Reports:

Transport and climate change - CfIT response to Defra consultation

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Section 1: Introduction and executive summary
Section 2: Do you agree with Defra emission projections for the transport sector?
Section 3: Which existing policies are working well? How might they be further improved?
Section 4: What new measures might we consider at the EU, national, regional or local level to develop cleaner, greener transport and reduce reliance on fossil fuels?
Section 5: What should be the role of industry and other stakeholders in developing and implementing low carbon vehicle and fuel technologies?
Section 6: How can we get the best out of our transport system without an unacceptable increase in carbon dioxide emissions?
Section 7: How can we encourage and help people to make smarter choices about the way they travel?
Section 8: Conclusions

Introduction and executive summary

1.1 Introduction

1.1.1 The Commission for Integrated Transport (CfIT) was established by the 1998 Integrated Transport White Paper "to provide independent advice to Government on the implementation of integrated transport policy, to monitor developments across transport, environment, health and other sectors and to review progress towards meeting our objectives."

1.1.2 Following an independent review of CfIT in 2003, the Commission's remit is as follows:

• Providing policy advice via evidence based reports on:
  • Future policy options, so-called "blue-sky thinking" on future strategic issues
  • Policy issues spanning departmental boundaries (i.e. environments, social etc.)
  • Best practice amongst local authorities / delivery agencies to encourage improved performance and to highlight barriers to best practice
  • Comparisons with European / International policy initiatives and dissemination of best practice
  • The impact of new technology on policy options
  • Specific issues as requested by the Department for Transport
• Refreshing the transport debate, based on published reports and with a view to raising the overall level of the "Transport Debate" and where possible to build consensus among stakeholders.

1.1.3 This Report seeks to analyse the effectiveness of existing transport policy in meeting the commitments to reduce greenhouse gas emissions in the period to 2010 and beyond and to offer an assessment of the potential contribution of future transport initiatives. It is submitted as the CfIT advice to the review of the UK Climate Change programme being undertaken by the Department for Environment, Food and Rural Affairs (Defra).

1.1.4 The report is structured according to the six questions set in Defra's consultation document:

1. Do you agree with Defra emissions projections for the transport sector?
2. Which existing policies are working well? How might they be further improved?
3. What new measures might we consider at the EU, national, regional or local level to develop cleaner, greener transport and reduce reliance on fossil fuels?
4. What should be the role of industry and other stakeholders in developing and implementing low carbon vehicle and fuel technologies?
5. How can we get the best out of our transport system without an unacceptable increase in carbon dioxide emissions?
6. How can we encourage and help people to make smarter choices about the way they travel?

1.1.5 To answer these questions, this report will cover all sub-divisions of the transport sector, although the principal focus is on areas such as road transport and aviation, which are significant producers of greenhouse gas emissions (GHGs), and where policy instruments are most urgently required to manage future emission levels.

1.1.6 This review of the UK's Climate Change Programme provides an opportunity to take stock of the contribution of current transport policies to the UK's overall climate change commitments and to offer guidance in the light of existing evidence on the potential for a low carbon transport future.

1.1.7 CfIT would like to acknowledge the assistance of The Robert Gordon University in preparing this advice.

1.2 Executive summary

The following points comprise the main conclusions and recommendations from this report. Evidence to support these statements and further conclusions are included in the individual sections of the report.

Question 1: Do you agree with Defra emissions projections for the transport sector?

The official forecasts of emissions from the transport sector are characterised by a degree of ambiguity and imprecision. The following areas need greater clarification:

• Data is needed which can be disaggregated to show to what extent the different forms of road transport and the other transport sectors are responsible for the carbon and other greenhouse gas emissions. There is currently much confusion as to what constitutes 'transport' and whether this is only road or including civil aviation. There is also very little dissagregation of the road transport sector itself. These categories need to be standardised and used consistently throughout government publications.
• The contribution of the transport sector to the overall UK emissions totals is to an extent unclear. This is exacerbated by the inconsistency in the figures used.
• The contribution of individual transport measures to this sector's emission reduction potential is unclear. Policies should be assessed in terms of their individual contribution and the cost effectiveness of this contribution.
• The considerable range of uncertainty surrounding the assumptions used to derive the transport projections is not acknowledged. This is particularly the case with respect to the assumed success of policies in the 10YP and the Voluntary Agreement on vehicle efficiency. Sensitivity tests are not apparent in the figures.
• The underlying assumptions underpinning the forecasts are not transparent.
• Within the overall targets for reductions in greenhouse gas emissions, there are no specific targets for transport.
• The consultation document focuses on carbon, to the exclusion of the other 20% of GHG emissions.
• There is insufficient focus on longer term projections- and targets - beyond 2010.
• There is insufficient use of scenarios based evidence to underpin emissions' projections.

