FAA sticks the boot in

The US Federal Aviation Administration (FAA) has made an official submission to the UK’s Department of Transport’s consultation on Sustainable Aviation. It is unusual for a foreign government agency to get so closely involved in UK policy making, but in certain circumstances this can be useful in ensuring that policy takes into account a range of stakeholders including key allies and trading partners. In this case it looks like the FAA is lobbying to defend the status quo and resist efforts to drag aviation into the 21st century.

The UK is taking a lead in developing sustainable policy for aviation; which – if it is to be effective – must tackle deep-rooted resistance from a highly conservative and globalised industry. The current policy framework locks the industry into an outdated framework in which aviation fuel for international flights is free of tax. This anachronism dates back to the end of the Second World War when aviation was seen as a key component of building the peace and emissions from the small fleets of aircraft were not seen as a threat to the global climate. Agreed in Chicago in 1944, the Convention on International Civil Aviation still rules aviation today. Article 24 prevents countries from levying tax on fuel carried on board aircraft. No country will lead in taxing aviation fuel as airlines would reconfigure their operations not to need to pick up fuel in that country and shift long-haul hubs to other jurisdictions. There is a stalemate in which all commercial decisions are taken on the assumption that aviation fuel is tax-free and will remain so.

The green aircraft designs needed in the 21st century are on the drawing board but have little chance of getting into the air as the engineers have to compete with conventional 20th century gas guzzlers burning cheap fuel. Even the newest plane on the block, the Boeing 787 Dreamliner is just the final model of 20th century aviation, more efficient, yes, but nowhere need the efficiency needed in the future. The Dreamliner has a future beyond the introduction of a tax on aviation fuel, for passengers who can afford high ticket prices such as time-poor business passengers and the rich, but those of more modest means will fly in highly efficient, but slower, aircraft. To develop these new aircraft requires a proper business case by levelling the playing field through removing the tax exemption for aviation fuel. The oddity is that there is a much better aviation industry waiting to launch if only policy makers could understand fully the opportunity.

The FAA does not agree, according to the UK newspaper, the Sunday Times who have seen the submission. The Office of Environment and Energy at the FAA expresses their ‘serious concerns about the UK’s approach to aviation’ and climate change worried that the policy will constrain aviation rather than support sustainable growth. There is also dislike that the UK is taking a more realistic viewpoint to the extent that biofuel can replace conventional aviation fuel. My detailed examination of aviation shows that the UK government is not being bold enough in the policy it proposes. To me the FAA viewpoint looks like stuck in the past trying to defend the indefensible.

Advanced orders now being taken for Peter McManners’ next book Fly and Be Damned: What now for aviation and climate change?

Financial Transaction Tax

The Financial Transaction Tax (FTT) proposed for Europe comes from muddled thinking but, oddly, if the objectives were clarified this could be a good tax, not just for Europe but for the world.

Chancellor Merkel and President Sarkozy have proposed a Financial Transaction Tax (FTT) levied at a rate of 0.1% and expected to raise €57bn. The UK Chancellor of the Exchequer, George Osborne is opposed, arguing that such taxes need to be brought in globally if London is not to suffer at the expense of other financial centres. In the United States, Democrat Senator Tom Harkin and Representative Peter DeFazio are calling for a tax on stock, bond and derivative trades but the Republicans who control the House of Representatives have always opposed transaction taxes and will be hard to persuade of the benefits. I would like to see the deadlock broken by shifting the dialogue from raising tax to improving the operation of the financial system.

American economist , James Tobin put forward a proposal in 1978 to introduce a tax on all currency trades to limit the role of the speculator. He suggested that the receipts could be held centrally to help fund aspects of the work of the UN; it was this secondary objective that caught the headlines. The Tobin tax became the Robin-Hood Tax in common parlance.

In my book Adapt and Thrive: The Sustainable Revolution, I proposed a share transaction tax with the clear objective of reducing volatility and lengthening the time horizon used by investors so that the long-term planning needed for sustainable business becomes the norm. A Robin-Hood tax it was not. Investors that have to pay a small but significant percentage to switch ownership change their behaviour. Instead of grilling the management over their plans for the next quarter or the next year (a huge disincentive to adopting sustainable strategies) investors will examine the plans for the next decade and beyond. My proposal recognised the need to include in principle the major global financial centuries such as London, Frankfurt and New York but, crucial to acceptance, the revenue would remain with national governments to use as they see fit.

Financial markets provide liquidity and capital but an often quoted metric is that financial trading is one hundred times the level of trading required to support the real economy. Each successful speculative trade takes a profit from the market to appear in the bottom line of a hedge fund, investment bank or fund manager. If this is curtailed by the McManners tax then the market is more stable and supports the real economy better. Resistance arises because traders in the financial centres would see their incomes go down and there would be complaints that the tax was a drain on the market. What would we prefer; a stable market from which the government harvests some of its tax revenue or an unstable market in which the speculators rule?

Merkel and Sarkozy are misguided to argue for a FTT to raise money to bail out the euro zone; but a transaction tax to stabilise the financial system, brought in across all the main markets, with revenues retained at the national level, would be a step towards healing the financial system.

