Aviation's Economic Downside

Prof John Whitelegg and Dr Spencer Fitz-Gibbon

with Dr Seth Crook

Foreword by

Dr Caroline Lucas MEP

Green Party of England & Wales

Second edition, November 2002

www.greenparty.org.uk

Promoted and published by Spencer Fitz-Gibbon for The Green Party, 1a Waterlow Road,
London N19 5NJ.
Tel: 020 7561 0282. Email: media@greenparty.org.uk

John Whitelegg BA PhD FCIT FILT FRSA, the Green Party's Chief Policy Advisor on Transport,
is an internationally-respected transport expert and environmental consultant. Managing Director
of Eco-Logica Ltd, he teaches in the School of the Built Environment at Liverpool John Moores
University, and is Honorary Visiting Professor in the Department of Biology at the University of
York. Spencer Fitz-Gibbon BA (Hons) PhD is a member of the Green Party's national executive
and formerly the party's Air Transport Spokesperson. He has written or edited a number of Green
Party publications on transport. Seth Crook BA PhD has been visiting philosophy lecturer
teaching on green issues at universities in California, Oregon and Illinois. He is currently head of
the Hebridean Green Philosophy Circle and contributes to the Green Party's research
programme.

Acknowledgements

The authors would like to thank Dr Caroline Lucas MEP (Green Party, South East England), Dr
Lucy Ford, AirportWatch, the Aviation Environment Federation, the European Federation for
Transport & Environment, Friends of the Earth, Transport 2000, the Gatwick Area Conservation
Campaign, HACAN Clear Skies, North West Essex & East Herts Preservation Association,
Manchester Airport Environment Network, and the Financial Times.
Contents
Foreword
Summary
1. Introduction - Aviation growth: the economic downside
2. Noise pollution from air transport: health and economic impacts
3. Air pollution from aircraft and airports: health and economic impacts
4. Climate change: the colossal economic costs of air transport pollution
5. The hidden costs of aviation
6. The hidden subsidies to aviation
7. Aviation is a drain on the UK balance of payments
8. Cutting through the aviation sector's economic propaganda
9. Policies for economic and ecological sustainability in the aviation sector
10. Conclusion
Notes

Foreword

Caroline Lucas MEP

(Green Party, South East England)

When this report was first published in August 2001 it made uncomfortable reading for the
government and the aviation industry. By drawing together data about flying’s impact on the UK
economy, it put the lie to the industry-sponsored myth that aviation was good for business. In
fact, it found that the industry costs the country more than £11 billion each year in tax breaks,
hidden subsidies, ill health and environmental clean up.

This new edition of Aviation’s Economic Downside will make uncomfortable reading for all of us.
In July 2002 transport secretary Alistair Darling announced the most ambitious programme of
airport development in British history, claiming expansion is needed to meet projected growth of
some 300 per cent and that the UK needs new airports to meet business demand and maintain
London’s competitive edge. This report shows these claims are simply not true. The high
projected growth in demand for flying is a product of the cheap flights made possible only thanks
to the billions of taxpayers’ pounds being used to prop up the industry. And business reliance on
flying is a consequence of the same policy: the deliberate creation of an uneven playing field for
transport, with taxpayers’ money being spent on subsidising cheap flights rather than investing in
greener alternatives.

Seasoned campaigners living in the shadow of Heathrow and elsewhere have already mobilized
widespread opposition to the plans. In my constituency, proposals for a brand new airport the
size of Gatwick on the banks of the Thames estuary, at Cliffe in Kent, have caused particular
alarm and generated some very active local anti-airport campaigns. But the threat is more
widespread than that: a plan has been proposed to give Stansted three more runways, multiply
its passengers throughout by ten (to 122 million) and turn it into an airport twice the size of
Heathrow. Manchester airport, which recently built a second runway as part of a £525 million 10-
year expansion, wants to grow to 41 million passengers per annum by 2015, from 15 million in
1995. All over the country, airports are seeking to expand regardless of the consequences.
But the proposed expansion to the aviation industry poses a far greater threat to us all than a
local campaign seeking to conserve its own environment can tackle, however large or well-
organised the individual group concerned. We need a concerted, co-ordinated, national effort to
explain why any airport expansion would be an unsustainable drain on the UK economy and
major impact on both the local and the global environment. We need to realise that the issue is
not about whose back yard airports are built in, but whether we build them in any back yard at all.

Aviation’s environmental downside is already well documented: a scientific consensus has

emerged on the industry’s contribution to climate change and ill health. This report contributes to
our understanding of the economics of flying, and the clear picture that is starting to emerge: that
the much-vaunted economic benefits of our aviation industry are a mirage, disappearing when
you look closely.

Summary
S1 Aviation is the most highly-polluting transport mode on earth, and its pollution constitutes a
major hidden cost to the economy. Aviation is also subsidised directly and indirectly by the
taxpayer, and is a major drain on the UK balance of payments.

S2 The health costs of air pollution from the UK aviation sector are estimated at more than £1.3
billion pounds a year.

S3 The economic costs of aircraft noise in the UK are estimated at £313 million a year.

S4 The costs of UK aviation's contribution to climate change are estimated at well over £2 billion
a year in 2001. And unless the government radically changes its policy on the matter, aviation's
CO2 emissions will have increased by 588% between 1992 and 2050, and its NOx pollution by
411%. By 2050, aviation could be contributing up to 15% of the overall global warming effect
produced by human activities - with staggering economic costs.

S5 The overall hidden economic costs of the European Union's aviation sector are currently
estimated at £14.3 billion a year - of which the UK alone accounts for £3.782 billion, or 26%. This
doesn't include the costs of aviation accidents, accident services, and direct subsidies like the
£500 million given to BAe to help it develop a new airbus.

S6 Hidden subsidies to the aviation sector also include the costs of building and maintaining the
surface transport infrastructure which serves airports - costs which are growing fast in parallel
with the growth of aviation.

S7 Aviation is under-taxed compared to most sectors. Flight tickets, aircraft and aviation fuel are
zero-rated for VAT. HM Treasury collects £1 billion in air passenger duty per year, but forgoes £3
billion due to VAT zero-rating of aviation products and loss of excise revenue. Aviation fuel pays
no tax at all, although if it were taxed at the same rate as unleaded petrol, this would raise some
£5 billion a year. Effectively, society is subsidising the aviation industry through a colossal tax-
break of £7 billion a year.

