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Aviation: Emissions Trading Scheme (EUC Report)

Volume 690: debated on Thursday 8 March 2007

rose to move, That this House takes note of the Report of the European Union Select Committee on Including the Aviation Sector in the European Union Emissions Trading Scheme. 21st Report, Session 2005–06, HL Paper 107.

The noble Lord said: My Lords, before I start my principal remarks, perhaps I may first extend the apologies of the current chairman of Sub-Committee B, the noble Lord, Lord Freeman, who is unable to be here this afternoon. He conveys his deep apologies to the House. This is an unexpected speech because I previously thanked everyone on Sub-Committee B when I spoke in a debate after standing down as chair. I repeat those thanks in relation to this inquiry. Sub-Committee B has again, as always, worked assiduously, with, again as always, the help of the Clerk.

For the purpose of today's debate, I will assume that there is broad agreement, at least in Europe, that climate change is a cause of concern; that manmade greenhouse gas emissions are a causal factor in climate change; and that there should be a major effort to reduce manmade emissions. Not everyone around the world agrees with those assertions, of course, but they provide the context for the European Union Emissions Trading Scheme and for the ongoing debate on whether to include aviation within it.

That was the starting point of Sub-Committee B of the European Union Committee. The Kyoto Protocol to the United Nations Framework Convention on Climate Change, negotiated in December 1998 and entering into force in March 2005, does not include international aviation emissions. It was recognised that aviation is an international, global industry, and the hope was that measures to tackle aviation emissions could be developed through the International Civil Aviation Organisation—the ICAO—itself a United Nations agency.

The European Union's second environmental action programme, in January 2001, called for action to reduce aviation emissions. Little progress was made in the ICAO, although it will again discuss the matter—fully and seriously, I hope—later this year. The United Kingdom Government had already committed themselves in the December 2003 White Paper on air transport to support the inclusion of aviation within the EU's ETS. The White Paper of July 2004 reiterated that position. The European Commission instigated a study of the issues in 2004, which led to a Commission communication on 27 September 2005 entitled, Reducing the Climate Change Impact of Aviation. It was in response to that that your Lordships’ committee conducted its inquiry. We took oral evidence in October 2005 and published our report in February last year. We received the government response on 11 May.

Matters have moved on since then and I intend to devote many of my remarks to the context as it is now rather than as it was a year and a half ago. The European Council of April 2006 confirmed its view that including aviation in the Emissions Trading Scheme seems the best way forward. The European Parliament took a similar position in July last year. The outcome was the Commission publishing its proposed legislation on 20 December last year—a draft directive to amend the original directive setting up the European Emissions Trading Scheme. It would amend it to include aviation in two stages: on 1 January 2011 to include all internal European flights—perhaps in the European Economic Area—and, from 1 January 2012, all flights into and out of and within the European Union. Monitoring and reporting is to start in 2010—I assume to get the airlines, the aviation industry and the regulatory authorities up to scratch.

The Government issued their Explanatory Memorandum on the Commission's draft directive on 26 January this year. In my remarks today, I will explain some of the issues on which we agree with the Government and the Commission and some of those on which there will be disagreement now, as there was when we considered our report.

Let me first put the matter of aviation emissions in a broader context. Aviation services are both the cause and a consequence of rising global living standards. By their nature, they are international. Global air passenger travel was projected to increase by 5 per cent per annum from 1990 to 2012. Improved aviation fuel efficiency led to projections of about 3 per cent per annum growth in aviation fuel use. Carbon emissions from aviation are closely related to aviation fuel use. All forecasters expect rising demand for aviation services to continue, and to outstrip further improvements in fuel efficiency.

As we reported last year, aviation emissions currently account for some 3 to 4 per cent of the European Union’s carbon emissions. Aviation emissions involving the European Union are now increasing by about 4 per cent per annum—a rate that is expected to reduce slightly to around 3.2 per cent per annum between 2015 and 2020. This growth reflects the fact that the demand for aviation services for both passenger and freight movement is growing as prosperity and globalisation increase. In the wider environmental context, however, European Union policy, supported by the United Kingdom, is for total carbon emissions to reduce substantially by 2050. The committee concluded that, although aviation emissions are not currently a problem, they will be a more significant problem by 2020, and very significant by 2050. If aviation emissions continue to grow by 3 per cent a year for 40 years, they will triple. If the growth is 4 per cent a year, they will increase by 450 per cent. If that happens while overall emissions are being reduced significantly, it is clear that what is a relatively modest contribution of 3 to 4 per cent now will be very much more in the years ahead.

There is no case for demonising aviation and aviation emissions; they are not a current threat to tackling climate change. However, if total carbon emissions are to be reduced by 2020 and drastically reduced by 2050, aviation emissions will, as I say, be more significant and will grow while other sources are reduced. The case for placing aviation in the Emissions Trading Scheme at an early stage is that it is easier to include it before its size poses a problem compared with other sources of carbon. However, the question of how precisely aviation is incorporated into the Emissions Trading Scheme gives rise to other questions. Get the detail wrong and there could be difficulties ahead.

On the detail, the committee, the Government and the Commission agree that aviation emissions are a global issue, and that continued efforts in the ICAO and elsewhere should be made to include international aviation in a post-2012 climate change regime. They also agree that aviation should in principle be included in the European Union’s Emissions Trading Scheme, that aircraft operators and airlines should be the entities responsible for complying with the obligations of the Emissions Trading Scheme, and that the total level or cap of emissions allowances allocated to airlines should be determined at the overall European Union level, as should the distribution of the total between airlines. The airlines’ involvement in the Emissions Trading Scheme should be administered by member states, and each aircraft operator should be administered by one member state only. The impact of greenhouse emissions other that carbon dioxide arising from aviation should in due course be included in the scheme, although more study is still needed on the issue and on how to incorporate it. Finally, other measures from air traffic control and the use of air space to technological change will also be important in alleviating some of the consequences of growth in air travel and air freight.

We do, however, have concerns. First, which flights should be included in the Emissions Trading Scheme? We deal with this issue in paragraphs 103 to 129 of our report. Airline flights can be divided into those internal to the European Union, international flights taking off from the Union’s airports, and international flights landing at the Union’s airports. There are two problems. Emissions arising from international flights take place largely outside EU airspace. Can the European Union impose emissions allowances, emissions trading and potential penalties in relation to emissions that occur outside its airspace? From evidence given to the committee, there appears to be doubt whether the European Union can unilaterally impose a scheme on airlines covering international air movement, and certainly whether it can impose such a scheme on non-European Union airlines for at least international flights. The European Union can argue that it “causes” international aviation emissions, arising from half the inward and outward flights—the other half presumably being “caused” by the citizens, industry and business of the other countries responsible for the other half of the travel.

Subject to the legal doubts mentioned earlier, the committee agreed that a European Emissions Trading Scheme with aviation should include all internal and international flights departing from European Union airports. We did not agree that international flights arriving and departing from the European Union should be included. At the time of our report, the United Kingdom Government and the Commission agreed with the committee’s position. But the Commission has now proposed in the draft directive that all international flights be included, inward as well as outward bound. Your Lordships’ committee rejected that approach as neither desirable nor practical and as going well beyond dealing with carbon dioxide emissions for which the Union could reasonably take responsibility.

The Government’s Explanatory Memorandum of January 2007 on the proposed directive says that they will consider whether to support the Commission’s much wider geographical scope following further analysis. What can be the justification for including all international flights into and out of the European Union within the ETS? Is the Minister aware what legal advice was taken by the Commission before publishing its proposals? In response to our May 2006 report, the Government recognised,

“the Committee’s concerns about the legal uncertainties”,

and told us that,

“work is on-going to examine the details of the different options”.

Have the Government taken legal advice on the issues raised? If so, what work has been done on this issue since May of last year?

The second area for concern relates to the total level of allowances allocated to the aviation sector within the ETS. As I remarked previously, aviation accounts for around 3 to 4 per cent of the EU’s carbon emissions. It is a growing industry. The Commission’s latest proposals are that the total allowances to aviation should be based on the average emissions from aviation over the years 2004 to 2006 rather than the base of 1990 which is used for the other trading scheme sectors. I agree that the more recent period is more appropriate for aviation. Will the proposed aviation cap be equal to the 2004-06 average or will it be a proportion of it? Is that a base or the actual figure? Because the next ETS runs only to 2012, and aviation will only enter the scheme in 2011, will the level of the initial carbon allowances cap for aviation remain in place after 2012?

