S1 Air transport is the most heavily-polluting form of transport on earth, and contributes significantly to climate change.

S2 The 'hidden' costs of climate change, and of other negative impacts of the UK aviation industry, are estimated at £3.782 billion a year - 26% of the total for the whole EU. Heathrow airport's share of the hidden costs is estimated at £520m.

S3 UK aviation is further subsidised by tax breaks amounting to some £7 billion a year. Heathrow airport's share of this is estimated at almost £960 million a year.

S4 The Green Party believes that all these tax breaks should end, and that the hidden costs be paid for by the industry that causes them to be incurred. This must involve international agreements on the taxing of aviation fuel.

S5 Pending such international agreement, measures are proposed here which would:

a. Introduce emissions charges like those in force at Zurich airport, which discourage the most highly-polluting aircraft and provide airlines with the economic incentive to introduce less dirty technology as quickly as possible.

b. Allow local authorities to apply 'air traffic congestion charges' seeking to reduce demand for air transport, while in the short term raising revenue for sustainable transport and environmental improvement projects, to offset the negative social and environmental impacts of the local airport.

1.1 Heathrow airport accounts for more than 13.7% of UK civil air transport movements [ 1 ] and therefore for a similar proportion of the pollution from UK aircraft. That would translate into 137,000 tonnes of carbon from Heathrow's civil air traffic alone. [ 2 ] The ground traffic stimulated by the airport is another major contributor to climate change.

2.1 The 'external' or hidden costs of UK aviation have been estimated at £3.782 billion a year, including £2.148 billion for aviation's contribution to climate change.

[ 3 ] [ 4 ]

2.2 Heathrow's share of the hidden costs of UK aviation is estimated at almost £520 million a year, including over £294 million for its share of climate change-related costs. [ 5 ]

3.1 Aviation fuel is currently exempt from taxation because of international agreements under the Chicago Convention not to tax fuel used for international air travel. [ 6 ]

3.2 But if aviation fuel were to be taxed at the same rate as unleaded petrol, this would raise some £5 billion for the UK treasury. Moreover, if VAT zero-rating were removed from airline tickets, aircraft and aviation fuel, this would raise a further £1.8 billion. Airport landing charges raise about £1 billion a year, but are offset by other tax-breaks such as duty-free goods. Altogether, UK aviation is currently getting a £7 billion a year tax break. [ 7 ]

3.3 Heathrow's share of this tax break can be estimated at almost £960 million a year.[ 8 ]

4.1 Technology can only partly solve the problem of pollution and its adverse economic impacts. Anticipated technological developments for improved aerodynamics, materials, engine efficiencies and combustors are expected to continue to improve the normative global CO2 and NOx emissions from aviation during the next 30 years. That is, pollution per passenger kilometre will fall - but of course with more passengers flying more kilometres, pollution will still increase very significantly unless remedial action is taken.

4.2 UK government analysis concludes that future technologies will offer fuel efficiency improvements of 2% per annum until 2030, whilst NOx reduction technology is forecast to deliver an 80% reduction from today’s LTO emissions by 2030. However, taken together these new technologies cannot offset the additional environmental impact associated with forecast growth in air traffic and therefore the net or overall environmental impact from aviation is predicted to increase from today’s levels. [ 9 ]

5.1 It is the Green Party's view that airports should repay the community for the hidden costs they pass onto the community, and should certainly not be given tax breaks like the above.

5.2 Although international agreements prevent us from applying fuel charges to aviation, we can have essentially the same effect by applying emissions charges.

6. Example: aircraft emission taxes at Zurich airport [10 ]

6.1 Zurich airport has a system of applying an emissions charge in which the most highly-polluting aircraft incur the highest charges.

6.2 The total yearly revenue from Zurich airport's air emission charge is estimated at almost £2 million a year. [ 11 ]

6.3 Revenues from the charge are used to finance emissions-related projects such as air pollution monitoring stations, fixed ground power stations, measures to reduce road transport to/from the airport, and an emissions-reducing aircraft approach/departure system.

6.4 The emissions charge is added to the normal landing fee, expressed as a percentage of the latter. It's based on a number of considerations such as:

a. Clean air incentives.

b. Available technologies.

c. Existing and forecast fleet mix.

6.5 Aircraft are classified according to their emissions, with the worst polluters paying the highest charges. But the largest single class, accounting for 48% of all scheduled and charter planes, pays no emissions charge. Indeed, these 48% have had a 5% reduction in charges.

6.6 The other classes begin at a 5% charge, doubling class by class up to 40%, indicating the intended economic incentive for promoting and accelerating the introduction and use of the best available engine technology in order to stabilise airport emissions without having to set limits to operations.

