Air Departure Tax: consultations and environmental report

2 Approach to the assessment

2.1 SEA process to date

2.1.1 SEA has a number of distinct stages: screening, scoping, the environmental assessment and the production of an Environmental Report and Post Adoption Statement. At each stage, there is a requirement to consult with three statutory Consultation Authorities. These are Historic Environment Scotland (" HES"), Scottish Natural Heritage (" SNH") and the Scottish Environment Protection Agency (" SEPA"). In addition, there is a requirement for early and effective engagement with the wider public once the Environmental Report has been published.

2.1.2 The SEA process began with the production of a joint Screening and Scoping Report ^[34] published for consultation in March 2016. This set out information including the proposed assessment methodology and environmental baseline that would form the basis of the assessment process. The report also set out information on the consideration of reasonable alternatives and the initial findings of some early assessment work. As noted above, it is a statutory requirement to seek views at screening and scoping stage from the three statutory Consultation Authorities. As a matter of good practice and in the interests of transparency, public consultation was also undertaken at this stage. Further information on this process can be found below in Section 2.2.

2.1.3 Following this stage of consultation, the Scottish Government determined that a SEA would be required. This determination was formally advertised as required by the 2005 Act.

2.2 Views received at Screening and Scoping Stage

2.2.1 The Scottish Government published "A consultation on a Scottish replacement to Air Passenger Duty" ^[35] on 14 March 2016. The policy consultation sought early views on how a tax to replace UK APD in Scotland should be structured and operated in order to boost Scotland's international connectivity and help deliver the Scottish Government's strategic objective of sustainable growth.

2.2.2 In addition, the SEA Screening and Scoping Report ^[36] was also published for consultation. Views were sought at this early stage in the process to help inform the assessment process and ensure that the assessment proceeded with an effective evidence base, informed by key stakeholders, organisations and individuals. Following the close of the consultation period " SEA Screening and Scoping Report Consultation - Analysis of Responses" ^[37] was produced and published in July 2016.

2.2.3 Where applicable, a summary of the views expressed at this consultation stage has been included within this report in coloured text boxes under relevant sections. Details have also been included on how these views have been considered within the assessment process as this progressed.

2.2.4 The paragraphs below set out a summary of the key issues and comments received in response to the Screening and Scoping Report and, where relevant, the 2016 policy consultation.

Overview of comments

2.2.5 One of the main concerns raised from respondents at this stage was the increase in GHG emissions considered likely to arise through greater activity in the aviation sector and the impact of this on Scottish Government's climate change commitments and ambitions. Other common issues included the potential for further impacts on climate change that may arise through the proposed reduction in tax encouraging a shift from train to air travel. The potential for associated localised environmental impacts from aviation activity, such as increased noise and traffic around airports, was also raised as a concern.

2.2.6 A few respondents felt that the policy proposals were inconsistent with wider Scottish Government policies, such as those that support active travel and policies related to transitioning to a low carbon economy. This was mirrored by views that the assessment of air connectivity should not be taken in isolation, but should be considered and assessed against wider objectives, such as those related to climate change, improving public health and quality of life. Other respondents also requested that the assessment consider the context of aviation within the broader picture of activity outwith the sector's influence, for example, increased traffic that may arise as a result of factors that were not within the ability of the aviation sector to influence. The potential for a modal shift to occur and the environmental implications of this was also a common issue raised. It was requested that this be given greater consideration, both during the policy development and in the assessment process.

2.2.7 Many respondents felt that a Scottish APD replacement tax should reflect the environmental and social impacts of aviation or be increased to reduce growth in the sector. A few respondents, however, expressed a view that the introduction of a replacement tax was not an environmental tax, nor an appropriate or cost effective measure when considered in a purely environmental way.

2.2.8 The role of existing mitigation measures, such as the EU Emissions Trading System, alongside work undertaken to improve efficiencies in the sector, was also noted by some respondents. However, views on the effectiveness of these differed, with some respondents of the view that these were not sufficient when considered in isolation in addressing climate change emissions from the industry.