S8 The effect of these tax-breaks and externalities is equivalent to each of the 58 million people
in the UK donating an average £185.90 to the aviation industry every year - not including
accident costs, direct and indirect subsidies to supporting industries including the oil industry and
the aircraft manufacturing industry, or the costs of providing airports with ground transport
infrastructure at public expense.
S9 Air passenger transport currently represents a drain on the UK balance of payments of £8.6
billion a year. This doesn't include the costs of importing fuel and aircraft.

S10 All these costs and subsidies are increasing rapidly as the aviation sector grows.
Government policy continues to support such growth regardless of the consequences.

S11 If remedial action isn't taken, UK air passenger numbers are forecast to increase from 130
million in 1995 to 400 million in 2020 - the equivalent of an extra 4 airports the size of Heathrow
or 12 new airports the size of Manchester. Without remedial action, by 2020 demand is forecast
to be rising by about 15 million passengers a year - equivalent to a new Gatwick every 2 years.

S12 The application of a fairer tax regime on aviation could cut UK passenger numbers to 59%
of the figure forecast for 2020. But even with such measures, passenger numbers would still
have increased by almost 150% during 1998-2020.

S13 The Green Party urges rigorous action to curb the growth of the aviation sector, through the
following 7-point plan:

a. A European-level charge on aviation, based on emissions.

b. An end to all public subsidies to aviation, and all its tax exemptions.

c. Investment in less-polluting travel alternatives. Because 70% of European air trips

are less than 1000 kilometres, there is huge scope for transfer to alternatives.

d. Research into, and promotion of, further alternatives to business air travel, including
video-conferencing, tele-presence etc.

e. Optimisation of air traffic control, which alone could reduce aviation's CO2 emissions
by 6-12% over 20 years.

f. Changes in land-use planning law, requiring all applications for airport development to
give full consideration to climate change, health, external costs and alternative job-creation.

g. A public education programme on the negative economic and ecological

consequences of air transportation.

1. Introduction

Aviation growth: the economic downside

"…an unquestioning attitude toward future growth in air travel, and an acceptance that
the projected demand for additional facilities must be met, are incompatible with the aims
of sustainable development."
Royal Commission on Environmental Pollution, 18th Report on Transport and the Environment

1.1 Aviation is the most highly-polluting transport mode on earth. Its pollution translates into
hidden economic costs which are paid not by the industry itself but by society as a whole.
Aviation is the fastest-growing source of greenhouse gas emissions, and a major contributor to
climate change and the resulting damage to the economy.
1.2 Yet the fuel aircraft burn to cause this pollution isn't even taxed. Unlike most goods, aircraft
and aviation fuel and airline tickets are zero-rated for VAT. The hidden subsidies to the aviation
sector also include:

a. Health costs associated with noise and air pollution.

b. Costs of building and maintaining the transport infrastructure which serves airports.

c. Direct and indirect subsidies to the industries which supply the air transport sector,
including oil and aircraft manufacturing.

1.3 The effect of these tax breaks and hidden costs is equivalent to every man, woman and child
in the UK donating an average £182.45 to the aviation industry every year - not including direct
and indirect subsidies to the oil industry and to the aircraft manufacturing industry, or the costs of
providing airports with ground transport infrastructure and emergency services at public expense.
Although some people derive economic advantage from this situation, the net effect is that those
who don't fly are subsidising those who do, and those who fly occasionally are subsidising those
who fly a lot. Society is subsidising businesses that generate air travel, but not businesses that
don't. All this is incompatible with the government's professed belief both in economic level
playing fields and in social justice.

1.4 The UK has the biggest airline, the largest airport, a very dynamic market (including new low-
budget airlines) and very high passenger growth rates. Of all European Union countries, the UK
is the worst offender when it comes to passing the hidden costs of aviation on to society as a
whole. The UK generates over a quarter of the European Union's hidden aviation costs. (See
tables 1 and 2 in section 6 of this report.)

1.5 Growth forecasts vary, but the middle of the range indicates at least a doubling of the miles
flown between 1995 and 2015. On a 1995 base, global forecasts of miles flown in the year 2015
range from a low growth of 181% to a high growth of 380%. Recent government forecasts predict
a 239% increase. That is, 310 million passengers will go through UK airports in 2015, up from
130 million in 1995 - an increase of 180 million passengers in 20 years. That's the equivalent of
an extra 4 airports the size of Heathrow or 12 new airports the size of Manchester. [ 1 ] By 2020
the forecasts indicate that demand will be rising by about 15 million a year, equivalent to a new
Gatwick every 2 years. [ 2 ]

1.6 As the aviation sector expands, so the environmental and economic costs associated with it
expand.

2. Noise pollution from air transport: health and economic

impacts
2.1 Aircraft noise is not simply annoying. It can be a significant threat to health. It thus has
human, social and economic costs.

2.2 According to the World Health Organisation: "Environments with heavy noise [are
characterised by] cardiac diseases, doctors' calls and purchase of medicine more frequently than
in quiet environments." [ 3 ]

2.3 The World Health Organisation proposes a range of noise standards designed to protect
human health. Yet over 170,000 people in Britain are currently threatened with aviation-
associated noise that fails to meet these standards. Evidence from specific studies points to
clear areas of health damage in noisy environments, such as reading deficits and problems with
cognitive development among infants and pre-school children. [ 4 ]

2.4 The growth of aviation will make the problem worse, and currently there is no government or
industry response that can guarantee noise reductions to safe WHO levels.

