Transport & Environment                            ZAS0038

Written evidence from Transport & Environment

Transport & Environment (T&E) is Europe’s leading clean transport think tank and campaigning group. It was created as a member organisation over 30 years ago and now has staff in 6 countries, with 63 member organisations across 24 countries. It has had a UK office since 2019. T&E coordinates the International Coalition for Sustainable Aviation, which has observer status at the International Civil Aviation Organisation (ICAO), and is also an active member of the Jet Zero Council’s SAF Delivery Group. T&E is also a founding member of the Clean Shipping Coalition, which has observer status at the International Maritime Organisation (IMO). It is also an active member of the European Sustainable Shipping Forum, which acts as an expert group advising the EU Commission on technical maritime issues.

Since getting aviation and shipping to net zero have different challenges, this response provides thoughts and evidence on shipping first, then aviation:

Shipping

The recently published Transport and Hydrogen Strategies show insufficient ambition for the shipping sector and risks turning the UK into a laggard in the sector. This is further problematic because the global target set by the IMO - 50% by 2050 - poses a serious risk of undermining the Paris Agreement’s temperature goals. The UK cannot threaten its own climate goals by continuing to delegate action on shipping to the IMO. Below are a series of measures the government should take to pave the way for the UK’s industry to be zero emission by 2050.

The UK must first confirm international shipping’s place in its long-term climate mandates. It should unambiguously clarify that all ships calling on UK ports are part of the UK’s 2050 net-zero climate goal and include shipping in the UK’s Nationally Determined Contribution (NDC). This would be in line with the recent announcement that all the UK’s shipping sector will be included in its 6th Carbon Budget. This will have the added benefit of pushing partners in the IMO to raise their ambition, while ensuring more investment is channelled towards this aim.

In this vein, the UK government should follow in the footsteps of California, China and the EU to mandate zero-emission ports by 2025. As well as reducing shipping's climate impact - in 2018 ships at berth emitted around 6% of total CO2 shipping emissions in the EU - a zero emission port mandate would massively improve air pollution in port areas.

A zero-emission mandate would involve a large roll-out of shore side electricity in ports. As it stands, installations of shore side electricity in UK ports are few. This is mainly due to missing technology and poor business cases: most ships don’t have the technology to plug in while at berth, and even for those that do, it is cheaper and easier to continue to burn diesel fuels. As such, the zero-emission port mandate should be accompanied by an obligation on shipping companies to plug in, or to use zero-emission energy sources when at berth (e.g. green hydrogen). Given the huge positive externalities in terms of health in port-city communities, government financing should be offered for ports to install shore side electricity.

While operational efficiencies will help reduce the fuel needs of ships, the key to decarbonising the shipping sector will be clean fuels. The Department for Transport has identified e-hydrogen and e-ammonia as the most promising options for zero-emission shipping in segments where direct electrification is not possible (essentially all segments apart from short sea passenger transport). Given the UK’s industrial heritage and its huge renewable energy potential, the UK should aim to lead the world in the development of e-fuels and related technology (engines, bunkering facilities…), which are not yet readily available on a commercial scale.

Nonetheless, the UK’s recently published Hydrogen Strategy risks diverting funds to inefficient end uses of the technology such as heating and road freight, which can be electrified. This Strategy should be updated to focus investment towards (green) hydrogen where it is most needed: industry, shipping and aviation. Similarly, the Department of Transport’s Decarbonisation Strategy currently lacks detail on how to ramp up the use of these fuels and make them competitive with conventional diesel fuels. There are a number of legislative pathways to do so (all of which are easily feasible given the reliable data collected under the Monitoring, Reporting and Verification legislation).

Similar to the approach taken by the EU, the UK government could mandate gradual reductions of the GHG content (including CO2, CH4 and N2O) of shipping fuels. However, to avoid driving fossil LNG and biofuels from dubious origin instead of truly sustainable fuels, the introduction of a GHG target should be combined with specific incentives to boost the use of e-fuels. In particular, and in a similar vein to the proposed SAF mandate in the aviation industry, a UK green fuels shipping mandate should also be applied: the government should legislate that each shipping company should use a certain amount of green e-fuels in its fuel mix in set years, starting from 5% by 2030 and increasing to 100% in 2050.