2.3 Assumptions and limitations relevant to the assessment process

Early development of assumptions

2.3.1 To better establish the changes that a Scottish APD replacement tax may bring about, three assumptions were made early in the assessment process to reflect changes in the aviation industry considered likely to arise as a consequence of implementation of the proposals. These assumptions were developed and applied in order to focus the assessment process and draw out the likely significant environmental effects that may arise as a result of the reduction of the replacement tax.

2.3.2 The key assumptions (Box 2.1) were developed by drawing on previous research carried out by Transport Scotland in September 2014 (this is discussed further under section 2.3.3). They were informed through stakeholder engagement, including discussion with members of the stakeholder forum, the Consultation Authorities and subject to a wide range of stakeholder engagement through public consultation at SEA screening and scoping stage. The views expressed on the key assumptions at the screening and scoping consultation stage are provided in Box 2.2.

Box 2.1 Key assumptions

1: The proposal to reduce Air Departure Tax in Scotland will lead to an increase in the overall number of flights and could potentially create opportunities for new routes to be created.

2: An increase in flight numbers will lead to an increase in overall greenhouse gas emissions ( CO ₂ and non- CO ₂ emissions) in the short-term, even with advances in technology.

3: An increase in passenger and flight numbers will place increased pressure on existing airport and interconnecting infrastructure.

Box 2.2 Key assumptions: Views received at screening and scoping stage

The majority of respondents who provided views on the key assumptions and the proposed focus of the assessment agreed or broadly agreed with them. A few respondents, whilst supportive, felt that it was important that the assessment give greater consideration to the wider context of growth in the aviation industry. For example, the assumption that there will be an increase in GHG emissions and increased pressure on infrastructure should be considered in conjunction with potential mitigation, such as new technologies, fuels and operational improvements and the greater optimisation of current capacity.

The work of Sustainable Aviation, such as the industry noise and carbon road maps, was highlighted as demonstrating that additional connectivity can be delivered within current obligations and environmental targets. The role of the International Civil Aviation Organization in delivering environmental improvements at a global level, such as the development of global market-based measure, and the EU Emissions Trading System was also highlighted. Whilst agreeing with the assumptions in principle, it was suggested that the assessment should include consideration of the effects on environmental objectives. For example, the consideration of increased GHG emissions should be assessed against Scotland's climate change obligations. It was also proposed that the assessment should include consideration of the impact of aviation emissions at differing atmospheric levels (known as the multiplier effect).

Scottish Government Response: These points are relevant and have been built into the assessment process, for example when considering the significance of the likely environmental effects. The key assumptions and focus of the assessment remain largely the same as that proposed at the screening and scoping stage.

Research work considered during this assessment

2.3.3 In 2017, Transport Scotland undertook research to estimate the impact on GHG emissions of a 50% reduction in ADT ^[38] . This updates similar research undertaken in 2014 to consider the implications that may arise from a 50% reduction in a Scottish APD replacement tax ^[39] . This body of research has been used to inform this SEA.

2.3.4 A number of assumptions were utilised in undertaking these research projects. For example, the relationship between passenger numbers and estimated emissions was assumed to be a linear average. The research projects also noted a number of factors which would introduce greater uncertainty into the analysis and results. This included data requirements and the complexity of ticket types and prices. It is also noted that a number of unknown factors were discovered in taking forward the research, such as the response to the reduced tax in the distribution of passengers between domestic and international flights.

Limitations experienced during this assessment

2.3.5 SEA is a high level assessment; therefore it is important to be clear regarding the scope and focus of the assessment work that can be undertaken through this process. The potential impact on overall GHG emissions that may arise as a result of any modal shift brought about by the implementation of the preferred policy option for ADT, beyond that considered as part of the research projects noted above, has been outwith the scope of this assessment. Whilst it remains a relevant consideration, the assessment cannot predict the impact on overall emissions to an acceptable level, should a modal shift arise.