The clear expectation is that air travel will be able to continue to grow because airlines will be able to buy additional carbon allowances from other sectors, implying that other sectors will cut emissions to enable aviation to continue to grow. That must imply additional upward pressure on carbon and prices in the other sectors concerned, such as electricity generation and sectors with high energy use, because aviation is brought into the scheme. Airlines will also effectively be able to buy carbon credits by investing in carbon-reduction schemes such as the joint implementation and clean development mechanisms.

The Commission predicts that by 2020 air ticket prices will rise by an extra £1 to £3 for short-haul flights and between £5 and £27 for long-haul flights. It expects that this will reduce the growth in air travel only very modestly—from 142 per cent to 135 per cent, a reduction of just 7 per cent over nine or 10 years. That clearly implies that aviation will continue to grow and that that growth will be achieved at the consequence of costs to other sectors. How big the impact will be will depend on the overall cap for all sectors and the cap for aviation. So the thinking of the Government and the European Union about the long-term approach to aviation emissions is important not only to aviation itself but to those who buy electricity and those who use it to produce industrial and commercial products.

I turn now to the third matter, which is to address the distribution of these allowances to each airline. The proposal is that some allowances will be allocated free to airlines based on a specified benchmarking basis, while the balance will be auctioned. In the UK, we have so far not auctioned any of the carbon allowances to existing sectors. Can the Minister tell us what benchmark is proposed, and whether he is aware that the specific method chosen for calculating the benchmark criteria could have significant and unbalanced outcomes for different airlines, even among the fuel efficient? Will he look carefully at the precise benchmarking criteria proposed by the Commission and assess the fairness and desirability of what is proposed?

Some carbon allowances will be allocated free of charge. What percentage of allowances do the Government estimate will be auctioned to aviation? If auctioning of some part of the carbon emissions allowances is introduced for aviation, do the Government expect to introduce auctioning of allowances for other sectors as well; and if so, when? As allowances are to be allocated or auctioned at the European Community level, which body—the Commission or member states—will collect and retain the proceeds of the auction? What will the proceeds be used for, and who will decide that?

What is the expected timetable for consideration of the draft directive in the Council of Ministers? What is the Government’s timetable for conducting their own partial impact assessment, and in due course their full impact assessment on the draft directive? Will there be further full consultation with interested parties in the United Kingdom, and will it cover non-European Union airlines flying into and out of the United Kingdom?

Climate change and the policy responses to it are hugely important to us all. All sources of carbon and other greenhouse gas emissions will feel the consequences in the years ahead. Aviation poses particular problems because of its international nature and because air travel is so closely bound up as both a cause and an effect of global prosperity. In my view the direction of the Commission’s proposal is right. But I commend the report of your Lordships’ committee as a reminder that the detail of the policy, as well as its direction, has to be got right. I have been able to touch on just some of the issues today. I look forward with great interest to the contributions of noble Lords to this debate.

Moved, That this House takes note of the Report of the European Union Select Committee on Including the Aviation Sector in the European Union Emissions Trading Scheme. 21st Report, Session 2005-06, HL Paper 107.—(Lord Woolmer of Leeds.)

My Lords, I thank the noble Lord, Lord Woolmer of Leeds, for his introduction and I will touch only briefly on some of the points he mentioned because there are other matters which are of great concern. On Monday, in response to a Question asked by the noble Baroness, Lady McIntosh of Hudnall, noble Lords were told that emissions from aviation make a comparatively small contribution to global warming. That begs two questions. The first is that the curve is rising very steeply, as the noble Lord, Lord Woolmer, said, and the second is that we do not really know about the effect of emissions at high levels and what certain emissions other than those of carbon may do. The fact is that aircraft use is growing so quickly that action must be taken urgently. The admission of the aviation sector into the European Union Emissions Trading Scheme is a welcome initiative and I too am glad to see that the International Civil Aviation Organisation has specifically endorsed the concept of an open emissions trading scheme. It is the best way of dealing with the environmental impact of global aviation.

I want to turn to the question of how the initial allowances are created. So far as I understand it, they can only be created by a current emitter ceasing to emit, or at least reducing their emissions, so that by 2045 the EU has stabilised emissions at 450 parts per million. If they succeed in doing so, that will be very good. It is a very ambitious target. The problem is, however, that the aviation industry by itself will have reached that level of emissions. The simple arithmetic is that there will be nothing left over for anyone else, because by 2045, as I understand the report, the aviation sector will have reached a point where it alone will be making, or buying, all the carbon. That sets aside a question that my noble friend Lord Redesdale will return to, about whether there will actually be any fuel for those aeroplanes to burn and how they will manage to fly.

First, we have to reduce the trend line itself. We cannot have an aviation industry that blithely just goes on increasing, regardless of anyone else. The aviation industry and its supporting infrastructure need to think carefully about the level of emissions, both from aircraft and from the various supporting activities of airline travel. I would have liked it if the committee had looked at that, although the noble Lord, Lord Woolmer, might tell us that that is the subject of another inquiry.

My view is that we have to make a significant number of journeys by more fuel-efficient and more affordable trains as soon as we can. What plans do the Government have for developing the replacement high-speed train, which they have taken in-house? How much more energy-efficient will it be than the existing trains, which are currently being “refreshed”—that is the word that is used? Will people be able to afford to travel on the trains that we provide? I am not concerned here with businessmen on expenses; I am asking whether ordinary people will be able to afford to travel by train. It is a plain fact that it is much cheaper to travel by air than it is to travel on the railways as they are currently constituted.

What about electrification? Does the Minister share the views that were expressed elsewhere by the Minister for railways that the electrification of railways is expensive and adds to the complexity of the network? I fancy that those are words from people trying to defend their bonuses, which are based on the public performance monitor of railways, and do not take account of the fact that if you electrify a railway you will have some disruption while you are doing it. Short-term issues, like people’s bonuses, should not be taken into account.

If we look at the map of Europe between 2010 and 2020—I am not looking as far forward as the noble Lord, Lord Woolmer, did—the high-speed lines will reach Berlin, Bari on the Adriatic coast of Italy, Malaga on the Mediterranean coast of Spain, and Lisbon. Sadly, though, in Britain we will only have a high-speed line from London to the Channel Tunnel. There are no plans that I know of to develop that sort of travel here.

We need an attractive, affordable and climate-friendly alternative to reduce our dependence on the aeroplane for short-haul journeys. All I am asking—this is another subject the committee might like to consider—is whether there is a potential to develop an alternative to aviation here. I am not entering any special pleas for anybody on the railway; I am just saying that we cannot go on letting aviation use all the available carbon. Other people will want some, however efficient aviation may be.

I now turn to airports as emitters of pollution. In reading the report, which I did most carefully, I noticed that BAA announced in its evidence to the committee with some pride that it was among the 20 top consumers of energy in the country—that is not including flying; that is just the airports. There must be strong incentives for such companies to cut down the amount of energy they use because they will presumably be able to sell it in this emissions trading scheme to the airlines that use the airports. We cannot afford it. I am not necessarily qualified to say whether we should build new airports, but those that we are modernising and building should at least be more energy efficient. It should be no source of pride to boast that you are in the top 20 energy consumers. I would rather see companies boast that they were nearer the bottom.

We should also not lose sight of the fact that there are a huge number of cars, coaches and lorries that use the airports and often park there in enormous car parks on land that is very scarce and which we should use for something else. Getting to the airport by rail is difficult and expensive. If any noble Lords have used trains such as the Gatwick Express or the Heathrow Express, they will know that they have to part with a considerable amount of money each time. But many of the travellers going to the airports are going there specifically, particularly to Stansted, to catch low-cost airlines. So obviously money is an important factor in their decision.

Some people get bargain fares on the plane. However, I was amazed when reading BAA’s plans for the expansion of Stansted to see some extra provision of journeys from London, at the expense of many local commuters, but that the service offered to the north of England would be one train an hour for half the day. It stays at that level even after the airport has been expanded. BAA, which employs expensive and I assume competent economists, never takes the question of the fare into account when making judgments about how many people will access the airport by railway. That is a fundamental flaw.