An Old Dream

The Boeing 787 Dreamliner is the newest, most efficient and most luxurious aircraft in the hanger, but it is the last gasp of the old 20th century aviation industry rather than the beginning of 21st century aviation. Its launch in 2007 was the most successful commercial airplane launch in history taking orders for 677 airplanes worth more than $110 billion. The Dreamliner’s maiden flight took place on 15 December 2009 and it is now entering service in 2011, three years later than intended.

For passengers, the aircraft is a step forward with a higher cabin pressure equivalent to 6,000ft – compared with 8,000ft for most other high altitude passenger aircraft – so headaches and fatigue should be reduced. The passengers on board the first scheduled flight by All Nippon Airways (ANA) last Wednesday also liked the spacious feel of the larger windows. Passenger comforts that grabbed the headlines were the toilet with a window and a bidet with a variety of spray options.

For aircraft construction, new methods have been used including the use of carbon fibre composite materials. According to Boeing, it will use twenty per cent less fuel per passenger than similarly sized aircraft. The 787 is a further evolution of the standard design, squeezing a little more efficiency and improvements from a model with similar operating characteristics to the stable of aircraft it hopes to replace. In a highly regulated and conservative industry, in which fuel is largely free of tax, this is the safe direction. The 787 is not a dream, but a statement that aviation intends to defend business-as-usual for as long as possible.

There are other designs, such as blended wing technology and the use of buoyancy as a component of lift in hybrid air vehicles, which could make dramatic reductions in the emissions from aviation, but there is no business case to bring these technologies to market until society demands that aviation is transformed for the 21st century.

Boeing will be using commercial judgement in planning its future models but it will be very wary of taking any action that may undermine sales of the Dreamliner before banking the $110 billion of advance orders. Commercial reality means that dreams of greener aviation will be kept under wraps until the Dreamliner production line has been running for many years.

Peter McManners is author of Fly and Be Damned: What now for aviation and climate change? Advance Orders now being taken on Amazon.

Health and Coal

News stories come into my inbox like a torrent of water from the base of a melting glacier in high summer. There are far too many to be able to read them all but dipping in can uncover some interesting dilemmas. One pair of news stories that I came across in quick succession last week was of a conference in London and a bill in the U.S. House of Representatives. I would like to have brought the delegates and congressmen and congresswomen into the same location for what I am sure would have been a fiery debate.

In London, the opening statement of the conference on Health and Security Aspects of Climate Change included the words:

Climate change leads to more frequent and extreme weather events and to conditions that favour the spread of infectious diseases. Rising sea levels, floods and droughts cause loss of habitat, water and food shortages, and threats to livelihood. These trigger conflict within and between countries. Humanitarian crises will further burden military resources through the need for rescue missions and aid. Mass migration will also increase, triggered by both environmental stress and conflict, thus leading to serious further security issues. It will often not be possible to adapt meaningfully to these changes, and the economic cost will be enormous. As in medicine, prevention is the best solution...We therefore call upon governments around the world to prioritise efforts to address the causes and impacts of climate change.

In the U.S., a bipartisan bill had been passed in the U.S. House of Representatives to establish a state-based regulatory framework for management and disposal of coal ash. Steve Miller, President and CEO of the American Coalition for Clean Coal Electricity (ACCCE) commended the U.S. House of Representatives for passing bipartisan legislation that would establish a state-based regulatory framework for management and disposal of coal ash.

“We support this bipartisan legislation because it would establish a sensible program to regulate coal ash and ensure the environment is protected without unnecessary increases in energy costs or putting American jobs in jeopardy.”

Coal is one of the dirtiest of fuels and a major contributor to global carbon dioxide emissions. The U.S. Environmental Protection Agency (EPA) is seeking to bring in regulations to limit emissions but whilst coal continues to be burnt it makes sense to use the ash in a variety of applications such as additives in concrete and fill material for road building. According to Miller, “This legislation [with regard to coal ash] represents the kind of balanced federal-state partnership that is needed for environmental protection. On the other hand, EPA is considering regulations for coal-fueled power plants that will raise energy prices, hurt families, and destroy American jobs.”

I note this juxtaposition of news stories to expose the disconnections as people argue their case within different policy stovepipes. Within the parameters of their own particular discussion they are making logical choices. One group of experts on human health is urging urgent action whilst an industry lobby group is protecting the very activities that need to be brought under control. We have been here before; remember the fight to deny that smoking was a danger to public health as cigarette companies defended their bottom line. There was little doubt who would win in the end but it took far too long, and too many people suffered, before the battle was won.

Airlines Fighting to Survive

There is a fight going on within the airline industry which is only the first skirmish of a major battle. The conflict is over the EU bringing aviation inside its Emissions Trading Scheme (ETS). Research by Thomson Reuters Point Carbon has concluded that it will cost airlines €1.1bn when they join the EU ETS next year rising to €10.4bn by 2020. Chinese and US airlines are particularly concerned at having to buy carbon allowances in order to fly into European destinations. The current outcry, aimed at Europe’s policy makers, is nothing compared with the fight to come as the tax-free status of aviation fuel for international flights comes under the spotlight.