2.5 Airports and aircraft manufacturers promise "quieter" aircraft. But this is not solving the
problem. Airports in Germany are served by the same kind of "quieter" aircraft that serve UK
airports, but there is still a trend towards more people being affected by noise. [ 5 ]

2.6 It's impossible to quantify all the negative impacts of aircraft noise, such as the negative
effects on the education and development of individual children. But studies indicate that the
economic costs of aircraft noise pollution in the UK amount to £313 million a year. [ 6 ]

3. Air pollution from aircraft and airports: health and economic

impacts
3.1 US data clearly suggests that aviation contributes significantly to local inventories of
emissions such as Volatile Organic Compounds (VOCs) and Nitrogen Oxides (NOx). Studies
around Zurich Airport and Stockholm Arlanda Airport show that aviation contributes a significant
share of total emissions within a well-defined geographical area. [ 7 ] The London Borough of
Hounslow, which borders on Heathrow Airport and monitors air pollution, is of the view that
"further expansion of the airport and associated road traffic congestion could lead to significant
worsening of local air quality." [ 8 ] In a press release dated 10.8.99 the same authority concludes
"It is clear that the use of motor vehicles and the operation of Heathrow Airport heavily influence
the levels of air pollution in Hounslow". A study of London's second largest airport [ 9 ] came to a
similar conclusion: "The Gatwick Study reveals a dramatic rise in aircraft derived emissions -
particularly NOx. For this pollutant at least, it will mean that air quality in neighbouring Horley will
remain above National Air Quality Strategy levels beyond 2005 despite the dramatic drop in road
vehicle emissions." Similar fears have been expressed at other airports, not least due to the
massive increase in ground traffic. Britain's third largest airport, Manchester, is seeking a
doubling of passenger numbers between 1995 and 2005, which will lead to an extra 12 million
car journeys a year around what is arguably Britain's most traffic-polluted city. [ 10 ]

3.2 Heathrow alone contributes about 10% of the England and Wales total of VOCs. Its NOx
levels are predicted to rise by 110% by 2015. Yet this pollution is associated with a range of
serious health risks. [ 11 ]

3.3 Problems associated with various pollutants include the following:

a. Carbon dioxide (CO2): at high levels this causes headaches, drowsiness, nausea, slowed
reflexes, and at very high levels it causes death. At low levels it can impair concentration and
nervous system function and may cause exercise-related heart pain in people with coronary
heart disease.

b. Nitrogen oxides (NOx): impairs respiratory cell function and damages blood capillaries and
cells of the immune system.

c. Carbon monoxide (CO): increases susceptibility to infection and aggravates asthma. In

children exposure may result in coughs, colds, phlegm, shortness of breath, chronic wheezing
and respiratory diseases including bronchitis.
d. Ozone (O3): ground level ozone reduces lung function in healthy people as well as those with
asthma. It may increase susceptibility to infection and responsiveness to allergens such as
pollens and house dust mites. It may cause coughs, irritation of the eyes, nose and throat,
headaches, nausea, chest pain and loss of lung efficiency, and increases in the likelihood of
asthma attacks.

e. Particulate matter (PM): strongly associated with a wide range of symptoms such as coughs,
colds, phlegm, sinusitis, shortness of breath, chronic wheezing, chest pain, asthma, bronchitis,
emphysema and loss of lung efficiency. As many as 15% of asthma and 7% of Chronic
Obstructive Pulmonary Disease cases in the urban population are estimated to be possibly
related to prolonged exposure to high concentrations of PM. Long term exposure is associated
with increased risk of death from heart and lung diseases. PM may carry carcinogens such as
polycyclic aromatic hydrocarbons (PAHs), hence may increase the risk of developing cancer.

f. Volatile Organic Compounds (VOC): This category of pollutant includes thousands of different
chemicals, many of which are hydrocarbons (HC). They may cause skin irritation, breathing
difficulties and long term exposure may impair lung function. Many individual compounds are
carcinogenic (including benzene). Benzene can cause leukaemia. Those most at risk are people
exposed to benzene at work or who live or work in the vicinity of petrol filling stations or general
vehicle activity.

g. Sulphur Dioxide (SO2): SO2 irritates the lungs and is associated with chronic bronchitis.
People with asthma are particularly vulnerable and a few minutes' exposure to the pollutant may
trigger an attack. The most serious effect occurs when SO2 is absorbed by particulate matter and
then inhaled into the lungs. At high doses it can release sulphuric acid on reaction with moisture
in the lungs. This can result in widespread death and illness - for example, it is likely to have
been the main cause of the 4000 deaths during the notorious 1952 London smog. [ 12 ] One
study cites cancer. [ 13 ]

3.4 Given the above it's no wonder that air pollution, including from aircraft and the surface
traffic pollution associated with airports, kills 12,000-24,000 people in the UK every year [ 14 ]
and requires medical treatment for thousands more. The health costs of air pollution from the UK
aviation sector are estimated at more than £1.3 billion a year. [ 15 ]

4. Climate change: the colossal economic costs of air transport

pollution
4.1 Aviation currently accounts for just over 3.5% of total CO2 emissions. According to a recent
report by the Intergovernmental Panel on Climate Change, by 2050 emissions from aircraft could
be responsible for up to 15% of the overall global warming produced by human activities. [ 16 ]

4.2 Not only is aviation the fastest-growing source of CO2 emissions. Aircraft emit a very large
proportion of their pollutants directly into the upper troposphere and lower stratosphere, where
the pollution is disproportionately damaging. It has been argued that aircraft pollution from NOx
effectively doubles the contribution to global warming from aviation's share of the main
greenhouse gas, CO2 itself. [ 17 ] Moreover, the ground traffic associated with airports is
considered to be an even greater contribution to climate change than the aircraft themselves.
[ 18 ]

4.3 All the forecasts point to large increases in the global inventory of pollutants from aviation:
the percentage change for CO2 in the period 1992-2050 is expected to be 588%. The equivalent
NOx increase for the same period is 411%. [ 19 ]
4.4 Of further concern are contrails, the vapour trails made by aircraft. Below the flight corridors
where air traffic is concentrated, contrails could have a greater warming effect than all
greenhouse gas emissions together.[ 20 ]

4.5 Estimates of the economic costs of climate change vary widely. But climate-induced damage
appears to be increasing at a faster rate than economic growth, so that at some point this century
the damage caused by climate change might be expected to equal or surpass the sum of the
world's annual economic product. [ 21 ]

4.6 The costs of UK aviation's contribution to climate change are estimated at well over £2 billion
a year. [ 22 ]

5. The hidden costs of aviation

5.1 Regardless of any detailed arguments about methodologies of studies into the alleged
benefits of the aviation sector, the external costs alone illustrate that this particular golden goose
has something of the appearance of a white elephant. (See tables 1 and 2.)