I hope that there will be real moves to encourage the use of rail. We should attack the question of price because that is an important issue. We should also attack the massive expansion of car parks.

I shall turn briefly to freight. Much short distance air freight, as is well known, travels by road. We must redouble efforts to see that that freight is sent by rail. Some time ago there were proposals for a new freight terminal near London Airport at Colnbrook, but they were turned down at a planning inquiry. I was never completely certain why because any description of that site as greenfield must have been made by someone who does not know what green fields look like. If that were linked, as it could easily be, to the high speed network in Europe, an awful lot of what is taken by lorry from Heathrow could go by rail. I really believe that an emissions trading scheme including the aviation sector may work, but it will only accommodate much of the growth of civil aviation to which the noble Lord, Lord Woolmer, has drawn attention, leaving others to make huge savings. The way in which to make those savings is in the much better and more efficient use of coal, which has been argued from these Benches persistently ever since I have been here by my noble friend Lord Ezra; we can also make them in the home—again, my noble friend Lady Maddock has persistently questioned the Government on how much effort will be put into making homes more energy-efficient. They often receive warm nods from Ministers and even rather patronising replies; but those are areas in which much progress is urgently required if we are to continue flying.

My Lords, I join in thanking the noble Lord, Lord Woolmer, for introducing this very topical issue and for his able chairmanship of his inquiry. It took place over a year ago, so I must admit to being somewhat rusty on much of the evidence. The noble Lord comprehensively covered most of the committee’s major concerns, so I shall not repeat them, but I was intrigued and interested by what the noble Lord, Lord Bradshaw, had to say in his very powerful argument for incentivising rail travel over air travel.

There is no question that combating climate change is the most serious challenge for society and that aviation has a key role to play. While global aviation emissions are not currently a serious problem, it is generally accepted, as both noble Lords said, that they will become one. Some reports claim that aviation emissions account for up to 3 per cent of total EU emissions, and that proportion is expected to double by 2020. Earlier today I was reading the Stern report, which claims that worldwide aviation produces 1.6 per cent of total greenhouse gas emissions, less than one-sixth of the contribution from road transport. The report estimates that aviation emissions will reach 5 per cent by 2050 if the industry takes no mitigating action. What surprised me is that the shipping industry accounts for as much as 4 per cent of global CO2 emissions.

I certainly welcome the decision to include aviation in the EU Emissions Trading Scheme, but I am not surprised that it is unlikely to start before 2011. My hope is that there will ultimately be a global emissions trading scheme that goes beyond that of the European Union, which would embrace all the world’s airlines. Clearly, any legislative proposals will have to be well thought through and sustainable in the long term, on environmental and economic grounds. One recommendation from our report was that all government departments will need to be involved in developing the UK’s analysis of any Commission proposals on the consequences of joining the ETS. In the Government’s response to our report it was confirmed that there is close co-ordination between relevant departments on including aviation in the EU ETS. I also agree with the Government’s response to our report that a balance needs to be struck between the economic, environmental and social impacts of aviation.

The jury is out on how effective the proposals for a directive to include aviation activities in the ETS will be. A recent lead article in the Financial Times claimed that including airline emissions in the European ETS would be neither effective nor efficient. The article claimed that the environment would hardly be improved and the economy would be harmed; it claimed that the reduction in emissions would be a fraction of a per cent, even if the carbon permit price was much higher than it was today, because the resulting increase in air fares would be relatively small and travellers are not very price-sensitive. That is a debatable point. The main effect would be a subsidy to the airline industry of billions of pounds a year. The article went on to say that there were better ways in which to reduce greenhouse gas emissions. I want to elaborate on that point.

Some of the committee’s witnesses called, in their evidence, for more efficient air-traffic control systems and less circuitous air corridors. I am sure that all noble Lords have been frustrated by those numerous occasions when their flights arrive at their destination on time but are delayed queuing for landing rights.

It became apparent from the evidence of several witnesses that some airlines—I stress “some”—are doing a lot more than others in the design of their aircraft to reduce carbon emissions and to become more fuel-efficient. This point was addressed in paragraph 226 of the committee’s report, which mentioned that if the aviation industry entered the ETS, technological improvements in the industry would inevitably become even more urgent in order to reduce emissions while maintaining growth in air travel and freight. A more positive development of the clean development mechanism and joint initiative schemes should be encouraged by the EU and by the aviation industry.

The Stern report emphasised the need for multilateral, not unilateral, action on aviation. It emphasised the importance of an economy-wide approach through emissions trading and taxation rather than sectoral targets to deliver the global reductions in emissions that we all need. I mention that in the context of paragraph 241 of our report. Given the United Kingdom’s target for a 60 per cent reduction in CO2 by 2050, the consequences of continued aviation growth for other sectors are likely to be severe. Growth in aviation emissions would be possible only if emissions by other sectors were reduced beyond any contraction in emissions required to meet EU targets by 2050. The most dramatic forecast of the Tyndall Centre is that aviation services for the EU might have to stop growing by 2017.

I have no desire to discuss the economics of grandparenting permits, as I find it all a bit vague. However, I believe that the distribution of CO2 allowances should certainly be set at European rather than national level. What was apparent from the majority of our witnesses, including Defra, was that the impact on passenger air fares, and hence on demand for air travel, would be very modest. Can the Minister advise me whether private jets will be included in the EU ETS? As our report recommended, clarity is needed about present and future policy on the level of permitted carbon emissions, both in total and for the aviation industry.

While I welcome the inclusion of aviation in the EU ETS, in reality unless there is a global emissions trading scheme and all airlines are included, the environmental impact is likely to be negligible. Climate change is a global problem which requires a global solution.

My Lords, I, too, thank the noble Lord, Lord Woolmer, for introducing the committee’s report. In contributing to this debate I feel slightly impertinent, as I have no scientific credentials whatever and am not a member of the committee. However, I am greatly interested in the committee’s report on this very important issue. I took particular note—as, it appears, did the noble Lord, Lord St John,—of the evidence submitted by the Tyndall Centre for Climate Change Research. As I have done on many occasions, I declare an interest as a resident of Uttlesford, in north-west Essex, and a supporter of the campaign to stop the expansion of Stansted Airport, which is located there.

Including aviation in the ETS should be a valuable step towards addressing the effect of aviation on climate change. My right honourable friend the Secretary of State for the Environment is clearly relying on it to do the job, judging from his speech earlier this week, in which he said:

“In aviation, our policy focus must … be to bring aviation into the EUETS at the earliest opportunity. By putting air travel within a cap and trade scheme that has teeth, we will ensure that overall emissions are driven down, within the EU or more widely across the world”.

However, as noble Lords emphasised, the committee’s report shows that doing so would by no means result in an uncomplicated benefit, particularly given the likely impact on other industries if aviation is included. I reiterate the point made by the noble Lord, Lord St John of Bletso, on paragraph 241 of the committee’s report. The quotation bears repetition:

“Some of our witnesses … told us that, given the United Kingdom’s target for a 60% reduction in CO2 by 2050, the consequences of continued aviation growth for other sectors would be severe. Under some assumptions, no growth in carbon emissions by other sectors would be possible after 2017”.

My Lords, 2017 is not very far away.

The Tyndall Centre evidence was submitted in October 2005, which, given the speed with which climate change issues have charged up the agenda, feels by contrast quite a long time ago. In the interim, we have had the Stern report and more recently the latest report from the International Panel on Climate Change (IPCC). The Chancellor has introduced a new tax on air travel, and the Government have announced a Bill on climate change, which we expect shortly. However, in spite of these important developments, we are still faced with the unpalatable fact that aviation, while not yet the largest source, is currently the fastest-growing source of carbon and other emissions. If allowed to continue developing at its present rate, it will pose a serious threat to our ability to reduce carbon emissions overall. Dr Kevin Anderson of the Tyndall Centre, in his evidence to the committee, said:

“If we seriously want to address climate change, just looking at the growth rates”—

that is, growth rates in aviation emissions—

“that we have today, which over the last year have been about 10 per cent ... that is the Government’s own figures, 10 per cent for one industry in one year. If these sorts of growth rates continue ... to 2012 the emissions from the industry will have doubled by then, so the problem you get [in] 2012 is a lot more difficult if you procrastinate now. Currently, aviation industry emissions are about 7 per cent of the UK’s carbon emissions, I am talking here purely about carbon”.