Regarding international aviation, carbon dioxide emissions from air travel will amount to some 16-18 MtC by 2030 (97% from international flights).

• The Defra consultation makes no reference to other greenhouse gas emissions from aircraft such as NO_x, sulphates, soot, H₂O and contrails (which can produce cirrus clouds). This is a significant omission; the overall environmental response from aviation - in terms of climate change - is estimated at between 1.9 and 3.5 times that of the response produced by the CO₂ emitted from aircraft alone.

Question 2: Which existing policies are working well? How might they be further improved?

The Voluntary Agreement

In order to work towards an effective second VA, the following measures are deemed necessary:

• Car manufacturers are under no legal obligation to adhere to the emissions standards and the rate of efficiency improvements in the UK is not on target to meet the EU agreement. The option of introducing statutory obligations needs to be kept open.
• There are no targets set at a national level for individual member states.
• The VA needs to be combined with further fiscal measures to stimulate greater consumer demand for very fuel efficient car technologies such as hybrid-electric cars. This includes greater differentials between vehicle excise duty bands and fuel duty differentials for alternative fuels.
• There are no targets for light and heavy duty vehicles.
• Target levels of an extended VA should be set at a level which helps Member States and the EU to meet their overall GHG reduction targets such as the UK's target for reducing CO₂ emissions by 60% by 2050.
• With a future increase in market penetration of biomass based fuels and hydrogen, there is a strong case for considering reformatting future agreements on the basis of well-to-wheel (W-T-W) emissions. A target based on tailpipe emissions could risk providing perverse incentives to increase W-T-W emissions. Future agreements could incentivise and account upstream for the use of alternative fuels. This could be reflected in subsequent agreements in the carbon content of the fuels, assuming a European average carbon intensity for the fuel based on accurate, transparent and robust assessments.
• The robustness of the agreements as climate change policy instruments is seen at risk if numerous accessories curb increasing vehicle efficiency. Some think the European drive cycle should reflect as closely as possible actual use on the road and therefore should include the use of mobile air conditioning and other equipment.
• Low carbon cars are already available on the market but people are generally not choosing to buy them. Therefore, there is a need to understand consumer choice and encourage purchasing of these vehicles through measures such as consumer information and education, tax incentives and purchase grants, car labelling and the development of mass market hybrid-electric cars.

Future fuels and technologies

The UK has already taken a number of steps to promote the uptake of biofuels and hybrids and to stimulate the market. However, the following areas need to be urgently considered:

• Fuel duty differentials could be used to help the UK meet its targets. This would send a long term price signal of the Government's commitment to low carbon transport by rewarding lower carbon forms of fuel. Duty incentives are considered quick, simple and easy to implement and can be targeted at specific fuels. However, there is scope to complement these with some kind of renewables obligation and enhanced capital allowances and even a voluntary agreement with the road fuels industry.
• A Renewable Transport Fuel Obligation (RTFO) drawing on the experience of the RTFO that applies to licensed electricity suppliers would present long term prospects for delivering all low carbon fuels. In essence, an obligation would require specified sections of the road transport fuel industry to demonstrate that a specified proportion of their aggregate fuel sales were 'renewable transport fuels' to ensure the gradual substitution of fossil fuels renewable fuels over the long term. Further assessments should be made by government as to how such an obligation might work and whether it would be the most effective and even more politically palatable mechanism.
• Enhanced capital allowances could support investment in the most environmentally beneficial biofuel processing plants.
• One method of promoting the use of this technology would be to encourage local authorities and central government to purchase vehicles of this type. Central Government is already doing this and incentives are in place for local authorities (see below).
• Today's biofuels are expensive and they are likely to remain so to at least 2010 but we should not dismiss the long term potential of biofuels to deliver significant carbon savings. However, it may be that that carbon savings from hybrid cars are more cost effective than savings from biodiesel. Assessment of cost effectiveness is urgently needed.
• The CO₂ efficiency gains possible with conventional engines could well outperform fuel cells for several decades.
• The Government should develop a 'route map' for future fuel infrastructure, which determines the timescale, legislation and investment required. This would involve demonstrating leadership and commitment to the innovation of low carbon vehicle technologies and fuels over the longer term and this will provide the industry with a much needed statement of direction.
• With current vehicle fleet and load factors, average emissions per passenger kilometre for passenger transport modes, especially bus, are not necessarily better than those for multi-occupancy fuel efficient cars. However there is potential for substantial energy and emissions savings from buses in the medium to long term through the adoption of CNG/LNG power, hybrid electric and hydrogen fuel technology. However, this is not a low cost option for the bus industry and could require changes to the current subsidy and grant regime to incentivise the uptake of these technologies in the bus fleet.
• Persuading motorists to 'downsize' will be difficult in an environment where real motoring costs are not rising, particularly as larger or less fuel efficiency vehicle are driven by higher income groups.
• The government should assess fuel and engine technology options on a well to wheel basis (W-T-W) as different vehicle technologies can have substantially different energy consequences upstream of the vehicle.