Table 1: Annual external costs of EU aviation: in billions of pounds

PASSENGER FREIGHT

Noise 1.9 0.6

Air pollution 3.1 1.0

Climate change 6.1 2.0

Total 10.7 3.6

Table 2: Annual external costs of UK aviation: in millions of pounds

PASSENGER FREIGHT

Noise 257 56

Air pollution 1063 243

Climate change 1750 398

 Total 3085 697

Overall Total for passengers + freight: £3,782 million

5.2 It will be noted that the UK figures represent 26% of the total for the European Union. The
Green Party believes that if one country out of 15 is responsible for more than a quarter of the
total external environmental costs, then that country must take the lead in exercising
responsibility for solving the problem. [ 23 ]

5.3 The European Environment Agency has estimated that the costs of climate change, health,
accident, noise, air pollution, landscape, nature loss etc presently unaccounted for and unpaid
amounts to about €44 (£28.39) per 1000 passenger kilometres. [ 24 ] This is the equivalent of
subsidising each passenger on a return flight from Luton to Glasgow by £28 for the external
costs of their environmental impacts. [ 25 ]

6. The hidden subsidies to aviation

"...the demand for air transport might not be growing at the present rate if airlines and
their customers had to face the costs of the damage they are causing to the
environment."

Royal Commission on Environmental Pollution 18th Report, Transport and the Environment',
October 1994.
[ 26 ]

6.1 Aviation is doubly subsidised. Firstly, as described in the previous section, it externalises
many of its costs. Secondly, it almost entirely escapes taxation. Although air passenger duty
raises about £1 billion a year, there is no tax on aviation fuel, no VAT on aircraft fuel, the
purchase of new aircraft, aircraft maintenance or airline tickets, and no duty is paid on consumer
goods sold to non-EC citizens.

6.2 If aviation fuel were taxed at the same rate as unleaded petrol, this would raise about £5
billion a year. [ 27 ]

6.3 If aviation's VAT zero-rating were removed, this would raise £2.6bn for VAT on aircraft fuel,
passenger tickets etc, and £0.4bn for excise duty and VAT on consumer goods. [ 28 ]

6.4 That is, even allowing for £1 billion revenue from air passenger tax, society is effectively
providing a colossal hidden subsidy to the aviation industry in the form of a tax-break of
astonishing proportions - some £7 billion a year.

6.5 Partly as a result of these hidden subsidies, air tickets are 42% cheaper today than they were
ten years ago. [ 29 ]

6.6 If the government forecast that air passenger numbers will increase by 250% over the next
twenty years, UK aviation's tax breaks would amount to about £17.5 billion per year. [ 30 ] These
tax breaks amount to subsidies primarily in favour of wealthier people. A Mori Poll,
commissioned in 2001 by the industry pressure group Freedom to Fly, showed that only 2 out of
5 people had made a trip by plane in the last 12 months, and those most likely to have flown
were people earning over £30,000 [ 31 ] Essentially, those who don't fly are subsidising those
who do, and those who fly a little are subsidising those who fly a lot.
6.7 According to a UK government report, [ 32 ] introducing an aviation fuel tax at 100% would
reduce demand by 10%. Taxing aviation fuel at 25p a litre - just half the rate applied to motor
fuel (i.e. at around 140%) - might therefore be expected to reduce demand by about 14%. This
would reduce the mid-point forecast for the number of passengers passing through UK airports in
2020 from 400 million to 344 million. [ 33 ]

6.8 VAT on air travel (including fuel and aircraft purchases) would put air fares up by 17.5%.
DETR figures [ 34 ] indicate that this would reduce demand by about 22%. Imposing both a fuel
tax and VAT would reduce forecast demand to around 268 million. [ 35 ]

6.9 Trebling airport charges at Heathrow and Gatwick would raise average UK airport charges by
about 100%. The government's figures indicate that this could be expected to reduce demand by
a further 11%. The abolition of the remaining duty-free might knock off a further 1%, reducing the
total demand in 2020 to 236 million. [ 36 ]

6.10 It would seem reasonable to conclude that the total effect of introducing realistic landing
fees and a fairer tax regime - even with aviation fuel taxed at only half the rate of unleaded petrol
- would be to bring about a situation where demand for air travel rises from 160 million
passengers using UK airports in 1998 to about 236 million in 2020. This would represent a
significant reduction in the growth of CO2 emissions and of the various hidden costs, but would
still represent an increase in passenger numbers of 147.5% over 22 years. [ 37 ]

6.11 A greater reduction in growth would be desirable in order to help the UK meet serious
emissions-reduction targets and further reduce the growth of aviation's hidden costs. This could
probably be achieved through a combination of measures:

a. Higher rates of aviation fuel tax.

b. Public education on the impacts of aviation - especially with reference to climate

change, which is of growing concern to the public.

c. Provision and active promotion of alternatives to air travel.

d. Encouragement of UK holiday options not requiring air travel.

7. Aviation is a drain on the UK balance of payments

7.1 The economic effects of aviation are not the same for everyone everywhere. This is
particularly significant with respect to tourism. Far more tourist money flies out of the UK than
flies in - £17.7 billion a year compared to £9.1 billion. That's an £8.6 billion annual drain on the
UK balance of payments due to air tourism. As fares have become cheaper, so this deficit has
increased, as subsidised flights tempt far more Britons abroad than are persuaded to visit the
UK. [ 38 ]

7.2 Aviation is extremely fuel-intensive and relies on imported oil. Moreover a very high
proportion of the air transport fleet is made up of imported aircraft. On both counts the UK suffers
a further drain on its balance of payments. Efforts to manufacture a higher proportion of aircraft
in the UK involve huge subsidies from the public to the aviation industry - for example the £500
million donated by the UK government to BAe to help it build its Airbus. [ 39 ]
8. Cutting through the aviation sector's economic propaganda
8.1 The case for expanding airports and supporting the growth of aviation is usually
accompanied by claims about the economic gains associated with this growth. The claims fall
generally into two categories: the amount by which aviation supposedly benefits the economy,
and the number of jobs this will create. In both cases these arguments are commonly
inconsistent, flawed and misleading.