Changing fuels is not the only step towards decarbonisation. Measures to reduce the amount of fuel used per transport work must also be incentivised (reducing a vessel’s fuel costs and making the fuel switch more economical). The most efficient policy choice would be a mix of fuel targets and energy efficiency. This provides flexibility to policy-makers to ensure emissions reductions in the short term (until 2025/2030) through energy efficiency, then concentrating on green fuels deployment in the mid to long term.

In particular, the UK should implement mandatory speed limits for vessels calling at its ports. Speed limits exist on roads to save lives; the same logic should apply on the seas. CE Delft has shown that speed reductions are an easy, successful way to reduce emissions: a 10% reduction in speed would lead to a net 19% reduction in emissions, even when taking into account the extra capacity needed to achieve the same transport work.

To complement the fuels strategy, it is imperative that the shipping sector finally pay for their emissions. As a first step, the UK government should integrate the maritime sector into the UK’s emissions trading scheme (ETS). As an existing policy, there would be limited additional administrative burden in integrating shipping to the ETS. Furthermore, it is a business-friendly measure that allows shipping companies flexibility to reduce their emissions however they see fit. The impact on consumers would be minimal, whichever policy option is chosen: historic fuel fluctuations and studies have shown that environmental charges would have minimal cost impacts on end-users.

As a second step, the Energy Taxation Directive must be revised to end the tax exemption for marine fuels. Given that the EU is making a similar step, the risk of carbon leakage (shipping companies bunkering outside the UK to avoid increased taxation) is limited.

The UK government should take an active role in the funding of green shipping. The Dutch government is a forerunner in this regard, having promised to work with industry to deliver 30 zero emission ships by 2030. This can be done through legislation alongside an investment strategy to channel funds to innovation and ramp-up of clean technologies in the sector. So far, the £20 million investment in the UK-SHORE programme will not be enough to make it a leader in green shipping.

Aviation

The government has set a target for aviation to be net zero by 2050, in line with other sectors, but there are some serious flaws in it’s strategy. The recently released Jet Zero Consultation (JZC) is very “techno-optimistic”, in that all hopes have been pinned on advances in currently unproven technologies, instead of attempting to mitigate some emissions by simply restricting growth of flights and keeping the industry the same size as it is now. The JZC target is for UK aviation to still be releasing 21 MT CO2 in 2050: bizarre when all other sectors targets are zero. Aviation has had few environmental standards applied to it in the past, which means there are few in place now. Pricing of emissions is sporadic at best - this needs to change if the UK is to have any hope of the industry being net zero by 2050.

There are three main technology fixes described in the JZC: zero emission aircraft; greenhouse gas removals; and sustainable aviation fuel. However, there is nothing in the JZC that will require the industry to invest in and adopt the first two, which will not drive investment and innovation into the right areas: the balance between carrots and sticks in the JZC is poor. Additionally, T&E believes that whilst the government should set up the frameworks and regulate these industries, airlines should be the ones to actually fund these nascent industries, since it is airlines that wish to benefit.

The proposed UK SAF mandate is welcome. It needs robust sustainability criteria, needs high penalties for non compliance, and should contain measures to ensure 100% of the fuel supplied in 2050 is SAF. It should also contain a specific mandate for e-kerosene supply. E-kerosene is the only type of SAF that has the chance to be net zero emission over its lifetime, and therefore is the most desirable type of SAF from a climate perspective. The e-Kerosene should only be produced using green hydrogen, and ultimately (in 2050) will have to only use direct air captured carbon.

It should be noted that planes running on SAF still burn fuel - which adds greenhouse gases to the atmosphere and also has other, non-CO2 effects. In an ideal world, this would not happen and planes would be powered by hydrogen or batteries. It is therefore essential that the government provides the framework for zero-emission aircraft research, design and development. This should include a requirement that domestic airlines should have to start flying an ever increasing number of miles in zero emission planes from a certain date. Furthermore, fossil kerosene-burning planes should be banned from flying domestic routes from 2040. This has already been proposed for all domestic Norwegian flights.  