Therefore, further research should be commissioned to answer the following questions:

• How much investment is appropriate now, how is it best to target that investment to get the maximum benefit and over what timescale?
• How can the cost effectiveness of each technology be assessed according to a standard measure such as cost of gram CO₂ per kilometre saved? Can this measure be used to evaluate policies within transport and between transport and other sectors?
• What are the quickest and cheapest ways to save carbon from transport?

Energy efficiency of alternative modes

• Alterations in the structure of the bus subsidy system could be made to favour the uptake and operation of low pollution vehicles whilst discouraging the purchase of conventional diesel vehicles. The current structure of bus subsidies is a significant barrier to the uptake of new technologies in the bus industry. This needs to provide incentives to operators to improve energy efficiency within the existing legislation. For example a fuel tax rebate/ Bus Service Operator's Grant could take the environmental performance of vehicles and/or fuels into account in the allocation of bus subsidy levels.
• There needs to be a standard and procedure for testing low carbon buses.
• Current measures such as the Low Carbon Bus programme may need to be supported with further measures to accelerate the uptake of hybrid buses.
• The rate of bus fleet replacement could be accelerated by setting rising targets for the proportion of an operator's fleet that must be powered at different points in time between 2010 and 2025.

Fuel duty incentives

• Research shows the difficulty of sustainable mobility without efficient price signals. Subsidies for the so called clean alternatives will have little effect unless the 'dirty' status quo is clearly marked with taxation.
• Even a stiff carbon tax would still leave the price of road fuels relatively unchanged because it is already heavily taxed.
• Rapid introduction of low CO₂ vehicles and fuels will require grants and or tax incentives on a major scale and will erode the large tax base in road transport - the effects of this require further research, particularly in the context of assessments for the feasibility of a national congestion charging scheme.
• Such a measure could have disproportionate effect on lowest income groups who are least likely to be able to afford to purchase these vehicles.
• Different rates of fuel duty are needed for alternative fuels.

Vehicle Excise Duty

• The current graduated scheme does not offer a large enough incentive to encourage changes in behaviour. The difference in duty for the most polluting and the cleanest vehicles is small, and the difference between neighbouring bands is minimal. The maximum VED amount currently payable is £165 per annum for a Band D diesel car. This is only £100 more than the rate payable for a Band AAA petrol vehicle. Compared to the overall cost of buying a car and running a car, this charge is insignificant. Therefore, gradations could be finer so that tax rates between low and high carbon vehicles will get steeper.
• The MORI research suggests that a higher differential would change purchasing behaviour.
• Consumers need to understand the cost implications of poor fuel economy. Likewise, car buyers are unlikely to be influenced by graduated Vehicle Excise Duty levels if they are not aware of how the system operates. The publicity strategy for this policy needs to be reviewed to ensure that awareness of such initiatives is improved. The introduction of car labelling (discussed below) may support this policy initiative. In addition, the Department could take the opportunity to reinforce the message of how VED is now calculated when issuing the renewal note or through simple measures such as colour-coding the disk.