Aviation is a net drain on the UK economy

8.2 When the government announced that it wanted a massive expansion of airport capacity in
summer 2002, a standard claim reiterated in the media was that aviation benefited the UK
economy by some £15 billion a year.
[ 40 ] However, it must be noted that if British consumers spend £15 billion of their disposable
income each year on aviation products, then that is £15 billion they are not spending elsewhere
in the economy. If, for arguments' sake, demand for aviation was only two-thirds of that figure,
then the consumers would be spending £15 billion on aviation and the remaining £5 billion
elsewhere in the economy. There is nothing about the aviation industry which is inherently
'valuable to the economy' in this sense. [ 41 ]

8.3 Moreover, it has been seen above that there are substantial tax breaks and externalised
costs to take into account, as well as the net drain on the UK balance of payments. Between
them, these outweigh the supposed contribution which aviation makes to the UK economy:

External costs £3.782 billion

Tax breaks £7 billion
Balance of payments deficit £8.6 billion

Total £19.382 billion

The myth of 'environment v economy' in the aviation debate

8.4 The aviation industry is adept at the skilful use of partial information, including slanted or
selective statistics, to argue that an airport is some kind of magical goose that lays golden eggs.
Media reportage of such claims is often uncritical, so that the public is usually unlikely to be
presented with an informed critique of grandiose claims by airports.

8.5 The issue of an airport expansion is most commonly resolved into the false argument of
economic benefits v environmental disbenefits, and the latter are usually presented as noise
nuisance and loss of greenbelt - as though climate change and other huge negative economic
impacts of aviation simply didn't exist.

Does aviation really create jobs?

8.6 A study by Oxford Economic Forecasting, based on 1998 figures, argued that aviation
directly employs 180,000 people (0.8% of the total) and supported up to 3 times as many
additional indirect jobs. [ 42 ] But there is nothing special about aviation when it comes to
creating jobs - all sectors of the economy sustain jobs. The more money passes through that
sector, the more jobs it will sustain. But there are two crucial factors to bear in mind:
 a. There is an 'opportunity cost' involved. All the money that consumers choose to spend
in the aviation sectors, they are choosing not to spend in another sector of the economy. Jobs
created in aviation result in jobs not created in other sectors of the economy.

b. Aviation is extremely capital-intensive and resource-intensive. A high proportion of the

turnover of the industry is spent on (1) expensive technology and (2) burning fossil fuels, and
therefore a relatively low proportion of its turnover is spent actually employing people compared
to probably most other sectors of the economy.

8.7 However, job-creation has been a vital component in the economic myths promoted by the
aviation lobby. And sometimes the numbers of jobs to be created by an airport expansion have
been grossly misleading, but have served to (unjustifiably) strengthen the case for the
development. For example, Manchester Airport plc announced in 1991 that it wanted to built a
second runway which would create 50,000 jobs. The latter claim was based on a flawed study -
but the point was made and the media continued to associate Runway 2 with 50,000 jobs. A
second study on Runway 2 and job-creation was commissioned by the Airport but never
published. A third, presented by the Airport to the Runway 2 public inquiry in a detailed
econometric report, revised the figure from 50,000 down to 18,000 - and even then could only
reach this figure by making absurd claims about the jobs to come from tourism and inward
investment - but the media continued to use the 50,000 figure anyway.
[ 43 ]

8.8 Moreover, the lengthy econometric study commissioned by the Airport in that case gave the
distinct impression that the choice was between building Runway 2 and creating 18,000 jobs, or
not building Runway 2 and not creating any jobs. There was simply no comparison of the
alternative job-creation potential of the same investment being applied to other sectors of the
economy (as Manchester Airport is owned by the Greater Manchester local authorities, which
could have used airport profits for purposes other than investment in airport expansion). The
Green Party established through correspondence with the majority shareholder that the latter had
taken no account whatsoever either of alternative job-creation potential, or of the external costs
of the airport, when it decided to support the £525 million expansion of the Airport between 1995
and 2005. [ 44 ]

Do airports generate wealth?

8.9 The aviation industry is happy to spread the simplistic and questionable impression that
airports generate wealth, whereas in reality airport expansion is only facilitated by consumer
choice - that is, by people deciding to spend their money on aviation rather than elsewhere in the
economy. Of course, if a person chooses to spend money on furniture, home improvements, car
maintenance, a non-air holiday or anything else for that matter, their spending will still create
jobs somewhere else in the economy. Because air travel is heavily subsidised by society -
because it passes on billions of pounds of external costs to society every year, and evades
billions of pounds in taxation - it simply appears good value for money. But if the cost of air travel
reflected its true costs to society, and if it paid its way through taxation as other items must, then
it could not appear such good value, and demand would fall. The Royal Commission on
Environmental Pollution has attributed the rapid growth of aviation to the fact that aircraft and
aviation fuel escape any kind of taxation. [ 45 ] [ 46 ]

8.10 A public education programme is necessary to provide balance in the public's perception of
the economics of aviation.
9. Policies for economic and ecological sustainability in the
aviation sector
9.1 The latest scientific evidence on climate change, and on the contribution of aviation to global
inventories of greenhouse gases, and the expected economic disbenefits of climate change,
point to the need for a fundamental change in public policy towards aviation - for both economic
and ecological reasons.

9.2 Recent years have seen major changes in land-based transport where traffic reduction is now
part (albeit imperfectly) of most policy agendas. If international organisations, the European
Union and national governments have agreed sustainable development strategies and/or
greenhouse gas reduction strategies then it follows that aviation, like any other commercial
activity, should be expected to play its part in delivering those reductions.

9.3 The following policies would help achieve such reductions with respect to aviation.

A European environmental charge based on emissions

9.4 The demand for aviation can be reduced by policies that build into the cost of a flight the full
cost of that flight. [ 47 ] Such a policy is already accepted for the transport sector as a whole (for
example, lorries) where the Polluter Pays Principle is agreed European Union policy. This can be
achieved by different methods including fuel charges, landing charges and seat/ticket charges.
Any or all of these pricing strategies can be used to achieve a target level of cost paid by the
user and modified from time to time to reflect new calculations on the costs of noise or damage
to human health or climate change effects.

