Costing the earth

The climate on climate change is changing. At last year’s Labour Party conference, there was still a debate about how serious an issue it was; if politicians mentioned it at all, it was as an afterthought. Now it has become a mainstream political issue. In Manchester this year, there was barely a significant speech that did not touch on it, and the fringe meetings on the subject attracted big audiences.

Even the Conservatives got in on the act. Although their conference delegates voted down a motion suggesting that there should be higher taxes on aviation, the vote, at 53% to 47%, was incredibly close. The fact that almost half the delegates at a Conservative Party conference supported increased taxes suggests that the political norms no longer apply.

Transport is a major source of greenhouse gases in the UK, contributing just over a quarter of the total, excluding international aviation and shipping. Crucially, however, that proportion is continually rising as the impact of other sources such as domestic heating and industry is reduced and car usage shows no signs of slowing down.

Transport is also widely perceived as the one area where there are opportunities for ‘something to be done’ about it, both by politicians and ordinary people. For politicians, however, the issue is fraught with difficulties. While they have accepted the need to address climate change, they are always concerned that policies to tackle it will prove unpopular. On each mode – road, rail and aviation – the moves towards a coherent strategy have so far been tentative.

This has already got Rod Eddington, the ex-British Airways chief charged with looking at long-term transport infrastructure for the government, into trouble. The first draft of his report was thrown back at him because he had failed to consider sufficiently the environmental impact of his findings – which was hardly surprising because his original brief made no mention of them. His much-delayed report, suitably greened, is now due out at the end of November.

The biggest generators of greenhouse gases from transport are, of course, road vehicles and, not surprisingly, this is also the most contentious area. In terms of reducing car use, the crucial weapon is road pricing, which would provide a far more sophisticated and targeted approach than existing taxes.

Soon after taking office, the new transport secretary, Douglas Alexander, committed the government to a national road-pricing scheme. But putting that into practice is fraught with difficulties, even within the ten-year timeframe specified.

There is still a debate in government over the nature of road pricing, with the key question being whether it should be revenue-neutral or not. If the purpose is solely to target taxes better to reduce congestion, road pricing will be very difficult to justify and, crucially, will have little environmental impact as the overall use of cars will be around the same. While the idea of revenue neutrality might superficially seem easier to sell to the public, there is another disadvantage: without extra funds from taxes there would be no money to pay for improvements, whether to roads or public transport. Ministers, therefore, have to accept that road pricing will increase revenue from motorists, and be an important tool in meeting targets to reduce carbon emissions.

Stephen Glaister, co-author of a new report by the Social Market Foundation on road pricing, National road pricing, is it fair and practical?, estimates that up to £16bn could be raised annually. To sweeten the pill, this money must go to local authorities, as it would not be politically acceptable for the revenue simply to disappear into the chancellor’s pockets. Local authorities would then have a large stream of income which they could securitise to build major transport projects designed to get people out of their cars.

The difficulties of achieving this in practice were demonstrated by a recent report on the feasibility of road pricing in the West Midlands, research paid for out of the government’s Transport Innovation Fund (TIF). The West Midlands is a disparate area of seven local authorities of widely different political complexions. The report, published in September, accepted the idea that a road pricing scheme charging up to £5 per day was feasible but only after massive public transport improvements, costing a staggering £2bn. (A further £2bn investment in transport would be needed after that, but this could be funded from the revenue from road pricing.)

That is not going to happen, as £2bn would take up a whole year’s national allocation of TIF money. The West Midlands study raises complex questions about who would collect the money and how it would be distributed to ensure that it had the maximum impact in improving the local environment. Indeed, without a change in the structure of local government, such as the much-mooted idea of stronger passenger transport authorities and powerful city-regions, it is difficult to see how road pricing outside the capital could proceed. That is why London, yet again, is the area most likely to be the pioneer, with a move towards a road pricing scheme that is far more extensive than the existing congestion charge arrangements.

There are several reasons for this. London already has the appropriate governance structure. The mayor, Ken Livingstone, could simply decide to implement a scheme – though he could face the wrath of his electorate and would therefore probably hold off until after the 2008 mayoral election.

Secondly, London, uniquely, could raise sufficient revenue from a scheme to fund all the long-awaited transport projects in the capital, such as the west-east London Crossrail and Thameslink 2000, a major upgrade planned for the north-south commuter rail route. Other local areas, as the West Midlands experience suggests, would need central government support in addition to revenue from road pricing.

And thirdly, of course, London has already had a successful experience with the congestion charge.

However, road pricing in the capital will happen only if Livingstone gets the money. And that begs the wider question about the allocation of the funds from a national scheme, which the government has shown no sign of resolving. No wonder that the Social Market Foundation paper concludes that these questions just seem too difficult for politicians to address: ‘While politicians are fond of saying that “doing nothing is not an option” and while government support looks encouraging, for the past couple of decades, governments have actually done very little.’