That aviation fuel for international flights is free of tax is not widely advertised. It is neither in the interests of the airlines to point it out, nor in the interest of government to show how impotent they are to change the international legal framework, nor is it likely that airline passengers will vote for higher ticket prices. However society cannot remain indifferent forever to this major anomaly. It can be expected that eventually it will be removed and taxation of aviation fuel introduced to at least match the taxation on other transport fuels.

The measures being brought in under the EU ETS, presented as total consolidated costs, look huge but these figures are only massive because the industry burns such colossal quantities of fuel. The purchase of carbon allowances equates to just a few cents per litre of aviation fuel. The Sunday Times reports that the costs could be recouped by BA with an increase of 50p per ticket. Other estimates put the additional cost to airlines at between €2 and €9 per round-trip flight between European destinations. This is hardly going to make a dent in the affordability of flying, or the profits of the airlines, so it seems odd that resistance to this modest measure is so strong. The answer is to be found in my book Fly and be Damned (orders already being taken on Amazon).

I admire the tenacity of the airlines in defending the status quo. If the fight over the UE ETS dominates the headlines, it deflects attention from the bigger battle over tax-free fuel. To lose the skirmish over the EU ETS, after a bruising fight, might persuade policy makers to back off from further action. On the other hand, policy makers might read my book and see through the policy stalemate to take the action needed to launch aviation into the 21st century.

Sustainable Aviation

The consultation period for the Department of Transport’s Document, ‘Developing a sustainable framework for UK aviation: Scoping document’ closes on 20th October. Philip Hammond, Secretary of State for Transport writes in the foreword:

‘The Coalition [government] believes that a modern transport infrastructure – which emphatically includes aviation - is essential for a dynamic economy as well as to improve our well-being and quality of life. But we also believe that transport needs to be greener and more sustainable...’

The document is a valiant attempt to find a context within which to develop aviation policy but the dilemma between ensuring ‘a dynamic economy’ and being ‘be greener and more sustainable’ is a major difficulty for the government.

A question that is asked within the consultation is:
‘What do you consider to be the aviation sector’s most important contributions to economic growth and social well-being?’

The answer I provided will not be liked within an industry that is slow to understand the strategic implications:

‘A narrow focus on aviation emphasises its current role in the economy. This question is an invitation to the industry to offer a defence of the status quo. From within the aviation industry, it should be expected that a strong argument emerges emphasising the ‘need’ for continued expansion. This has parallels with the power companies trying to defend their right to sell more power. It is now accepted policy that power companies are expected to encourage reductions in demand and make profits from selling less. Aviation is similar in that the obvious sustainable solution in the near-term is to reconfigure the economy to be less reliant on aviation and for the industry to make a profit from a highly efficient reduced capacity flight network.’

Photo by Jim Donahue

Cycling Cities

Cycling can be the salvation of our cities but only if the implications are accepted that the infrastructure needs to change and restrictions applied to cars. The first costs money and the second clashes with the rights of car drivers. These are high hurdles to leap to make cycling practical and safe. There is also a third less obvious barrier, which can be just as difficult to negotiate: the rights of pedestrians. People on pavements and sidewalks do not like to be at risk of being knocked over by a cyclist. Let us examine the three hurdles of cost, car drivers and pedestrians.

First, money is tight so expenditure on major reconfiguration of the urban infrastructure will not be found easily. We must wait for the normal cycle of urban renewal so that when a new suburb is added, or an area is redeveloped, plans for bicycle provision are included. In these circumstances it is not a question of spending more but of spending differently to put the focus on people: good public transport, walkways and cycleways.

Second, the rights of car drivers should be moved down the policy agenda. This is a loud and powerful lobby but it is the broad rights of people that should be considered. I am a car driver, and I used to be a cyclist until I was knocked down by car and broke my back. The recovery from my injuries was slow and I do not now like to ride my bike on roads shared with cars. I want my rights as a car driver to be curtailed so that so that my right to travel safely by bicycle is restored. I accept that not all car drivers will agree, but if they could visualize how cities could be better it would help to win their support. Examples of high quality cycle provisions are required to bring the vision into observable reality.

Third, pedestrians have to be persuaded that a city that is friendly to cyclists will include spaces that are shared with cyclists. This is particular true in the short-term waiting for the next major redevelopment when the existing space used by both cars and pedestrians has to be reallocated to include space for bicycles. The paths of pedestrians and cyclist will cross; there will be cross words and the occasional bump but hopefully not the same severe injuries that cyclist suffer from cars.

Of the cities that I know well, Helsinki has the best provision for cyclists. It is possible to ride into the city centre from all directions on routes separate from cars. The Finns have planned carefully, invested well and it is understood amongst the city residents that on many routes cyclists and pedestrians share the same space. There is no feeling that the rights of car drivers or pedestrians have been infringed in making cycling easy and safe.

City planners should think bike and face down opposition from car drivers and pedestrians with confidence that people will like the better cities that result. If in doubt, visit Helsinki.