We should bear in mind that carbon emissions are not the only problem. He continues:

Given that we should be reducing our emissions to meet our 60 per cent target; if the aviation industry is permitted to continue to grow at current rates … then by 2012 it will be a very substantial proportion of the UK’s carbon emissions budget”.

The conclusion that Dr Anderson and his colleagues reach, which they expressed to the committee and even more clearly in their own publications, is that the volume of air transport will have to reduce, not increase as is envisaged. In this they are of one mind with the Oxford Environmental Change Institute. Its research, published last summer, makes clear that the Government’s decision, taken in 2002—and, I regret to say, confirmed at the end of last year—to expand UK airport capacity should be reversed as a major and achievable contribution to reducing traffic. I also agree with a great deal of what the noble Lord, Lord Bradshaw, said about the need to invest in railways to build a more sustainable infrastructure.

When these matters come up for discussion, as they do more and more frequently both in your Lordships’ House and elsewhere, I and others who share my views are usually berated for “picking on” or, as my noble friend Lord Woolmer, said “demonising” the aviation industry. The argument goes that singling out the industry for special opprobrium is unfair and counter-productive. As I think the noble Lord, Lord St John, must have seen, only last weekend the Guardian ran a front-page story on the significant volume of carbon emissions now contributed by shipping. Being of, I hope, a generally fair-minded disposition, I would be inclined to take this point seriously were it not for two things, both of which emerge powerfully from the committee’s report.

First, partly because of the long life of aircraft and the huge investment each one represents, the ability and possibly the willingness of the aviation industry to mobilise within a useful time-frame new technologies likely to mitigate the damage caused by aircraft emissions is minimal; even the Secretary of State accepts this. In his speech to which I referred earlier he said that,

“the technologies to create low carbon fuels and make major reductions in aviations emissions seem a long way away”.

They sure do. The committee poses the following question at paragraph 242 of the report:

“Is aviation a special case in the context of emissions reduction ... in the sense that its ability to reduce the level or even the growth of CO2 emissions is extremely limited in the foreseeable future?”.

It seems to me that the answer must be yes, and I hope that the Minister will confirm that he thinks so too, but not in the sense that the industry, regarding itself as a special case, should be allowed to continue on its present course unchecked.

The second thing is that the drive for growth, particularly in low-cost air travel—currently being pursued by the air industry with, it appears, scant regard for environmental impacts—runs directly counter to the need for urgent action to address climate change. In every other area of life—energy consumption, road use, recycling and many other issues—we are being urged individually and collectively to take responsibility for the future of the planet. Only aviation proposes to increase its contribution to global warming over the next decade. That cannot be right. I still hope that the Government will take serious note of the issues that the committee has raised and review their policies on aviation before it is too late.

My Lords, I ought to declare an interest as the president of the British Airline Pilots Association. The views I express are not entirely its, but also mine.

This has been a valuable debate so far; I thank my noble friend Lord Woolmer for introducing it. He and I have long known each other, and I have tremendous regard for his ability, which was on display in his contribution today. I was struck also by the contribution made by the noble Lord, Lord Bradshaw. He drew attention to the fact that it is cheaper to travel by air than train when it is possible to do so. That illustrates effectively why we have to consider all forms of transport in this debate; we cannot isolate air transport. He also talked about emissions in or around airports. He is entirely right so far as that is concerned, and I invite the Minister to comment on that.

We also heard an invaluable contribution from the noble Lord, Lord St John of Bletso. I entirely agree that it is folly simply to rely on the European emission trading system. We should examine the possibility of further international action. I ask the Minister to reply to that as well.

My noble friend Lady McIntosh is not exactly the friend of all airlines at all times. Nevertheless, she is a friend of mine, but I disagree with her on this issue. We have to be positive about the role of aviation, and she has been long on the indictment of aviation and short on the practical remedies that one could pursue.

Having said all that, I pay tribute to those responsible for this timely and constructive report. As the noble Lord, Lord St John of Bletso, argued, there can be no doubt that climate change and its probable effects—certainly in the long term—are extremely worrying, particularly if we take no or inadequate means to address it.

My own belief is that the Government are right in submitting that at present emissions from aviation, viewed globally, do not present a serious problem. But they will, and, as the Government have argued, a balance has to be struck in the longer term between the economic, environmental and social impacts of aviation and its obvious advantages to the travelling public and to the economy of our country.

The Government appreciate the downside of air travel—that is, the impact, especially on the environment—and their views are shared by my own trade union, the British Airline Pilots Association. It is surely right to stress that over time, and as a result of international agreement, aviation, like other modes of transport that display environmental ill effects, must discharge the costs of the damage done to society at large. That balance cannot be achieved forthwith but constructive discussion about the most salient issues should proceed apace both nationally and internationally.

We have an opportunity—after sensible discussion has taken place between government departments with overlapping responsibilities—to join the European Union Emissions Trading Scheme. But that means that the Government have to initiate movement rather than simply hope that something will miraculously happen. I am confident that, with the leadership displayed by the Government, that will occur.

The Government have long argued that aviation should be included in the EU Emissions Trading Scheme—indeed, it is the only game in town at present. But that must be accompanied by substantial changes in the design of aircraft. More modern aviation can make a real contribution.

The European Union can, and should, lead the way, supported in the not-too-distant future by the International Civil Aviation Organisation, in producing a harmonised cap for aviation, and it should indicate how that can best be shared. Already the ICAO has supported the concept of an open emissions trading scheme for international aviation. That, as the Government argue, requires the airline industry to do its homework by declaring how emissions will operate and how much the airline industry will have to subscribe with regard to abatement costs.

All this presages real technological progress. Britain could demonstrate its adherence to this by establishing a centre of excellence in environmental research, spurred on by the Government, the airlines and others. I hope that it could also include non-carbon dioxide emissions. In this way we will begin to define with accuracy how significant progress might be achieved.

Certainly we should aim at rather more progress than has been made by the air passenger duty, which has had, and will have in the future, such a superficial effect on demand that it will produce little or no environmental benefit. One way of doing that would be an aviation mitigation fund. I await with interest the Government’s response to this idea.

Kyoto does not deal with aviation at all. What do the Government propose to do about that omission, if it be that? Have they proposed that ICAO should act? In that regard, what progress has been made? How do the Government propose that airports, airlines and traffic controllers should subscribe to the goal of minimising their respective impacts on climate change?

The Government say that all departing flights, not simply intra-European Union ones, should be embraced in the European Union Emissions Trading Scheme. If so what progress are the Government hoping to achieve on that?

I turn now to benchmarking. We should ensure that all airlines that enjoy a good environmental record and a commitment to operational efficiency, are not placed at a disadvantage. My hope is that the Government will sponsor such dialogue as a matter of immediate concern. Airlines that are proactive on environmental matters can be of enormous benefit to the travelling public, and to the citizens of the nation as a whole. All modes of transport have a part to play. It is no good simply concentrating one’s fire on the record of the aviation industry.

At the same time, it is clear beyond peradventure that unless aviation establishes indisputably its environmental credentials, others will have no compunction about attacking the industry and blaming it for all the world’s environmental ills. I find it optimistic that British Airways, Virgin, and many other airlines seek to promote emissions trading on the basis of aviation’s early entry to the EU Emissions Trading Scheme. Surely that demonstrates the bona fides of the industry, and that it can develop in an environmentally sustainable way. There are real dangers, but I think the airlines are contributing constructively to that debate.

My Lords, I thank my colleagues on the Select Committee, our special adviser and our Clerk for all their hard work. I particularly thank and congratulate my noble friend Lord Woolmer, whose skilful chairmanship was an object lesson to us all.