In fact, worse, new road schemes have been scrapped, partly under pressure from environmentalists, and fuel duty has not been increased in line with inflation since 2003, which means that demand has been stimulated while no extra capacity has been provided. The question, therefore, is whether politicians who have shown themselves too timid even to raise taxation on motorists in line with inflation can bite the bullet and impose a national road-pricing scheme designed to bring about environmental objectives through increased taxation. Without strong public pressure over the issue of climate change, this seems unlikely.

The other ministerial suggestion in relation to transport and the environment has been modal transfer. In other words, as John Prescott promised when he was New Labour’s first transport secretary, get people out of their cars and on to trains. Certainly the railways have been booming, with 40% growth in the past decade, but little of that has been a result of government action. Indeed, recent major franchise awards have been on the basis of big premium payments from operators to government, effectively a tax on rail ridership. This is already translating into higher fares and increases in other charges, such as catering and car parking, none of which will encourage more people on to the railways.

Moreover, on close examination, rail is not as kind to the environment as many of its supporters suggest. It has been taken for granted that trains, which account for 7% of passenger mileage, cause far less damage to the environment than road vehicles. Or do they? Even though the average loading of a train approaches 100%, the overall figures for CO2 emissions per passenger kilometre, according to the Department for Transport, are 109 grams for cars and 49 for rail, which makes rail just over twice as efficient. The Tyndall Centre for climate change research gives a figure of around three times better, but this is still not enough.

There are several reasons for this. Onerous health and safety requirements, requiring crumple zones at the front, and disability regulations, which eat up vast amounts of space for toilets, have both contributed to the weight/seating ratio. Air conditioning uses extra fuel, too, and so does the onboard entertainment that passengers are beginning to expect on longer journeys.

Rail’s relatively modest performance in terms of environmental benefits drew sharp barbs from the former transport secretary, Alistair Darling, who was wont to point out that the new Pendolinos on the West Coast line were so heavy that, even when full, passengers were being driven around on the equivalent of half a fuel-guzzling Land Rover Discovery.

At least the Pendolinos are electric-powered. The best way to improve the railways’ carbon footprint is through electrification, especially as more will be generated from renewable sources.

The industry faces a big dilemma over the eventual replacement of the jumbo of the rails, the high-speed train, which is reaching the end of its life cycle. The Department for Transport has set up a stakeholder group to discuss the issue and ministers are bound to become embroiled in this very complex question.

The key issue is whether the department should retain diesel power when prices are likely to soar and the environmental impact is far greater, or transfer to electric trains, with all the difficulties of having to install overhead lines and power equipment. Network Rail, which is funded by government, has said it is reluctant to undertake this. So far the indications are that ministers do not want to force the industry to electrify, although the issue is being fiercely debated in the department.

The rail companies have realised they have a lot of ground to make up on environmental issues but now the Rail Safety & Standards Board has a research team looking at ways of making trains more fuel efficient. It plans to contribute its findings to the 30-year rail strategy white paper which the DfT will publish next summer. There is no single solution that will greatly improve the environmental sustainability of railways, but, instead, a whole host of ideas are being mooted, from using low sulphur diesel to ensuring that engines are not left idling at stations.

Finally, on aviation, by far the fastest growing area of emissions from transport, the government’s focus is on emissions trading. This is the scheme already introduced at European Union level for several heavy energy-using industries such as power generation and cement production. The idea is that each company is allocated the right to release a certain amount of carbon each year and, as those amounts are reduced, trade the savings to other businesses that find it harder to cut down on their emissions.

The EU scheme has already hit trouble because the original allocations were too generous. Nevertheless, New Labour ministers still see it as the way to make aviation, which so far has not been included in the scheme, cut down on its carbon.

However, environmentalists believe this is unworkable. Jeff Gazzard, co-ordinator of the GreenSkies Alliance, points out that with aviation growth estimated to be 3%-4% annually, the industry would continue to increase emissions, being dependent on other industries to reduce their demand.

‘In other words, aviation will take an increased amount of the carbon available, reducing its availability for other industries. So, will people really want to take that holiday abroad if they can’t heat their homes?’ asks Gazzard. He suggests instead a tax of 3.6p per kilometre on aviation, equivalent to £36 on a return flight between London and Glasgow, to damp down growth to the 1%–2% level. That would make the industry’s carbon emissions stable, since it claims it can save that amount through greater efficiency.

The whole issue is about how to apply price mechanisms to the damaging environmental effects of transport – what the economists would call ‘externalities’. That will be made easier if the price of oil continues to rise, as market mechanisms will then point the right way. But the government has to be braver than that, and start nudging up those price signals.

Climate change cannot wait, and the evidence so far suggests that the politicians are behind the public mood by showing so little urgency about this crucial issue, despite all the fine words at party conferences.