6.7 But the emissions charge has NOT meant an overall increase in charges paid by airlines. At the time of introduction the overall landing fees were decreased by 5%. This means that nearly half of all landings pay 5% less overall landing fees than before, while landings of the most polluting planes costs 35% more.

6.8 Therefore while Zurich-style emissions charges encourage the less highly-polluting aircraft, and discourage the more highly polluting, they still do not reflect the external or hidden costs of aircraft pollution - the costs of pollution-related impacts (climate change, ill-health etc). Nor does this charge raise revenue beyond what landing charges raised previously.

7.1 The Green Party advocates the full internalisation of external costs - the polluter should pay for the costs of pollution. But the government will not even consider introducing aviation fuel taxes until the international community as a whole does, and this is currently expressly forbidden under the Chicago Convention. Moreover, the US government (if not the British) may be expected to strenuously oppose such taxes.

7.2 The Greens on the London Assembly believe that Heathrow's hidden costs of £520 million should be reclaimed through a combination of fuel taxes and congestion charging. As a starting point, we might aim to raise one-fifth of the total through an emissions charge - just as motorists in London will be paying both tax on fuel and a congestion charge. This would mean raising £100 million a year from Heathrow airport.

7.3 Heathrow's income for 2000 was £712 million. A £100 million a year emissions charge, passed on to the airport's customers, would be recovered (all other things being equal) by a 14% increase in its charges to customers, from airlines to retail franchises.

8.1 We recommend the following policy:

a. Zurich-style emissions charging should be introduced, on a zero-cost basis as at Zurich, in order to encourage use of the least dirty engine technology by aircraft operators.

b. In addition, congestion charging for air traffic at Heathrow should be introduced in order ultimately to help reduce air traffic. The initial target should be set at £100 million a year. This would most practicably be applied according to formulas taking into account:

(1) Number of air transport movements (ATMs).

(2) Factors mitigating the pollution level of individual ATMs, such as whether an aircraft is full or not and so causes less pollution per passenger kilometre.

1. CAA: Heathrow's civil air traffic movements (ATMs) in 2001 numbered 463,460, or 13.7% of the UK total of 3,383,294.

2. Refs: Department of Transport, telcon 3.7.02: UK aviation currently emits 1 million tonnes of CO2 per annum.

3. See Whitelegg & Fitz-Gibbon, Aviation's Economic Downside, www.greenparty.org.uk/reports.

4. According to the CAA, subsonic aviation globally currently contributes between 2-3% of the carbon dioxide emitted from all fossil-fuel combustion: http://www.caa.co.uk/dap/environment/default.asp?page=52 . However, to this must be added the global warming effects of water vapour from aircraft contrails, which may account of for 1% of warming, and the effects of nitrogen oxide (NOx) pollution which, being especially damaging when emitted at the altitude at which international aircraft fly, may equal aviation's contribution to climate change from CO2. See Aircraft and our Atmosphere: Air Transport and Global Warming, Green Party Transport Policy Group, May 1997.

5. Estimated on the basis that Heathrow accounts for 13.7% of UK air transport movements and therefore roughly that percentage of the pollution therefrom. Climate change isn't the only costly result of aviation pollution. Heathrow alone contributes about 10% of the England and Wales total of volatile organic compounds (VOC)s, which are harmful to health. Heathrow's NOx levels are predicted to rise by 110% by 2015. Ref NRDC 1996: see Whitelegg & Fitz-Gibbon, Aviation's Economic Downside, op cit, note 11.

6. It has been estimated that fuel accounts for about 10% of airline costs. Therefore even if aviation fuel were taxed at 100%, this could be expected to translate into a mere 10% increase in ticket prices: ref Department of Transport study, http://www.aviation.dft.gov.uk/atfuk2000/07.htm. This study assumes an environmental tax of 10% introduced in 2006 and increased by 10 percentage points every year for the next nine years until the tax were 100% of fuel costs in 2015. A number of simplifying assumptions were necessary:

• The fuel tax was introduced globally, in a way that did not affect the existing fuel price differentials between countries, thereby eliminating the scope for ‘leakage’ through increased tankering.
• All the increase in fuel prices was passed through to fares. In practice airlines might absorb some of the increase through lower margins, or increase business fares more than leisure fares due to the generally lower fare elasticities for business passengers.

The price elasticity of demand for air travel used in this study was -1.0, reflecting a lower elasticity for business markets and a higher elasticity for leisure markets. The effect of supply side responses such as the introduction of more fuel efficient aircraft on the contribution of fuel costs to total costs were assumed to be limited between 2006 and 2020 because of the long operational lives of aircraft.

8. All other things being equal, 13.7% of £7 billion = £959,000,000.

9. Ref http://www.aviation.dft.gov.uk/techchange/index.htm .

10. Ref www.uniqueairport.com/environment .

11. £1,976,371.08 CHF4.5m @ 0.43919.