There is a gap between the government's stated ambition - flying across the Atlantic in a zero-emission plane - and the design of current planes. The radically new plane designs and technologies (eg blended wing designs) needed to achieve this ambition are not being sufficiently researched. The Government should channel some funding towards these radical plane technologies, and less towards incremental changes to current technologies.

Aircraft fuel efficiency has improved a lot over the years, but the pace has slowed down in the last few decades. The JZC mentions that aircraft efficiency has improved by 0.8% per year since 1990, but this is partly due to the fact that many new models were introduced to the global fleet relatively recently. Since aircraft replacement times are long, and there are only two new aircraft models (the 777X and the A321XLR) being introduced soon, there is the risk of a looming “efficiency innovation gap”: the 0.8% annual increase cannot be relied upon.

Regardless, the easiest policy the government could pursue is to simply require airlines to  ‘fly in a straight line’. Currently, flight paths are cost-optimised, and not eco-optimised: airlines will routinely choose to take a longer route to avoid paying higher air traffic fees. This means that flight paths are optimised for what is cheapest for an airline, not what emits the least greenhouse gases.

New fuels, zero emission aircraft and better operational efficiencies are all vital tools needed to decarbonise aviation. Regardless though, these measures will not have any significant effect by the time the sixth carbon budget starts in 2033. Therefore policies are needed that reduce the growth of demand. Note this means that passenger levels would stay the same as 2019, not that the industry would significantly shrink. There are various demand levers the government could use.

Any policies that increase costs should, all things being equal, decrease demand. One massive anomaly in aviation environmental pricing is that airlines do not pay for most of the greenhouse gases they emit. This should be changed as soon as possible. Free allowances for airlines in the UK ETS should be phased out by 2027 at the latest: this is exactly the same date as has been proposed by the European Commission for the EU ETS. Additionally a non-CO2 charge or multiplier should be added to every UK ETS allowance surrendered: in direct contradiction of the polluter pays principle, the non-CO2 emissions from a plane - which account for three times as much warming as the carbon emissions - have never been priced.

Furthermore, airlines do not, and never have, paid duty on the fuel they uplift. Again, the UK should follow the European Commission’s proposals, and impose duty where it can. At the very least this should cover all fossil kerosene supplied for domestic flights and flights to the European Economic Area.

Finally, flight tickets are currently exempt from VAT. This means that plane tickets are in the same “essential” category as food and medicines: it is obviously very difficult to describe plane tickets as necessities.

Demand should be restricted in other ways as well. The CCC has proposed that there be no net UK airport expansion. Current airport expansion proposals could increase UK passenger capacity to 532 million annual passengers (recent pre pandemic years have seen UK passenger numbers in the low 300 million range).

CORSIA should not be relied upon to either change behaviour, or reduce demand due to the extra costs imposed. CORSIA will only offset (not reduce) emissions above a 2019 baseline until 2035. CORSIA will have an oversupply of cheap - less than £1 - credits, which means that the scheme will never provide an incentive to airlines to reduce emissions. All in all, this means that CORSIA should not be considered as one of the decarbonisation tools the UK employs.

There are major question marks over the government’s approach to decarbonising the aviation sector, with the main criticism being that, as it stands, the strategy relies exclusively on technological advances that have not happened yet, and when they do will not start having a major effect on emissions for decades - unless rules and regulations change. The strategy currently anticipates the sector being allowed to emit 21 Mt CO2 in 2050, with that carbon being offset by a greenhouse gas removals industry that does not exist yet. The JZC contained little to no focus on what could be done in the short term to reduce emissions from the sector.

The UK government has set itself a challenging goal of making both the aviation and maritime sectors net zero by 2050. However, it does not have the right policies to start this process - yet. Through a mixture of policy interventions - zero emissions ports, requirements to fly zero emission planes, gradually more stringent fuel mandates and standards, and focused investments, the UK can become a world leader in zero emission aviation and shipping, pushing on its partners to meet its climate goals.

For more information, contact: Matt Finch, UK Policy Manager

September 2021