As other noble Lords have said, this debate is about climate change. When your Lordships debated climate change 18 months ago, we said that this was not just another policy issue, but it has to be the political issue that impacts on everything. Today, we are debating its impact upon aviation. As my noble friend Lord Woolmer explained, the European Commission estimates that aviation contributes about 3 per cent of the total greenhouse gas emissions in Europe. Perhaps that is currently not a problem. As we say in our report and other noble Lords have emphasised, however, aviation is growing rapidly and the proportion will soon become unacceptably large. In addition, the effect of these emissions and vapour created by aircraft 10 kilometres up in the sky may be having a far greater impact than the 3 per cent we can measure. The noble Lord, Lord Bradshaw, shares this concern.

What is to be done? The European Union considered a variety of ways to reduce aviation’s effect on climate change: taxing tickets, taxing fuel, research into cleaner and more efficient aircraft, improving the air traffic management system and emissions trading. While not excluding these other instruments, the Commission concluded that emissions trading was the most cost-effective method, partly because an emissions trading scheme had already started on 1 January 2005. Your Lordships’ committee therefore decided to consider whether emissions trading was indeed the right answer. What would be the impact on fares and the airline business? Which flights would be included? How should allowances be allocated? How would the scheme work? We concluded that the Emissions Trading Scheme was the right instrument, but not exclusively. Newer aircraft emit less carbon, and there was room to make further improvements with yet more advanced aircraft. The new technology had to be encouraged.

The noble Lord, Lord St John, reminded us that work must be done to improve air traffic control. Research is certainly needed to better understand the effect of CO2, nitrous oxide and vapour emissions at high altitudes. We thought that the ETS should include all flights leaving European airports. We agreed that it was desirable to include flights arriving from outside Europe, but wondered how we could legally and practically impose the scheme on non-EU airlines. My noble friend Lord Woolmer voiced this concern to the Minister.

The evidence produced no consensus about distributing the allowances. Some argue that they should be distributed free, because that is how the scheme started in January 2005. Others argue that, as they were entering a scheme already in existence, the allowances should be auctioned. We felt that if the allowances were to be allocated free of charge, there should be a benchmark basis for the allocation which penalised the heavier polluter. Allocation was and remains a problem.

We felt that the impact on fares would be quite small, perhaps about €9 a ticket, partly because carbon is currently quite cheap and partly because airline mergers tend to produce fuller aircraft. However, we did not expect this impact to be small for long.

Since we published our report in February 2006, there have been three interesting developments. First, the Government responded. They agreed with many of our observations. Like my noble friend Lord Clinton-Davis, they felt that the Emissions Trading Scheme would help to balance the needs of the economy for air transport and travel versus the cost to the environment. They agreed with us that the mechanism of the scheme needs a lot more work. As the Government put it, the amount of the cap needs to be scientifically robust and stringent, because it would otherwise create competitive distortions. Translated, that means that the quotas must be fairly allocated and aligned to achieve the target of a 20 per cent saving in carbon emissions. How will that be done?

Quite rightly, the Government warned that phase 2 of the ETS will probably be in place before the aviation industry joins it, and the mechanism and implementation of phase 2 must be carefully examined for its effect on the aviation industry. The Government also confirmed that they are pressing for better air traffic control, new technology and research to understand better the effect of these emissions at high altitudes. They did not agree with us that it is not practical to include all flights arriving in and departing from EU airports, even though that is desirable, and my noble friend Lord Woolmer asked the Minister why.

Secondly, although the Government’s response was received last year, in January this year, the Commission produced a new draft directive for the inclusion of aviation emissions. As my noble friend Lord Woolmer said, the Commission wants the scheme to cover all flights arriving at or departing from an airport within the European Union from the start of 2012 and to cover flights starting and finishing within the EU a year earlier. Meanwhile, the CO2 allowances will be allocated free and benchmarked with a small percentage to be auctioned. Generally, there seems to be movement towards the introduction of the scheme, albeit rather more slowly than many of us would like. The price implications for carbon are unclear.

Thirdly, last week the Environmental Audit Committee gave its view. It estimates that the scheme will add only about £3 to a typical fare, which is much the same as our scheme. It said that that small sum would not pay for the environmental damage or act as a deterrent. It called for much higher fare increases. It shares our concern that the free issue of carbon allowances would enable airlines to make windfall profits and it called for safeguards. I share its concern about windfall profits, which are why proper benchmarking is essential. However, although the Environmental Audit Committee seems unhappy about the trading scheme as the main instrument, its one big advantage is that most airlines agree to it. Ticket prices can be increased in other ways. It is obvious that aviation will not join the trading scheme before 2012 and between now and then, much can happen.

I notice that the Government are increasing airport passenger duty, an option open to any member state at any time. Many billions of pounds have been committed to develop alternative aircraft fuels. Sir Richard Branson has offered a prize for removing harmful emissions from aircraft. Any or all of these initiatives can bear fruit. The Eddington and Stern reports agree that aviation should pay the environmental costs that it imposes on society, but they refer to social costs, and there is a big variation between the social costs of carbon and the traded price of carbon, but presumably they will come together in time. Perhaps this will be a feature of phase 2, which will be in operation by then, but the future price is very unclear.

By 2012, the railway system in Europe may look entirely different. The noble Lord, Lord Bradshaw, listed the new fast passenger routes that are being introduced all the time that will compete with air travel. If the work on clearing rail freight bottlenecks is successful, the large proportion of Europe’s freight that goes by air could be considerably reduced; your Lordships’ Committee also reported on that.

Heads of state are meeting in Brussels today. There are pressures on them to enlarge the European trading system considerably. My noble friend Lady McIntosh told us that there were calls last week for shipping to be included, and this week there were calls for road and rail to be included. The noble Lord, Lord St John, said that the scheme should ideally be global. I agree, but I think that before then it is possible that many new organisations, from supermarkets to local authorities, will be brought into the European scheme. Large firms such as HSBC and Tesco are making serious proposals to reduce their carbon footprint, and so is the City of London. Making figures comparable by improving carbon accounting standards will highlight polluters. All this will affect the aviation industry one way or another.

Society is also changing. An offsetting standard and carbon capture gives people confidence that when they offset their air travel it is going towards a clean development mechanism project, perhaps certified by the United Nations. The social impact of climate change may result in consumers indulging themselves less. That will have a significant impact on the economy generally and on aviation in particular, with perhaps more people flying for need and fewer for pleasure.

It is right that work should continue towards incorporating aviation in the Emissions Trading Scheme, but when it finally starts the aviation industry may find that the circumstances are very different from the ones that apply today. The picture is uncertain. That is why I am sure your Lordships will return to the matter again.

My Lords, I thank the noble Lord, Lord Woolmer, and his committee for the report. This debate has been split into two—those who believe that the report is the way forward and those who believe that climate change means that the report has merely an interesting slant.

I had difficulty with the report. I felt unease almost from the first words in the abstract. My unease is summed up in paragraph 224, on page 51, which states:

“We do not agree with the Environment Council that global aviation emissions are currently a serious problem but we agree that they will become so”.

I know that this report is a couple of years old and that climate change has moved with—I was going to say anything but “glacial”, given the pace of change, but never mind—almost a glacial shrinkage, but I think that many people do not now agree with that conclusion. The aviation industry emits large amounts of carbon from fossil fuel, which adds to the carbon burden. That cannot be offset by planting trees, as they are part of the carbon already in storage. A tree will hold the carbon only for a very short time, whereas this is carbon being released into the atmosphere. We have a real issue with this when talking about parts per million of carbon. Aviation has a particular issue because carbon is being pushed into the upper atmosphere, with a much higher consequence than there would be if it was coming from the ground, according to the scientists.

Another aspect that should not be underestimated is that, on any of the indices, aviation has a higher carbon output than any other form of transportation. I commend the noble Lord, Lord Bradshaw: I did not know how he was going to turn this into a rail debate, but he managed to do so, which shows tenacity. He rightly said that other forms of transportation should be taken into account.

Since the report was published, the issue has become a very real concern. This is having an effect on how people view aviation. They are viewing it as something that should not be taken frivolously. A vast number of people are changing their views—not of course the Prime Minister, who says that you can take air flights without worrying about the practical implications for yourself. The change is borne out by GNER, which noticed a marked increase in the number of people travelling from London to Edinburgh who stated in surveys that their reason for doing so was that the train has a lower carbon count than a plane.