9.5 Pending wider agreement, the Green Party is calling for UK regional or local authorities to be
given the power to levy 'air traffic congestion charges' similar to road traffic congestion charges.
The Greens on the London Assembly have called for the GLA to be given this power, and to set
a charge equivalent to one-fifth of an airport's estimated external costs. [ 48 ]

9.6 The Green Party is also calling for a Zurich-style emissions charge, to discourage the most
heavily-polluting types of aircraft. This is a revenue-neutral charge under which aircraft are
categorised according to their emissions, and the most heavily-polluting aircraft pay greater
charges. [ 49 ]

Ending all subsidies and tax exemptions

9.7 It is normal for airports to be connected at public expense to the public road and rail systems
and for those systems to be expanded when demand rises. Airlines receive large amounts of
funds from national governments for "restructuring," and air traffic control costs are funded partly
if not wholly from public funds. All these methods of shifting costs of aviation away from users
and onto the taxpayer, whether he or she flies or not, are economic distortions and should be
ended together with fuel tax exemption and zero-rated VAT on aircraft, aviation fuel and airline
tickets.

9.8 The Green Party is calling on the UK government to internalise aviation's external costs by
means of an end to tax exemptions, plus the levying of such other taxes as are necessary to do
so.
9.9 The European Union is deeply involved in funding the expansion of aviation facilities via the
European Investment Bank. [ 50 ] Large sums are provided under very favourable terms and
conditions. This system of loans acts as both an insulator from the normal rigours of free-market
financing and as a strong force pushing up the supply of infrastructure and stimulating growth in
demand. The removal of these unnecessary privileges and subsidies is a key component of any
strategy to reduce the demand for air transportation.

Optimising air traffic control

9.10 The Intergovernmental Panel on Climate Change has published a report showing that an
overall fuel saving of 6-12% could be achieved by implementation of an improved air traffic
control system during the next 20 years. [ 51 ] This would achieve a proportionate reduction in
the associated hidden costs.

More stringent noise and emission standards for aircraft and for geographical areas
around airports

9.11 Communities around airports will inevitably be lighted to a degree by factors like noise and
the generation of ground traffic, which has knock-on effects in terms of congestion and pollution.
To a certain extent, these factors are acceptable as a matter of collective choice: if society wants
air travel, there will be social and human costs. But those who are using aviation should
compensate those most adversely affected by it - hence the air traffic congestion charge which
the Green Party proposes for local or regional government, which would compensate the
affected area by feeding the revenue into projects calculated to improve quality of life.

9.12 However, This alone in insufficient, and there should be tight controls on noise and
emission, strict regulation of flight paths, and a ban on night-time flying.

Provision of alternatives to air transport

9.13 Studies show that air travel produces far more CO2 emissions per passenger kilometre than
rail. Over short distances (i.e. less than 500km) air travel produces around three times more
CO2 per passenger kilometre than rail. Nearly 70% of all flights within European airspace are
less than 1000km long, and in 1998 there were over 7.5 million flights within European airspace.
[ 52 ] So clearly there is considerable scope for replacing air travel with rail travel, and the
necessary investment must be made to facilitate the shift.

Research into further alternatives to air transport

9.14 Use of email, data transfer, video link-up, tele-presence etc can reduce the need for
physical travel. A high proportion of business travel could be avoided by these methods, which
are also cheaper and make better use of time. Evidence on the extent to which this is happening
is scarce but the experience of telework in the European Union where the substitution is for the
journey to work by car shows that the potential is there to be exploited. [ 53 ]

Change in UK land-use planning system

9.15 In considering applications for airport development, independent auditing of economic

justifications should be mandatory. Full weight must be given to the climate change and human
health issues, external costs and alternative job-creation potential - considerations not
adequately considered even in the lengthy public inquiries into Manchester's Runway 2 and
Heathrow's Terminal 5.

Education on the negative economic and ecological impacts of aviation

9.16 Consumer choice in favour of air travel is heavily influenced by the fact that it's heavily
subsidised and therefore cheaper (or rather, appears cheaper, the true costs being hidden by the
subsidies, tax-breaks and externalities). Demand is further encouraged by an abundance of
advertising, travel programmes, uncritically positive news reportage of airports as "generators of
wealth", etc, which contrasts sharply with a dearth of information about the negative
consequences of air transportation. Balance must be restored through a comprehensive public
education effort.

10. Conclusion
"The air transport industry is growing faster than we are currently producing and
introducing technological and operational advances which reduce the environmental
impact at source.

"The overall environmental impact is bound to increase since the gap between the rate of
growth and the rate of environmental improvement appears to widen in important fields
such as emissions of greenhouse gases.

"This trend is unsustainable and must be reversed because of its impact on climate and
the quality of life and health of European citizens."

European Commission, 2000 [ 54 ]

10.1 The environmental impacts of aviation, which are already huge and are continuing to grow,
translate into negative economic impacts. Reducing the ecological and economic impacts can
only be successful if we reduce the size of the industry.

10.2 Whilst society will doubtless continue to make use of aviation on a large scale, it certainly
isn't inevitable that demand for aviation will continue to grow. Demand is artificially stimulated by
direct and indirect subsidies, and if these were removed, then aviation would not be seen as
such good value for money. Moreover, as public concern about climate change grows, and as
people become increasingly aware of aviation's contribution to this and other problems, more
people will seek alternatives. On both counts, demand for air travel will fall.

10.3 The seriousness of problems like climate change and pollution-induced illness, and the
scale of the economic disadvantages, suggest that we can't leave things to chance. There must
be a determined effort to reduce the negative impacts of the aviation industry. This effort must be
led by government policy, as a matter of public interest and ecological sustainability.

10.4 The Green Party has led the way in advancing policies for tackling the ongoing ecological
crisis and for developing a sustainable and socially just economy. We shall continue to do so, not
least in the realm of aviation.