Implications of Brexit

2.3.6 Following the outcome of the referendum in June 2016, the UK is to leave the EU. The Prime Minister triggered Article 50 on 29 March, meaning the date of the UK's withdrawal from the EU will be 29 March 2019, unless all EU Member States agree to extend the negotiating period. In the intervening period, the UK remains a full Member State of the EU. Much of Scotland and the UK's environmental legislation is derived from EU Law and Regulations. The Scottish Government will not accept any diminution of the current standards of environmental protection as a result of Brexit and is pursuing all options to ensure that Scotland's interests are protected through Brexit, including through continued membership of the European Single Market.

2.3.7 The outcome of the Brexit negotiations has implications for the future of the UK's and Scotland's continued participation in the EU Emissions Trading Scheme, which is currently the main mechanism for delivering emissions reduction from international aviation. Furthermore, the EU will implement the new global scheme ( CORSIA - see section 3.3.32), therefore the UK might have to consider how to implement this outside of the EU.

2.4 The scope and scale of likely significant impacts considered in the assessment

2.4.1 At screening and scoping stage the assumptions developed to focus the assessment ( Box 2.1) were applied to help identify the likely environmental effects that might arise from the proposal to reduce the overall burden of a Scottish APD replacement tax. This process was undertaken to identify the SEA topic areas that may be affected and therefore "scoped in" to the assessment. It was considered at this stage that there was potential for the Scottish Government's policy plans for a Scottish APD replacement tax to have a range of environmental effects. All SEA topics have therefore been scoped into this assessment.

2.4.2 It was also noted at screening and scoping stage that many of the potential environmental effects likely to arise will impact at differing geographical scales as a result of a combination of factors. For example, the type of effect, the nature of the environmental receptor and whether the impacts are likely to occur only in certain locations. As a result of these factors, some of the environmental effects that arise from the aviation sector occur at altitude and are therefore trans-boundary in nature and experienced over a larger geographical envelope. Other environmental effects may be associated with airport infrastructure and, whilst potentially still significant in nature, are likely to be experienced at a more local level.

2.4.3 It was proposed that the SEA would explore and consider the potential effects at differing geographical scales, using the key assumptions to build on the initial assessment work undertaken at screening and scoping stage.

Box 2.3 Proposal to consider differing geographical scales: Views expressed at screening and scoping stage

This was viewed as essential and sensible given the global nature of the industry. Respondents emphasised, however, that different weight or significance should not be given to national priorities or impacts over local effects. Noise and air pollution were provided as examples of where effects will be experienced more acutely at a localised scale. A few other respondents considered that, as a global industry with global effects, recognition should be given to measures and mitigation implemented globally by the industry.

Scottish Government Response: The assessment process considers the environmental impacts likely to arise from the preferred policy option at differing geographical scales. Scale has been one of a number of factors taken into account when considering the significance of likely environmental effects.

2.5 Reasonable Alternatives

2.5.1 The 2005 Act requires that the potential for significant environmental effects of reasonable alternatives to a plan, programme, or strategy are assessed as part of the SEA process. This section discusses the consideration of reasonable alternatives that have been assessed alongside the preferred policy option of a 50% reduction in the overall burden of ADT by the end of the current session of the Scottish Parliament, which is expected to be in 2021.

2.5.2 The SEA has considered and compared the following policy approach as a reasonable alternative:

• No reduction in the overall tax burden of ADT compared to the overall tax burden of UK APD ( i.e. tax rate amounts maintained at current levels).

Box 2.4 Proposed alternatives: Views expressed at screening and scoping stage

The majority of respondents provided a view at screening and scoping stage that a Scottish APD replacement tax should reflect the environmental or social impacts of aviation or be increased to reduce growth in the aviation sector and associated environmental impacts.