We also should take stock of why people fly. Ninety per cent of flights are taken for leisure purposes. We have to realise that that is not an economic necessity. There is a very real economic argument about whether people staying at home or flying into the country will have more effect, because we are exporting much of our economic wealth to other destinations, in the same way that visitors lead to greater tourist growth. That must be taken into account. I notice that the cost of the aviation industry in Europe is in the order of €20 billion, which is a not inconsiderable amount of money.

A staggering statistic that our party unearthed concerned who is taking those flights. A lot of short-haul cheap flights are being taken not by people going on a cheap holiday but by those who are more wealthy in society—on an average income of about £50,000 a year—because they are going off to holiday homes. I watched with incredulity a programme in which people were going off to Croatia and Turkey to look at weekend cottages, because they could afford to book ahead to go off to those places to spend their weekends.

I find that incredible for a very simple reason. My noble friend Lord Bradshaw mentioned that I was going to come to this. The great argument about oil was that it was going to run out. That argument seems to be totally forgotten. At the present rate of growth—if you factor in the rising growth in India and China—we will run out of oil by 2050, so planes that are being designed and built at the moment may run out of oil before they come to the end of their projected lifespan. That issue was raised by the noble Baroness, Lady McIntosh: if we are relying on fuel efficiency, planes that are being built now will be in service for the next 20 or 30 years, so we cannot come up with planes that will change that significantly.

The noble Lord, Lord Haskel, mentioned the prize on offer from Mr Richard Branson. Flying pigs may as well be on offer, because we do not have such wonderful technology around the corner. Many people believe that we will suddenly come up with something, but I do not believe that you can run a jet engine on another form of fuel. It would be interesting to see how much land would be needed to meet the aircraft industry’s requirement for biofuel. A report by the Science and Technology Committee of this House stated that if we used every acre counted as agricultural land—the noble Lord, Lord Rooker, will realise that that includes moorland and forestry—ploughed it up and turned it over to biofuel, we would meet only our diesel requirements in this country, not our petrol requirements. We often make assumptions about meeting our future needs through wonderful technological solutions, but that must be reconsidered.

One aspect of the report that I found rather disappointing is that we are burying our heads in the sand—not just in this country, but in Europe. On page 17, in Chapter 3, entitled “Options for tackling the climate-change impact of aviation emissions”, the report states:

“The following five options were, after preliminary screening, rejected by the Commission for Community-level implementation at this stage because they were not sufficiently effective or practicable”.

The first of those is restriction on air traffic volumes. I find it incredible that we are saying that there is no way to restrain the growth of air traffic, as if that is imponderable.

Many of us in London live under flight paths. I often get woken in the morning by planes coming in. There is a massive social impact. There is economic gain for the airlines and the airports from increasing the number of flights, but there is a capacity implication. How do we limit that? Do we do it through a scheme such as the European Emissions Trading Scheme or do we use other fiscal measures?

One problem is not just with the aviation industry; we have had it for a long time. Until very recently, there has been no cost to carbon. Carbon emissions have been free, but we are now trying to put a fiscal measure in place. This is the change that is being made.

I have a real problem with the trading scheme if we are suggesting that aviation should not, for some unknown reason, suffer the massive cuts that every other industry has to suffer. As my energy brief and my many speeches on carbon and power generation have shown, power generation is going in the wrong direction, as demonstrated recently by the spot prices on gas and the fact that many more coal-fired power stations were brought on line to deal with the problem. That has driven up our carbon emissions and is causing a real problem if we want to reduce nuclear power. Obviously we on these Benches are very concerned about the introduction of nuclear power, which will also increase the amount of carbon if carbon capture and storage is not introduced into the energy industry.

The concept is that we will somehow reduce our energy production. However, airline carbon emissions are growing, as are carbon emissions from shipping. Indeed, shipping carbon emissions are almost worse than airline carbon emissions because shipping uses the worst sort of fuel. We are getting acid rain in this country as a result of large ships in the Channel, which is of considerable concern.

Two measures should be considered. In relation to the Emissions Trading Scheme, we should consider not introducing any windfall for the airline industry. The “polluter pays” principle is well understood. We learnt about the pitfalls of over-extending permits when the carbon trading scheme was introduced in Europe. We can make money off the aviation industry. It will squeal but it will pass the cost on to the passengers. If the passengers find that the cost of flights makes that trip to their holiday home in Croatia slightly less attractive, so be it.

The second concept is to isolate the other industries from aviation so that aviation cannot buy permits off other industries. Perhaps the Minister could say whether consideration has been given to a European trading scheme solely for aviation. Such a scheme would mean that that trading could not be offset among other industries. The jam tomorrow concept of promising to make cuts tomorrow could not be offset. The aviation industry would have to be discussed. I find it interesting that, in an extremely highly regulated market—planes cannot of course simply take off and land without landing slots—we cannot regulate the number of flights or reconcile the cost of those flights with the environmental impact that we know aviation has.

On that basis, I very much hope that the Minister will consider two pertinent measures that can be implemented. The first is fuel duty for internal flights within Britain. It seems incredible that fuel duty is paid by trains but not by aeroplanes. That is why the cost is so different between the two. Nothing is preventing us from doing that. The second is an inter-Europe fuel duty, which could very well be implemented and would stop a lot of the short-haul flights. The Stern report has shown that there is climate change and that sea levels will rise if we do not do something. To a degree, it does not matter what we do: sea levels will rise. I ask noble Lords to imagine the economic cost of London flooding. These fiscal measures will be seen as insignificant then. The real cost of not implementing them will be half of London flooded in 30 years’ time.

I realise that many of these issues are complex and that this debate is being held late on a Thursday night. The House is not full; indeed, many have gone home at this point. However, this is an important debate. The report deals with European policy, which is often like throwing something into a black hole; it does not touch the sides and it is very difficult to change all the European aspects.

In replying to this debate, the Minister is between a rock and a hard place. The Chancellor has raised passenger duty, as a green tax, by a very small amount, which has not gone down well with consumers because they do not believe that it was done for the environment. At the same time, there has been massive airport expansion, not just at Stansted and Heathrow, but at many regional airports, which are looking to expand dramatically over the next few years. The country will have to face this problem, as well as the problem of climate change. The measures set out in a European trading scheme will seem outdated in two or three years’ time. We are looking to fiscal measures that will be very stringent within a few years. I hope that the Government will take a leading role in that area.

My Lords, I congratulate the noble Lord, Lord Woolmer, on securing this debate and on the work of his committee. It has been enjoyable to listen to two members of that committee—the noble Lords, Lord St John of Bletso and Lord Haskel—and to share their expertise, as well as to hear the introduction by the noble Lord, Lord Woolmer. The report is very thorough, full of interesting information and very well researched. It is a great pity that we were not able to have this debate a year ago when the report was freshly minted, although I would not have been here. A lot has happened since then and the subject matter is even more a topic of the moment. In some ways, it is more timely to be talking about aviation emissions and ETS now.

It is to the advantage of this debate that the noble Lord, Lord Woolmer, has brought us up to date on how the issue has moved on. I am grateful for his introduction, which has broadened the debate beyond the report. We now have the decision of the European Commission made in principle in December 2006 to take aviation into the ETS system. By 2011, flights between points within the EU will be included and this will be extended in 2012 to flights in and out of the EU.

The noble Lord’s report makes clear the deficiencies in the ETS, which is subject to a review at the end of its second phase in 2012 and more immediately when phase 1 ends at the end of this year. Long-term investment strategies need some security for the path ahead. Wither will all this go after 2012? It is not so very far away—we only have to ask the Olympic organisers how close that date is.

We know that the glide path of carbon reductions is still running too high to meet the 60 per cent reduction target by 2050, which is the significance of today’s announcement from the EU environment Ministers. Perhaps the Minister can indicate whether the Prime Minister will sign up to the new proposed EU targets at the meeting next month. What discussions are Her Majesty’s Government planning to have with other EU members on the issue before this meeting? I am sure we will all agree that setting targets is one thing, achieving them is quite another.

The sophisticated permit system on which ETS is based cannot succeed unless member states tighten the control on permits issued. It also depends on greater transparency and technical definitions, as highlighted by Ian Pearson, Minister with responsibility for climate change, at the all-party group last November. He emphasised the need for a global carbon market of which ETS could form the core.