Notes
1. DETR, 1997. Caroline Lucas MEP, response to The Future of Aviation, government
consultation document on air transport policy, 2001, correspondence with the author, cites an
increase of 240 million, from 160 million to 400 million, between 1998 and 2020.
2. Caroline Lucas MEP, ibid.
3. World Health Organisation (1993) Community Noise, p83.
4. WHO (1993), p99. A 1995 study of school children around Munich Airport (Natural Resources
Defense Council, 1996) noted that those children living in areas affected by aircraft noise had
poorer long-term memory recall, reading comprehension and overall tolerance levels than did
children in a comparable urban environment unaffected by aircraft noise. A study around
LaGuardia and JFK International Airports in the USA controlled for racial, socio-economic and
educational factors concluded that high levels of environmental noise are inversely related to
reading ability in primary school children. Natural Resources Defense Council (1996) Flying Off
Course: Environmental Impacts of America's Airports, NRDC, Washington DC, USA.
5. See John Whitelegg, The Plane Truth, Ashden Trust.
6. External effects of transport by IWW, Karlsruhe, Germany and Infras, Zurich. IWW and Infras
are the leading transport economics consultancies in Europe. This report was dated 1994 and
appears to be the most up-to-date study. Figures have been factored up by 48% in line with the
rate of growth of the industry since the IWW/Infras research, and converted into sterling on the
basis of 1 Euro = £0.60.
7. Airports and the Environment, edited by Anne Paylor, MDIS Publications Ltd, Chichester, West
Sussex, 1994. Konzepte Studie zur Umweltsituation des Rhein-Main-Flugahafens Frankfurt/Main,
TUV Rheinland Gruppe, 1992.
8. Source: http://www.hounslow.gov.uk/es/monitor.html .
9. Pease 1999.
10. See Pigs Might Fly: A Green economic critique of Manchester airport's expansion, North
West Green Party, April 1996.
11. NRDC 1996.
12. Source: British Lung Foundation (1998) Transport and Pollution: the health costs.
13. Environment Protection Agency (1993) Estimation and evaluation of cancer risks attributable
to air pollution in SW Chicago, EPA, Washington DC, USA. Conclusion: these pollutants
contributed to elevated rates of cancer incidence in the vicinity of Midway Airport (SW Chicago).
Midway's arriving and departing planes contribute far more of these toxic pollutants than other
industrial sources within a pre-defined 16 square mile study area. The EPA study estimates that
aircraft engines are responsible for 10.5% of the cancer cases in SW Chicago caused by toxic
air pollution.
14. UK government figures.
15. External effects of transport by IWW and Infras, ibid.
16. IPCC, Special Report on Aviation and the Global Atmosphere.
17. See Aircraft and Our Atmosphere: Air Transport and Global Warming. Green Party Transport
Policy Working Group, March 1997.
18. Atmospheric Research and Information Centre (ARIC), Manchester Metropolitan University,
correspondence with Spencer Fitz-Gibbon.
19. See Intergovernmental Panel on Climate Change (IPCC) report Aviation and the Global
Atmosphere, June 1999.
20. Sustainable Aviation: The Need for a European Environmental Aviation Charge, European
Federation for Transport and the Environment, Brussels, 1998.
21. See Climate Change: Crisis and Opportunity, Green Party, forthcoming.
22. External effects of transport by IWW and Infras, ibid.
23. Source for Tables 1 and 2: Green Party calculations based on External effects of transport by
IWW, Karlsruhe, Germany and Infras, Zurich. IWW and Infras are the leading transport
economics consultancies in Europe. This report was dated 1994 and appears to be the most up-
to-date study of this kind. Figures have been factored up by 48% in line with the rate of growth of
the industry since the IWW/Infras research, and converted into sterling on the basis of 1 Euro =
£0.60. AirportWatch arrive at an overall estimate of about £3 billion a year external costs for UK
aviation in 2000: see http://www.airportwatch.org.uk/briefings/externalcosts.htm .
24. European Environment Agency TERM 2001 report, INFRAS/IWW study, cit AirportWatch,
'AirportWatch Aims', http://www.airportwatch.org.uk/about/aims.htm .
25. AirportWatch, 'AirportWatch Aims', http://www.airportwatch.org.uk/about/aims.htm .
26. Cit Airport Watch, 'Briefing Note on the External Costs of Aviation',
http://www.airportwatch.org.uk/briefings/ecost1.htm .
27. See Brendon Sewill, Tax Free Aviation, published in December 2000 by the Aviation
Environment Federation with the support of Friends of the Earth, Transport 2000, Gatwick Area
Conservation Campaign, HACAN Clear Skies, North West Essex and East Herts Preservation
Association and Manchester Airport Environment Network.
28. AirportWatch briefing 'Aviation, the Economy and Taxation',
http://www.airportwatch.org.uk/briefings/econ6.htm .
29. Caroline Lucas MEP, response to The Future of Aviation, government consultation document
on air transport policy, 2001, correspondence with author.
30. AirportWatch briefing 'Aviation, the Economy and Taxation',
http://www.airportwatch.org.uk/briefings/econ6.htm .
31. Cit AirportWatch briefing 'Aviation, the Economy and Taxation',
http://www.airportwatch.org.uk/briefings/econ6.htm .
32. DETR Air Traffic Forecasts.
33. Caroline Lucas MEP, response to The Future of Aviation, government consultation document
on air transport policy, 2001, correspondence with author.
34. DETR, ibid.
35. Caroline Lucas MEP, ibid.
36. Caroline Lucas MEP, ibid.
37. Caroline Lucas MEP, ibid.
38. AirportWatch briefing 'Aviation, the Economy and Tourism':
http://www.airportwatch.org.uk/briefings/econ2.htm . Note how this has increased as air transport
has grown: in 1997 UK air travellers abroad spent £13.4 billion whereas foreign travellers by air
to the UK spent £9.9 billion, giving a deficit of £3.5 billion: Y Van de Pol (1998) The Myths of
Flying, Friends of the Earth, Amsterdam.
39. See, eg, Financial Times 13.3.2000.
40. A study by Oxford Economic Forecasting, based on 1998 figures, argued that aviation
contributes £10.4 billion to the Gross National Product (1.4% of the total). It concluded that, if the
number of passengers were not allowed to grow at all beyond 1998 levels, £30 billion a year
would be lost to the economy by 2015: AirportWatch briefing 'Aviation and the Economy'
http://www.airportwatch.org.uk/briefings/econ3.htm .
41. This was the clear conclusion of an independent report commissioned from consultants
Berkerley Hanover by the local authority group SASIG and published in 2000: Airport Watch
briefing 'Aviation and the Economy' http://www.airportwatch.org.uk/briefings/econ3.htm .
42. AirportWatch briefing 'Aviation and the Economy'
http://www.airportwatch.org.uk/briefings/econ3.htm . See also
