Why Tim Yeo is wrong on aviation and the EU ETS

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The environmental case for Heathrow expansion remains as weak as ever, regardless of Yeo’s attack on the Prime Minister

29 Aug 2012  (James Murray’s blog from Business Green)

There are many reasons why Tim Yeo is wrong about the need for a third runway at Heathrow. But let us focus on just one of them, the assertion that aviation’s inclusion in the EU emissions trading scheme (ETS) means the environmental objections to expansion at Heathrow are “disappearing”.

This is manifestly untrue, as evidenced by the angry response to his plea for a third runway from green groups, but even if the European ETS was working perfectly (which it isn’t) it would do little to strengthen the case for more airport capacity.

ETS explanation:

Yeo’s argument that the inclusion of aviation in the European emissions trading scheme means “we could cover the whole of Surrey with runways and not increase emissions by a single kilogram”, makes a certain kind of sense: the emissions cap imposed by Brussels should ensure emissions do not rise regardless of new infrastructure investment. But the argument is fatally flawed on two fronts (and that is before you even look at issues such as air and noise pollution).

In practice, there are too many weaknesses in the ETS that still need to be addressed to suggest aviation’s inclusion in the scheme magically resolves the sector’s environmental problems.

As EU officials have repeatedly admitted, the carbon price is currently too low, there are too many credits in the market, and the emissions caps are too high. In addition, it is too easy to import questionable carbon credits from outside the bloc to help meet those emissions limits.

The EU ETS can work effectively and aviation’s inclusion is a step in the right direction, but until the current deadlock over the future of the scheme is resolved and the various flaws in the market are corrected it is impossible to say with any real confidence that airports can expand across whole counties without posing any threat to UK and European emissions targets.

However, the real flaw in Yeo’s argument would apply even if the ETS was working perfectly.

Aviation’s inclusion in the ETS is effectively a means of putting a carbon price on flying. As such, if the number of flights increases airlines have to buy in more emission allowances to cover their carbon footprint, driving up costs and therefore ticket prices.

The only way this cost would be manageable is if other sectors of the economy deliver such deep and rapid reductions in emissions that they are left with a glut of allowances that they would then sell to airlines at a knock-down price. But you’d be hard pressed to find a single credible expert who believes emission reductions of this pace and scale are on the horizon.

The expansion of Heathrow would allow more flights, which would result in increased carbon costs and higher ticket prices, which in turn should result in reduced demand for flights. If the ETS works as Yeo says he wants it to work then it is a mechanism for curbing demand for aviation that should inherently preclude the need for more aviation capacity.

The price of carbon determined by the ETS is expected to rise over the coming decades as emissions caps are tightened and carbon targets increased. This is why there is an increasingly compelling financial argument against the construction of new carbon-intensive infrastructure, regardless of whether that infrastructure comes in the form of coal-fired power stations or new runways. It is an argument Yeo used to adhere to.

As I have argued many times before, there is only one environmentally credible argument for airport expansion, and that is the prospect of low or even zero carbon flight. Sadly, despite billions of dollars of investment and plenty of interesting research avenues, the prospect of genuinely green aviation is decades away at best, meaning there is currently no case for airport expansion in industrialised countries that is consistent with their stated goals to reduce emissions.

Sensible businesses are already adapting to this new reality and developing green travel policies that reduce their reliance on business flights through a combination of videoconferencing, rail travel, and new working practices.

Yeo’s intervention is easy to understand given recent attacks from right-wing newspapers who have finally noticed his properly declared involvement with a number of green businesses could be seen as a conflict of interest with his chairing of the Energy and Climate Change Select Committee (for what it’s worth, it is clear the problem here lies more with our parliamentary system than it does with Yeo – if we kicked out every MP and peer with business interests that could be seen as conflicting with their parliamentary work both chambers would be virtually empty).

But Yeo must now ask himself whether he is man or mouse. His place in history is assured as the Tory MP who has arguably done more than any other to promote the concept of a greener economy, an achievement that eluded hundreds of MPs before him. But does he want to be another opportunistic and inconsistent backbencher, presiding over a dignified slide towards insignificance? Or is there somewhere inside his heart – an organ that still remains impenetrable to most Britons – a trace of the environment minister he once was, determined to protect the UK’s green credibility?

 

http://www.businessgreen.com/bg/james-blog/2201356/is-tim-yeo-a-man-or-a-mouse

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There is also a good explanation from AEF (Aviation Environment Federation) of why Tim Yeo is wrong, and how the ETS works for aviation, at http://www.aef.org.uk/?p=1404  

 

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The Carbon Briefing:

Is Tim Yeo right to claim a third runway won’t make any difference to UK emissions?

• The Carbon Brief,
• 29 Aug 2012,
• by Ros Donald

Energy and Climate Change (ECC) Committee chair Tim Yeo has argued that a third runway at London airport Heathrow will not lead to extra greenhouse gas emissions due to the aviation sector’s inclusion in the EU Emissions Trading Scheme (ETS) this year. Could he be right?

Yeo was originally against the plan to increase Heathrow Airport’s capacity because he said a new runway would lead to an increase in greenhouse gas emissions. But now, he’s changed his mind.

As he wrote in a Telegraph column this weekend, he thinks the European Union’s decision to include aircraft emissions in the overall EU emissions cap in January means that as long as other industries continue to cut their emissions, the UK can afford to increase its aviation capacity. He writes:

“Even if we covered the whole of Surrey and Berkshire in new runways it wouldn’t actually lead to a single kilogram of extra greenhouse gas emissions taking place.”

Yeo also suggests that that if the UK were to increase its airport capacity, carriers would be more likely to send their newer, more efficient planes to Heathrow.