When we look at aviation and its inclusion in such a market the overwhelming case for a global agreement becomes clearer. Within the EU we are responsible for just over a third of air movements. Already 80 per cent of passenger journeys are made for leisure and tourism. The market is expected to grow at a compound rate of 3.7 per cent per annum for the next 25 years. We have some variations on those figures, but we can see that growth in the market is moving in that direction.

Can we live with such a rate of growth? Aircraft emissions today account, so it is said, for 2 per cent of carbon emissions. However, here too we have heard a variety of figures quoted—the noble Lord, Lord St John of Bletso, talked about 1.6 per cent—but they are rising, and it is the rate of that increase which has troubled noble Lords in the debate. However, there must be an argument for allowing technical developments, which are evidenced by the continuing introduction of new aircraft, to absorb some of the increase. The new Boeing 787 is very much more efficient, saving 20 per cent on fuel use. The noble Lord, Lord Clinton-Davis, indicated how real determination to exploit technology can both benefit operators and lead to a greener world. I believe that the next generation of aircraft, which are cleaner and more efficient, can contribute to that greener world. That is a powerful argument. No airline will survive in the vigorous market of cut price air fares by operating bangers.

I hope noble Lords will sense that I believe in the efficacy of flying as a form of transport. This is where I disagree with the noble Baroness, Lady McIntosh of Hudnall. I do not share her determination to see a reduction in air travel. I enjoy her contributions to debates, as I have enjoyed listening to her today. She always presents a powerful point of view with great passion. Similarly, I am not sure that I share with the noble Lord, Lord Bradshaw, his total enthusiasm for the railway, although the high-speed connection to Amsterdam due to commence shortly will at least give me an alternative for business visits to that city. However, it has got to be cheap to be competitive with current air travel.

Travel can make an enormous contribution to the human experience and, yes, to human happiness. I cannot agree with the stay-at-home approach of the noble Lord, Lord Redesdale. Air travel is a benefit in which an ever-increasing number of people share. Cheap air travel is not just about the few flying more often. Although it is true to say that most of us have probably become the frequent flyer of the safety announcement, it is also about the many going to places they would not otherwise be able to visit. It unites the world culturally and socially. It enhances our friendships and enriches family life. Economically, it is hugely beneficial, as the noble Lord, Lord Clinton-Davis, reminded us. Further, as an aside, although the air-freighting of fresh produce has been criticised, greenhouse production in temperate climates may bring a higher carbon input to our dinner table. I declare an interest as my family business includes greenhouse production. It may interest noble Lords to know that preconditioning and an increased reliance on solar radiation has greatly reduced our use of carbon fuels. I believe that any bid to restrict—I use that word in the regulatory sense—air travel would be a move in the wrong direction.

Can an argument be sustained for reliance on the market to drive down carbon emissions in the aviation industry? Are the pressures for greater fuel economy by maximising payload efficiency and increasing occupancy rates sufficient to allow us to increase air travel and reduce relative costs while at the same time reducing carbon emissions? Can the market and technology combine to give us a green dividend in air travel? As the noble Lord, Lord St John of Bletso, pointed out, there is no doubt that improved airport design and efficient air traffic control can lead to reduced flight times through less taxiing and stacking. It could make a real difference if investment was encouraged to that end. As an observation, I seem to spend more time on the ground taxiing to the terminal at Schipol than in the air from Gatwick. It is not just the airline operating companies that can make an investment in a greener aviation industry.

In many ways the European Commission report of last December echoed the view of the noble Lord’s report. The Commission, too, concluded that the inclusion of aviation in the EU ETS was appropriate. It also emphasised the need for proper evaluation of the implications of such a proposal and the mechanisms for reflecting it. It is a credit to the report of the noble Lord’s committee that the Commission also agreed with it in what it thought would not work. Both the Commission and our EU sub-committee rejected any restriction on air traffic volumes. They considered that regulatory standards were currently sufficient, and that the restrictions on less polluting aircraft were unnecessary as the market would provide for that; similarly, that voluntary agreements with airlines could not be the answer, but that the industry was likely to continue investment in new aircraft for market reasons.

The Commission also felt that little or nothing would be achieved by the taxation of flying, either through departure or arrival taxes on aircraft or passengers or VAT on flying or fuel. We know the Chancellor of the Exchequer took no note at all of that. In the light of Gordon Brown’s increase in air passenger duty, it is interesting to consider John Healey’s comments in 2004, when he was Economic Secretary to the Treasury:

“The problem with Air Passenger Duty as it stands is that it is a blunt instrument for anyone interested in environmental policy and environmental improvement; essentially it is a per passenger head charge. A plane with the same number of passengers that has the most modern engine technology and the cleanest set of emissions is charged exactly the same rate as the oldest, dirtiest plane in the sky. So clearly if you are interested in environmental policy and objectives then Air Passenger Duty as it stands is not an instrument that is likely to be useful or relevant to the environmental ends”.

The report produced for our House by the noble Lord, Lord Woolmer, and his committee rightly recognises that the market approach can be reinforced by the use of the ETS to cover all flights departing from EU airports. Ideally, it should include all flights through global agreement. That may not be possible, but the ETS mechanism may still have a part to play. However, the decision of the Commission to commit to the inclusion of aviation emissions in the ETS in principle only suggests that they share the view of the noble Lord and his committee of the need for a rigorous assessment. As the noble Lord, Lord Haskel, reminded us, the devil will be in the detail.

This debate has been well reasoned, reflecting the report itself. We on these Benches would ideally like to see the inclusion of aviation in the EU ETS, but could not agree more with both the Commission and the Government that they should make a rigorous assessment of all issues before embarking on a policy commitment. That is not a headline-grabbing conclusion but it is a wise one, and one that reflects great credit on the noble Lord, Lord Woolmer, and his committee, and the House should take note of it.

My Lords, I begin by virtually repeating what others have said in congratulating the committee on its report and my noble friend Lord Woolmer on his work in guiding the committee to its successful conclusion, and indeed on his introductory speech today. We have had a fascinating debate. This is about the third debate I have participated in since I went back to Defra. Although it is not a subject I am massively familiar with, it is interesting. It is our future that we are talking about.

I do not propose to go over the background to the issues. I could repeat all the statistics that everyone has mentioned today, but that would chop out the time to respond to as many questions as possible. My preliminary remarks simply confirm that the Government welcome the publication of the European Commission’s proposals on 20 December to include aviation in the European Emissions Trading Scheme. We now look to the German and Portuguese presidencies of 2007 to get on and push this. We support the proposal that aviation should begin emissions trading as soon as possible, certainly before the end of phase two, which is 2008-12. We believe that it is possible, although challenging, to achieve it by 2010.

We want the scheme to cover all flights arriving at and departing from EU airports from the outset—I will deal with that issue in a moment. It must allow aviation to buy allowances from other sectors and to use project credits to meet obligations—an open scheme, in other words, obviously subject to further analysis. We need to study the Commission’s proposals a lot more. We also need a scheme that sets the benchmarks and the cap for the sector and allocates allowances and levels of auctioning at the EU level to minimise competitive distortion. We understand the arguments for the historic baseline of 2004-06 emissions but need to do further work before coming to a final view.

It is still early days. We are only a few weeks away from the Commission's proposal and we are conducting a thorough analysis of the details to inform a comprehensive UK position. We will be launching a stakeholder consultation exercise in the immediate future. When a Minister says that, you do not usually get a date, but I will give one: it will be before purdah—before the Scottish and Welsh elections—therefore before 3 April. There will be a full 12-week consultation and an interim regulatory impact assessment.

I will never be able to answer all the questions asked by noble Lords, but I want to put the record right. I imagine that we will return to this issue frequently. My noble friend Lord Woolmer said that, although many international flights land or take off in the EU, a vast amount of emissions do not occur over EU airspace. We are confident that the inclusion of the EU Emissions Trading Scheme is in line with the Chicago convention because it is not a tax or charge and does not amount to extra-territoriality. The UK Government are satisfied that extending the EU Emissions Trading Scheme to international civil aviation is in accordance with EU and international conventions. I cannot quote legal chapter and verse on that, but quite a bit of work has been done on this. Obviously, the sensitivities that have been raised are important.