<http://www.airportwatch.org.uk/briefings/Employmentbriefing.doc> or PDF version:
<http://www.airportwatch.org.uk/briefings/Employmentbriefing.pdf> .
43. See Cloud Cuckoo Land: The sad truth about jobs and Runway 2, Manchester Green Party,
March 1996.
44. Correspondence between Spencer Fitz-Gibbon and the chief executive of Manchester City
Council.
45. The RCEP said: "….the demand for air transport might not be growing at the present rate if
airlines and their customers had to face the costs of the damage they are causing to the
environment." Royal Commission on Environmental Pollution, 18th Report on Transport and the
Environment.
46. Two reports published in 1999, dealing specifically with these issues, came to different
conclusions. The Contribution of the Aviation Industry to the UK Economy was prepared by
Oxford Economic Forecasting (OEF) for a consortium of the UK's major airport operators and
airlines and DETR. Transport and the Economy was prepared by the Standing Advisory
Committee on Trunk Road Assessment (SACTRA) for DETR. Although SACTRA's general remit
deals with road transport, the latter report addresses the impact of all transport modes. The
SACTRA report addressed the question of whether improvements in transport infrastructure and
increasing transport capacities lead to increased economic activity. It concluded that although
there are theoretical reasons why improved transport infrastructure could lead to more economic
activity, the empirical evidence for this is weak. Moreover, in a mature economy with developed
transport systems (such as the UK), contribution to economic growth from improved transport is
likely to be modest: SACTRA (1999), p17. It also concluded that it isn't possible to give a
complete and unbiased estimate of the economic impact of transport without an assessment of
environmental costs and that, since transport improvements connect different locations and
areas, the benefits do not necessarily accrue evenly: SACTRA (1999), p22. There may be losers
as well as winners as a result of more competitive areas gaining improved access. Improved
access could lead to loss of employment at particular locations. The OEF Report argues that
there are important links between economic growth and aviation. These, it says, derive from the
contribution aviation makes in its own right to employment, production, exports, investment, and
the impact it has on the performance of other industries as a facilitator of economic growth and
rising productivity. OEF produce quantitative estimates of the negative economic effects of
restricting air travel, including the claim that restricting passenger growth to 3.5% per annum
rather than the predicted 4% would reduce UK GDP by 2.5% by 2015, or £30 billion at 1998
prices. They estimate that over the last 10 years the impact of aviation growth in the UK
economy has been to increase output in the whole economy by about $550 million per year. The
OEF report lacks credibility. Its terms of reference exclude environmental costs, so it presents an
incomplete analysis. In fact it may be that the beneficial effects (including economic benefits) of
restricting air travel would be greater than any unproven estimates of reduced economic growth.
Its data and methodology are also flawed. Some of these data are estimates of the required
variables (such as the indirect employment caused by aviation), and its methodology makes
simplistic assumptions about the nature of the links between aviation and economy that the
SACTRA report reveals to be complex and context-dependent. The theoretical justifications
made by OEF for the links between aviation and economic growth are weak. It is claimed for
example that excellent air services are a key factor in foreign direct investment decisions and
that the UK leads Europe in terms of such investment at least partly because of excellent
accessibility by air. No convincing evidence has been produced to justify this claim. Good air
services are necessary, but any incremental enhancement from an already high level is unlikely
to make a significant difference compared with other advantages that the UK offers such as
language and financial incentives. (See Airports Policy Consortium (1997) Efficiency and Equity,
Policy Paper 1, Surrey UK.) Manchester Airport plc made similar claims when arguing that its
proposed Runway 2 would create thousands of jobs from inward investment. Yet: (a) air
accessibility is only one of a company's requirements, and seldom the highest priority - other
regions were achieving higher levels of inward investment than the North West, despite lesser air
accessibility (see Pigs Might Fly, North West Green Party, op cit); and (b) potential for inward
investment would depend more on the availability of land than on the number of runways at
Britain's third biggest airport - meaning, in this case, pressure to build on large areas of
greenbelt, which would by no means be welcomed whatever the size of the local airport. Finally,
restrictions on the growth of air travel are unlikely to result in a loss of jobs. This is because the
long-run level of employment is determined more by the supply of labour than the level of
demand in particular industries.
47. See Dutch Centre for Energy Conservation and Environmental Technology (1998), A
European Aviation Charge. Feasibility Study, A Bleijenberg and RCN Wit, Centre for Energy
Conservation and Environmental Technology, Delft, Netherlands. Other work carried out
independently of the Dutch Centre for Energy Conservation and Environmental Technology
arrives at similar conclusions. (Brockhagen and Lienemeyer, 1998, Proposal for a European
Aviation Charge. Design and implementation with respect to international economical, ecological,
legal and political constraints.
48. See Lucy Williams and Spencer Fitz-Gibbon, Air Traffic Congestion Charging: The Potential
at Heathrow, July 2002, www.greenparty.org.uk/reports .
49. See Williams and Fitz-Gibbon 2002, ibid.
50. The EIB in 1998 provided 5.4 billion Euros in loans to transport infrastructure projects, of
which 1.25 billion Euros was for air and maritime transport. These loans funded increases in
capacity at Hannover, Edinburgh, Heathrow, Gatwick, Bologna, Athens, Reunion and Madeira
Airports. They also funded airline fleet renewals in Austria, Spain, Portugal, Luxembourg and
Sweden. Annual Report 1998, European Investment Bank, Luxembourg.
51. Caroline Lucas MEP, response to The Future of Aviation, government consultation document
on air transport policy, 2001, correspondence with author.
52. Energy and emissions profiles of aircraft and other modes of transport over European
Distances, Centre for Energy Conservation and Environment Technology, Delft, 1997.
53. Source: http://www.telework-mirti.org .
54. Communication on Air Transport and the Environment (COM(1999)640-C5-0086/2000).