;
• we ask industry to report annually on the progress it has made on reaching the targets in its Sustainable Aviation Strategy.

[7] UK emissions of greenhouse gases, 1990-2004 (final figures), www.defra.gov.uk
[8] Giving Wings to Emissions Trading, CE Delft, July 2005
[9] Stern Review on the Economics of Climate Change, published 30 October 2006, www.hm-treasury.gov.uk
[10] Climate Change: The UK Programme 2006, published March 2006, www.defra.gov.uk
[11] Average charge of a representative sample of offsetting providers (CO2 Balance, Carbon Neutral, Carbon Clear, Climate Care)
[12] The EC TRADEOFF project (Aircraft emissions: contributions of various climate compounds to changes in composition and radiative forcing - tradeoff to regulate atmospheric impacts) involved ten European scientific organisations, including Manchester Metropolitan University. The project completed in 2003 (Sausen et al, 2005).
[13] Figures previously provided to the House of Commons Environmental Audit Committee, are published in the document Aviation: Sustainability and the Government Response (HC623) issued on 7 June 2004
[14] The Eddington Transport Study, The case for action: Sir Rod Eddington's advice to Government, December 2006, www.dft.gov.uk or www.hm-treasury.gov.uk

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