Company car tax

• The reformed company car tax regime has been more effective than graduated VED in encouraging the purchase of cleaner cars.
• However, the reform has been the catalyst for structured 'cash for car' schemes and employees have opted out of traditional company car policies. 'Cash for car' schemes remove the focus on carbon dioxide emission levels and allow employees to choose their own model of car. The average carbon dioxide emission level of the vehicles delivered by one personal leasing company was 11 per cent higher than those delivered to customers with traditional company car policies. The increasing popularity of 'cash for car' schemes could undermine the progress made within the company car market.
• Companies typically change their cars on a three to four year cycle. The Inland Revenue should announce taxation levels for periods suited to the timeframe in which company car purchasing and leasing decisions are made. For example, the proposed taxation rates for company cars could be published for the forthcoming four years and be updated on a rolling annual basis.

Transport Grant Programmes and purchase tax

• Transport Grant programmes provides grants for scrapping vehicles that fail emission tests and for conversion to LPG. These schemes have been successful at the 'margins', saving 34,210 tonnes of CO₂ emissions in the last two years.

Fiscal measures overall

• The government should undertake a formal review of the role and objectives of taxation and pricing in transport - tax is a key instrument in signalling priorities and influencing business and consumer behaviour. It should set out how the tax structure contributes to climate change objectives and how it interacts with other areas of policy.
• Rather than attempting to 'pick winners', a technologically-neutral approach to incentives should be adopted. This should be supported by identifying the objectives the Government needs to achieve and encouraging and rewarding whichever technologies and fuels deliver against these aims.

Lorry fuel efficiency

• Incentives are required to encourage road haulage companies to run low emission fleets and adopt more efficient operating practices.
• Commercial vehicle manufacturers should be required to publish fuel efficiency data to common benchmarks. This would allow potential purchasers of vehicles to investigate performance against anticipated operating conditions.
• The government should evaluate the case for pressing for a negotiated agreement on CO₂ emissions for commercial vehicles along the line already agreed for cars.
• The Government could offer incentives to vehicle operators to replace older more polluting and less fuel efficient vehicles by incentivising earlier than planned replacement of new vehicles.

Sustainable distribution

• Government and industry need to support further development of commercial brokerage networks with services targeted at smaller operators.
• The construction of transfer centres on the outskirts of cities and towns where goods are transferred from heavy vehicles to low emission light vans could be encouraged.

Rail freight

• Further research is required into how best to optimise any transfer of freight from road to rail in terms of net CO₂ reduction.

Aviation

• Reducing emissions from aviation through improvements in engine and airframe technology is consistent with greater economic competitiveness. However, long lead-in times from research and long in-service lifetimes mean that technological advances are not sufficient in themselves to prevent a net increase in emissions associated with increasing demand for air travel.
• The inclusion of CO₂ from aviation in an emissions trading scheme should produce a saving in greenhouse gases, while allowing the industry to grow. The amount of carbon saved will depend on the agreed cap for the air transport sector.
• However, there is currently no provision for including other global warming emissions such as including NO_x, contrails, etc.
• There are also doubts over the ability of an aviation emission trading market to work in practice.
• There is potential to reduce emissions further through operational measures such as air and ground traffic efficiency savings and routing flights to avoid environmentally sensitive parts of the atmosphere. More research is needed on the latter in particular.

Question 3: What new measures might we consider at the EU, national, regional or local level to develop cleaner, greener transport and reduce reliance on fossil fuels?

• Future transport and Climate Change policy will involve both 'thinking big' (Emissions Trading and carbon rationing) and thinking small (car labelling and smart measures).
• There is potential for early 'quick wins' from such things as smart measures, car labelling and speed management.
• Carbon rationing may be an option for the longer term.
• An intermediate solution is national congestion charging, but the potential for emissions reduction are small if this is introduced as revenue neutral.

EU Emissions Trading Scheme for Transport

• The Government should work with business transport users to develop projects through which carbon savings made in the transport sector can be brought within the Government's Emissions Trading Scheme.
• However, evaluating transport's potential inclusion in the EUETS must not delay real action on climate change.
• Further research is needed including issues of radiative forcing that impact on transport as it is not only CO₂ that is produced by transport vehicles.

Car labelling

• Further developments in this area should take account of the European evaluation of the car label due to report early 2005.
• The introduction of the interim voluntary car label this year should be accompanied by appropriate publicity to ensure that consumers realise that a more helpful scheme has been introduced, and to ensure that dealers know how to explain it.

Scrappage schemes

• It appears that scrappage schemes may not have a large potential to reduce carbon emissions from road vehicles.
• A lifecycle emissions analysis of scrappage and restriction schemes are needed before policy recommendations can be made.
• In addition, this policy would require scrutiny as to its distributional impacts and its cost effectiveness.