My noble friend asked about the case for including all flights arriving in and departing from Europe. We agree, simply because of the greater environmental impact that that will have. That is the reason for going down that route. Obviously, the legal and other consequences are different. The Commission's impact assessment concludes that a scheme covering all arriving and departing flights would result in the biggest environmental benefit; it would be neutral from a competition point of view, considering that the alternative scope of competition between airlines is unlikely to be affected by the geographical area; and it would be the best option for tourism. The estimated impacts are limited and likely to decrease with the largest area.

The Commission has sought legal advice, and this was fed into the Commission's impact assessment entitled Giving Wings to Emission Trading. As I said, the Commission and the UK Government believe that the inclusion is consistent with the 1944 Chicago convention and bilateral air service agreements.

The noble Lord, Lord Bradshaw, need not apologise for making this a railway issue; far from it, because I have one or two things to say myself about railways. He asked about the Tyndall report. The Tyndall projections of the aviation share are based on its own projections of demand and emissions, which are in excess of the White Paper figures. The Government believe that these are mistaken, as they are based on the false premise that the air transport White Paper figures are heavily infrastructure-constrained. From that point of view, there is a disagreement. The Eddington study, to which the noble Lord, Lord Bradshaw, referred, concluded that very high-speed rail access across the country is unlikely to be an effective way of meeting economic or environmental objectives. It found that, even under the most optimistic assumptions, carbon savings from shifting from air to high-speed lines are relatively small—indeed, only 0.2 per cent of total UK commissions.

On the other hand, I have flatly refused to go by air to Brussels when I travel as a Minister. I never have done and I do not intend to. Frankly, anyone in London or Paris going to Brussels has no excuse whatever for flying. You can work on the train, whereas you cannot do so on the plane—and then you have all that wasted time in the airport.

The noble Lord, Lord St John, raised the issue and I shall come to it now: I have spent a year as a direct rule Minister in Northern Ireland, with two return flights on average a week for that year. I think of the number of times that I have seen Heathrow and spent 20 minutes flying round the south-east of England, waiting to land and of the number of times that I have landed at Heathrow and then spent the best part of quarter of an hour coming to a standstill. The amount of energy that is being poured out during that time is unbelievable. The management of aircraft on the ground as well as in the air has to be clearly dealt with as an important element—just as important as all the other aspects of this. We simply cannot ignore it.

The aim is not to reduce the number of flights, but we can reduce flying when it is crazy time-wise. It takes longer to get out to Heathrow and fly to Paris than it does to jump on the Channel Tunnel express. We do not have the aim of stopping people flying or reducing flights but to make it more efficient and beneficial environmentally.

Noble Lords asked about private jets. We are seeking to minimise exclusions from the Emissions Trading Scheme as far as possible. There will be an exclusion based on the size of aircraft because otherwise it would be a cop-out; we expect very few aircraft to be below the size threshold. Flying clubs that take off and land at the same location will be excluded—it is self-evident that that would be the case—but executive or non-executive private jets should not be excluded.

My noble friend Lady McIntosh raised the same issue as she raised at Question Time the other day, along with other valuable points relating to Stansted. I see where she is coming from there; a lot of questions have been raised about Stansted. I have kept getting them from the noble Lord, Lord Hanningfield, and I do not intend to go down that route this afternoon, because there will be other opportunities—and it will be the Transport Minister who deals with it, too.

The whole point of emissions trading is to allow the market to identify where the cheapest carbon abatement options can be made, not just in one sector. That is very important, as the more free and flexible it is the cheaper it will undoubtedly be. This is not a special case; our goal is to bring as many sectors as possible into trading, so there is no barrier about aviation. There has always been a dispute about aviation being left out of such schemes in the first place, so good progress is being made.

I pay tribute to my noble friend Lord Clinton-Davis. When I was a young Labour MP, he was Aviation Minister; it was a long time ago. He asked how the Government were progressing on departures and arrivals of European international flights. As I said, the Commission proposed coverage of all departing and arriving flights; we support that and did so at the Environmental Council, and we shall continue to do so throughout the legislative process. He asked, too, how we proposed that the airports, airlines and air traffic controllers minimised their impact.

I touched on some personal examples that I am familiar with, as others are. Government action in the three areas outlined in the air transport White Paper of last December refers to efficient air traffic, with a single European sky; emissions trading and emissions cost assessment; and strict sustainability criteria in the planning process for new and expanding airports. As I said, we do not wish to snuff out this industry, which allows people to travel to parts of the world they would otherwise never have the opportunity of visiting—no one is seeking to do that. We are looking for the necessary environmental alternatives throughout Europe, with high-speed rail networks, which are clearly a positive advantage.

There is also voluntary action by airlines and airports to improve energy efficiency. There is an awful lot of pressure on the private sector at the moment; we know that from some of the examples being given today, where moves have been made for environmental reasons but, underneath it all, are being made for brand and competition reasons, because that will increase their customer flow. That is a good thing. Such measures may have been introduced initially with the environment in mind but people have seen the benefit of incorporating them in their selling efforts. That is fine. It is done voluntarily and I am sure that it will be successful.

My noble friend said that aviation was not covered in the Kyoto arrangements and asked what we were doing about that. However, domestic aviation is included. The Kyoto protocol tasks parties to pursue the reduction of emissions of greenhouse gases working through the International Civil Aviation Authority. It also calls for parties to make demonstrable progress in reducing emissions. From that point of view, we are not dealing with narrow action plans; it goes much wider than that.

My noble friend Lord Haskel gave many examples in his practical speech in which he specifically asked how to stop airlines making windfall profits. We believe that air fares and air freight charges should be subjected to very close scrutiny for evidence of windfall profits. If allowances are issued free of charge, there will have to be the most detailed scrutiny of fares and freight charges. We are taking into consideration lessons learnt in phase one of the emissions trading system. Clearly, there were difficulties initially, as everybody understands. We are still assessing which is the most appropriate methodology for aviation. However, in contrast to the power industry, we expect aviation businesses to remain highly competitive and price sensitive, making the scope for passing on costs relatively limited. There is self-evidently a difference with regard to large power stations but we need to learn from experience.

I do not intend to speak for all my allotted time because I do not think that is a very good use of everybody else’s time. I refer to the points made by the noble Lords, Lord Redesdale and Lord Taylor. The noble Lord, Lord Taylor, has now appeared on the Front Bench opposite me two days running. As I said to him yesterday in Grand Committee, he has only been here five minutes, but the greasy pole is obviously a very fast way to the top on the Tory Benches. I believe that I have covered a lot of the central points that they made. We favour an open scheme. As I said, aviation has limited abatement options but can fund reductions in other sectors. We seek to avoid distorting sector targets. We do not want the Government to dictate to the public who can or cannot travel or to deny an industry a valuable right to grow. If it is denied that, it will lose out on technological advances and that is in no one’s interests. The idea that we shall run out of oil pretty quickly ought to be a salient point for the designers of the future to consider. That issue is certainly worth bearing in mind. Air miles constitute a very seductive but simplistic issue which is not at all accurate in many ways. The idea that we can grow our own biofuels is an absolute nonsense. They are a helpful element but we do not have enough land to grow them. If you grow the wrong biofuels, you can damage the atmosphere and the environment more than if you leave forests intact.

I congratulate the committee. I have tried to answer the questions that were raised and not launch into a government diatribe on where we are on this, what we have been doing and how we are leading on everything, because we know all that; it is said every time. I hope that I have answered as many of the salient questions as possible. I have no doubt that we shall return to the matter. As I said, before purdah on 3 April we shall publish the stakeholder consultation, which will last for 12 weeks, and there will no doubt be further debates in this House.

My Lords, we had, as always, a wide-ranging debate. I heard the true voice of old sackcloth and hair-shirt liberalism saying that leisure air travel was not an economic necessity and could be priced out or stopped. I can guarantee that will not appear in the Liberal Democrat election manifesto.

But, seriously, the debate was wide ranging and I thank all those who stayed on a Thursday to contribute to it. Without doubt we shall return to these issues.

On Question, Motion agreed to.

House adjourned at 6.55 pm.