Scottish Government Response: The Scottish Government does not consider a Scottish APD replacement tax with a higher overall tax burden compared to UK APD to be a "reasonable alternative" to delivering the main objectives of the policy.

2.6 Building on other previous relevant assessment work

2.6.1 A considerable amount of research has been undertaken to explore the environmental effects that arise from activity in the aviation sector. For example, in addition to the research projects undertaken by Transport Scotland noted earlier, in 2011 the UK Government undertook a consultation on "A sustainable framework for UK aviation" ^[40] . Other relevant research includes the work undertaken by the Airports Commission in 2015 ^[41] . This considered the impacts of increasing the UK's long-term aviation capacity and included an assessment of the potential implications on a number of factors such as surface access, noise and air quality.

2.6.2 The SEA undertaken on NPF3 and SPP explored transport issues. In particular, this SEA involved the assessment of the vision of 'A Connected Place' including proposals for Scottish airport enhancements at Aberdeen, Glasgow Prestwick, Edinburgh, Glasgow and Inverness, and improving transport links between cities ( e.g. rail links). Transport connectivity for Scotland's airports is also widely addressed through the Local Development Planning process, which are subject to SEA.

2.6.3 Where appropriate, this SEA has built on this and other relevant work to inform the evidence gathering and assessment process.

2.7 Evidence used in the assessment process

2.7.1 Schedule 3 of the 2005 Act requires that the following be identified:

• Relevant aspects of the current state of the environment and its likely evolution without the plan or programme.
• Environmental characteristics of areas likely to be affected.
• Relevant existing environmental problems.
• Relevant environmental protection objectives at the international, European or national level.

2.7.2 There are many objectives for environmental protection and improvement within existing legislation, policies and strategies that form the context for this SEA. A summary of these have been set out in the following sections of the report under the respective topic.

2.7.3 Additionally, a wide range of evidence has been drawn together in order to inform the assessment process and much of this information was included in the Screening and Scoping Report, alongside the finding of some early assessment work. The views expressed at the screening and scoping consultation stage on the proposed evidence base to be used in the assessment and initial identification of potential environmental effects have been summarised in Box 2.5.

2.7.4 Evidence continued to be collated as the assessment progressed, with specific focus on the characteristics which have the potential to be affected by activity in the aviation sector. The information presented within each topic area has been drawn from a number of sources, such as SNH, SEPA, HES, the Committee on Climate Change and the aviation industry. In order to provide transparency, an overview of the sources of information used to inform the assessment has been included in Appendix B.

Box 2.5 Initial findings and proposed evidence base: Views expressed at screening and scoping stage

There were mixed views on the proposed evidence base for the assessment process. Views ranged from it being reasonably comprehensive to overly complex.

A few respondents emphasised that it was important that the impacts of Scottish air transport are not assessed in isolation and that the assessment should consider the environmental implications the changes may have on other transport sources or at other locations. For example, an increase in emissions in some airports may be offset by decreases in others. A few respondents also felt that the assessment needed to better consider current and future mitigation measures, for example, the EU Emissions Trading System. In addition, the work of Sustainable Aviation, such as the development of road maps on carbon, noise and sustainable fuels, was discussed. It was requested that this body of work be more thoroughly assessed and incorporated into the evidence base.

Views on the effectiveness of mechanisms such as the EU Emissions Trading System and the work of Sustainable Aviation and the International Civil Aviation Organization differed. Some felt references to the collaborative approach and targets set through the work of Sustainable Aviation were misleading. This was based on the belief that these were aspirational targets of the aviation industry and not based on actual emissions trends and evidence of the implementation of emissions reductions mechanisms. Furthermore, whilst it was acknowledged that some progress has been made with a global market-based measure via the International Civil Aviation Organization, no standard had yet been adopted. The effectiveness of the standard (once adopted) in meeting the target deadlines, such as stabilisation of emissions by 2020, was also questioned due to timing implications of its adoption.