Carbon rationing

• Carbon rationing through Personal Carbon Allowances or Domestic Tradeable Quotas is worthy of further study and investigation.
• The environmental, equity and public acceptance considerations should be assessed comparatively to other policies such as road user charging.
• In particular, there is a need to assess the fairness of the allocation of emissions rights, the technological feasibility of implementing carbon rationing and the likely efficiency and effectiveness of such schemes.

Smart measures

• Smart measures should begin to be seen as having potential for early emissions savings in the transport sector.
• Smart measures 'programmes' are a potential way to secure funding for these policies, ensure complementary effects are maximised and these measures are mainstreamed.

Aviation

• Priorities for aviation include modelling of 'green flight' and exploring mechanisms for including all the greenhouse gas emissions in an emissions trading scheme, potentially through the development of flight emission profiles based on variables such as duration, altitude and latitude.
• CfIT has previously recommended that the external costs from aviation should be internalised using a CO₂ multiplier. However, there are difficulties in using a single average multiplier as the radiative forcing of emissions vary with altitude, latitude, atmospheric temperature, etc. In terms of refining this recommendation:
• The use of flight profiling to integrate NO_x, sulphates, soot, H₂O and contrails into the GWP 100 metric should be considered; and
• examining possible metrics and mechanisms for including all emissions from aviation in emissions trading schemes needs to be examined in more detail.

Question 4: What should be the role of industry and other stakeholders in developing and implementing low carbon vehicle and fuel technologies?

• In terms of transport, vehicle manufacturers, energy producers and airlines, public transport, freight and other fleet operators need to work closely with bodies such as the CfIT, DTI, Defra, DfT, the Treasury, the UK Energy Research Centre and the Carbon Trust to bring new technologies to market as quickly as possible, and to ensure that such technologies are viable to produce and affordable to buy, and that customer incentives will be in place long term. Such an approach could encourage the development of approaches such as:
• Diesel exhaust treatment;
• Advanced transmissions and engine management systems for cars, lorries and buses;
• On-board energy management and use of lighter weight materials;
• The wider availability of alternative fuels;
• Encouraging and funding research into 'green flight' initiatives for the aviation industry.
• The Government should develop a 'route map' for future fuel infrastructure, which determines the timescale, legislation and investment required and is designed in consultation with stakeholders. This routemap would not be confined to technological solutions such as has already been done for hydrogen for example. This would involve demonstrating leadership and commitment to the innovation of low carbon vehicle technologies and fuels over the longer term and this will provide the industry with a much needed statement of direction.

Question 5: How can we get the best out of our transport system without an unacceptable increase in carbon dioxide emissions?

• In order to optimise our transport system, we need to focus on:
• Behaviour change as well as technological solutions;
• Efficiency improvements including reducing the need to travel;
• Price signals to rearrange the various signals that affect the use of cars over other modes, the fuel economy of cars, the choice of fuels and the choice of cars;
• Intelligent transport systems and telecommunications;
• Speed management for a cost effective, quick fix with added benefits;
• Non high tech solutions such as non motorised modes and smart measures;
• Improving public understanding and acceptability of climate change and transport solutions;
• Development of a strong government commitment and policy framework;
• Avoiding secondary rebound effects of policy and locking in benefits.

Question 6: How can we encourage and help people to make smarter choices about the way they travel?

• Smart measures require a supportive policy environment in order to galvanise the willingness and ability for people to change their travel behaviour.
• Pricing is the key to rearranging the various signals that affect the attractiveness of cars over other modes.
• Commercial marketing strategies need to be applied to the travel market to understand the motivations of existing and potential passengers. In order to encourage change, innovative, targeted marketing strategies must be employed which draw upon psychometric and marketing principles.
• A National Behaviour Change Programme and strategy for smart measures.
• National Guidance - Local traffic reduction could be supported by national guidelines, information and advice on how smart measures might contribute to their traffic reduction targets. National support can help to give credibility, demonstrating both that traffic reduction is an officially approved policy objective, and that smart measures can make a valuable and concrete contribution to this.
• Funding and national guidance to mainstream soft factors - most smart measures are funded via local authority revenue budgets, and most specific initiatives are locally designed and launched. If smart measures are to be applied more intensively and extensively than at present, greater flexibility in funding them via capital programmes would be required, or alternative revenue sources would need to be found.

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