The UK’s Institute of Directors (IoD) agrees with Yeo. In a submission to the Department of Energy and Climate Change’s consultation on new airport capacity, it says:

“[I]nclusion of aviation in the ETS does allow aviation to grow without worrying about carbon emissions, given that emissions from air transport are now part of the overall cap. The logic of the ETS is to reduce emissions where it is most cost-effective to do so, which is unlikely to be in aviation. So the inclusion of aviation in the ETS should allow a long-term growth in air transport while the UK meets its emissions targets overall.”

Aviation in the ETS

Let’s look at how the ETS now applies to airlines. The UK’s Climate Change Act doesn’t currently cover the UK’s emissions from international aviation or shipping. This means that the ETS is the only mechanism aimed at limiting UK aviation emissions.

All aircraft operators became subject to the ETS in January this year.  This means that airlines receive emissions permits from the government of the EU member state they’re based in. On the 30th of March every year, they have to report their emissions, and from 2013 they’ll have to surrender enough allowances to cover them. They can emit more than their allowance by buying permits from the market or, if they emit less than the allowance, they can sell their leftover permits.

The ETS aims to reduce emissions from aviation in the EU every year by increasing the amount of emissions permits that must be bought. This year, the ETS cap on airline emissions is set at 97 per cent of average emissions from the sector in 2004 – 2006.

Eighty-five per cent of the emissions allowance is free of charge to airlines this year, leaving airlines to bid for the remaining 15 per cent of emissions at auction – a number that’s set to increase as time goes on. Airlines will be able to buy and sell allowances across the EU. They will be able to buy credits from other industries, but they’ll only be able to sell them to other airlines.

Will the ETS be enough to limit the UK’s emissions?

But not everyone agrees that the ETS will be enough to ensure extra Heathrow capacity doesn’t push up overall UK emissions. Commenters have pointed to high emissions caps, aloophole that allows carbon offset credits from outside the EU to be traded on the scheme and legal challenges against the inclusion of aviation in the ETS scheme from non-EU countries as reasons why the scheme isn’t enough on its own to keep emissions down if the UK keeps building runways. And that’s if the ETS manages to weather the current slump in emissions prices – critics have also pointed out that the scheme could fail altogether, as it already has – twice.

The Aviation Environment Federation (AEF) produced a response to Yeo’s claims in March, pointing out that cap and trade systems need complementary legislation to keep them stable. The federation claims that if the government decides to go ahead with the runway believing the ETS will iron out emissions problems, it could face a future crunch point if the price of emissions permits goes up. It says the UK would have to either cut down on aviation demand or overstep its emissions cap. AEF claims that the latter situation is much more likely, given that the government would make itself rather unpopular if it decided to limit aviation activity by closing runways or rationing air travel.

But this argument assumes that the ETS will function according to plan in the future, with emissions prices rising as the EU tightens the emissions cap next year as part of the scheme’s third phase. ETS expert Michael Grubb wrote a piece for the BBC after the second market crash in 2009, calling on the EU to step in to ensure the carbon price stops plummeting. Since he wrote the piece, of course, no such thing has happened. The carbon price crashed a third time this July, meaning it’s currently too low to drive emissions reductions – a low carbon price means it’s cheaper to emit greenhouse gases than invest in greener alternatives.

Improving the ETS

But could the ETS be strengthened to the point where we can be confident it will constrain aviation emissions? The EU released a plan in late July to bolster the market by delaying some carbon auctions, but this is unlikely to address the problem of oversupply.

The UK Parliament’s ECC Committee produced a report in January, which outlines a variety of mechanisms that could be used to raise the carbon price again. These include allowing countries to set aside emissions allowances aside, ensuring there aren’t as many available. Another possible solution could be to further tighten the emissions cap. But opposition from Poland appears to be holding these proposals back. The country has lobbied against set-asides and recently blocked a proposal for firm emissions milestones to be set in the lead-up to 2050 targets under the ETS.

The Committee on Climate Change – which advises the government on how to cut its emissions in line with the Climate Change Act – wants the government to add its own cap on aviation emissions in addition to the ETS. It says the government should formally include aviation in its carbon budgets, which are set every five years and place legally binding ceilings on the level of permitted UK emissions.

But what if emissions trading started to expand to include other countries? Australia and the EU announced today that they would start carbon trading from 2015, potentially laying the groundwork for a global scheme. The architects of the deal say that it will create greater certainty in carbon pricing. Critics have pointed out, however, that the EU is likely to dictate the level of pricing, which seems a bit risky given that the EU’s carbon price is looking so shaky at present.

Better planes

And then there’s Yeo’s claim that airlines will send their most efficient planes to the UK if it increases its capacity. This argument doesn’t seem to have much to do with the ETS. As the scheme also applies to other European countries, there doesn’t seem to be any reason why the cap would necessarily mean airlines would send their newest planes to the UK over other EU destinations.

But it doesn’t seem to be a serious argument in favour of the third Heathrow runway, either.Justine Greening, the current transport secretary, says the new runway won’t be a full-size one so it won’t be able to “take the new planes”.

So has the ETS fixed it?

Both Yeo and the IoD seem to think that the inclusion of aviation into the ETS has solved any question of whether increased capacity at Heathrow will have a negative effect on the UK’s carbon emissions. Unfortunately, this seems like a risky bet to make.
The ETS could start to work better, and the extra aviation capacity could become much more expensive, or the ETS may just give up the ghost again and leave aviation emissions unregulated. There may be other arguments in favour of a third runway, but claiming that the ETS has removed any cause for concern about emissions seems a bit weak.

http://www.carbonbrief.org/blog/2012/08/is-tim-yeo-right-to-say-the-ets-will-allow-airport-expansion-with-no-uk-emissions-rise