Additional sources of information and amendments were provided on a range of issues. Suggestions of further evidence included information on climate change such as the Paris Agreement and the Committee on Climate Change's reports "The high ambition towards a low carbon economy" and "Meeting the UK Aviation target - options for reducing emissions to 2050". It was suggested that the assessment should also give greater consideration to the airline fleet replacement programme and investment in modern, quieter and fuel efficient aircraft.

A number of respondents broadly agreed with the initial findings but provided further comments. Some felt the findings were reasonable and thorough, but that wider considerations had not been sufficiently reflected. It was also felt that the assessment did not consider the extent to which forecast growth may be accommodated through existing infrastructure and aircraft movement, for example though higher load factors. It was suggested that factors such as these should be given greater consideration in order to provide a more nuanced and complete picture of the likely environmental effects.

It was also requested that specific consideration be given to how the proposed policy could incentivise modal transport shift on routes where air and rail compete, and that the subsequent impact on CO ₂ emissions should be modelled.

Mitigation was also raised as an issue from a number of respondents. It was noted that the assessment presumed that the legislation that currently exists is applied effectively and considered that too much responsibility for regulating impacts was left to the aviation industry. Another respondent considered the findings reasonable but expressed concern that mitigation such as climate neutral growth or sustainable fuels may be used to minimise the likely impacts.

Scottish Government response: We have taken into account the best available environmental information and have been clear regarding where this information has been sourced to ensure a robust evidence base underpinned the assessment. The early assessment work presented in the Screening and Scoping Report was provided as an indication of initial issues under consideration across a range of receptors, for example, climatic factors, soil and biodiversity, flora and fauna. As part of this process, examples of potential mitigation measures were included. It was made clear that the significance of the initial findings would be explored as the assessment and preferred policy option developed. The following sections setting out the findings of the assessment process have built on this initial work to consider issues such as existing mitigation, the likely significance of the identified likely environmental impacts and broader considerations such as existing growth pressures on infrastructure, local airport policies and initiatives and existing airport capacity.

2.8 How the findings of the assessment have been presented

2.8.1 As discussed earlier ( Section 2.3), three key assumptions have been used to consider the likely environmental impacts that may arise from a 50% reduction in the overall tax burden of ADT by the end of the current session of the Scottish Parliament, which is expected to be in 2021.

2.8.2 Additionally, the SEA has considered illustrative scenarios that could be applied to meet the 50% reduction in the overall tax burden set out in the preferred policy option. These have been included in the assessment process to help frame the discussion on the likely impacts of the preferred policy option and how different ways to achieve the overall objective of a 50% reduction in the overall tax burden could influence these impacts.

2.8.3 This has included the consideration of applying a 50% reduction in the overall tax burden proportionally equally across all tax bands and tax rate categories. Applying a zero tax rate amount to short-haul flights only, with the tax rate amounts for long-haul flights maintained at current UK APD levels, and vice versa, was also considered. Both these scenarios would still broadly deliver a 50% reduction in the overall tax burden (it is estimated that approximately 48% of all APD revenue currently generated in Scotland is from short-haul flights, and 52% is from long-haul flights).

2.8.4 A reasonable alternative to the preferred policy option and the potential impacts it may have has also been considered in undertaking this SEA. The SEA has considered and compared the following policy approach as a reasonable alternative: no reduction in the overall tax burden of ADT compared to the overall tax burden of UK APD. This would replace the existing UK APD with a like for like tax in Scotland.

2.8.5 The following sections set out the findings of the assessment process under each SEA topic alongside the objectives for environmental protection and enhancement detailed within existing legislation, policies, strategies and plans relating to that topic area. Information including relevant aspects of the environment likely to be affected and existing environmental problems has also been included.

2.8.6 At the end of each SEA Topic, a summary box has been included, which sets out the key points and issues relating to that topic. Furthermore, the assessment findings and evidence within these discussions have been used to inform Section 11 of the report. This sets out a summary of the assessment findings at the national and local level, in addition to the reasonable alternative.