RSE INQUIRY INTO FACING UP TO CLIMATE CHANGE: STAGECOACH GROUP SUBMISSION

1.0 Introduction

1.1 Stagecoach Group is a leading international public transport company with bus and rail operations in the UK and North America. The Group employs around 30,000 people and runs around 12,000 buses and trains. We operate more than 1,500 buses in Scotland, including the Highlands and Islands of Scotland, Aberdeenshire, Fife, Tayside, Ayrshire and West Scotland. Stagecoach is also the leading provider of inter-city coach travel in Scotland through Scottish Citylink and the budget inter-city coach service megabus.com.

1.2 We are pleased to have been invited to make a submission to the RSE’s inquiry on Facing up to Climate Change. The submission below addresses the following issues: • Transport and climate change • Risks and opportunities • Impact of the Climate Change (Scotland) Act • Transport priorities • Carbon reduction partnerships • Barriers to change • Regulation and incentives

2.0 Transport and climate change

2.1 We believe modal shift from car use to greener, smarter travel on buses and trains is central to tackling the challenge of climate change. While this may ultimately lead to increased carbon emissions from public transport, the overall benefit to society from dramatic reductions elsewhere will be enormous. Road transport accounts for around 22% of carbon emissions in the UK and it is are rising. Commuting and business travel, for example, accounts for nearly 40% of all miles driven by car in the UK. Government, local authorities, businesses, public transport operators and other stakeholders must work in partnership to encourage intelligent car use and create an environment in which it is easy for consumers to make the switch to more carbon efficient options.

2.2 The current global dependence on fossil fuels is also an issue of energy security, with even more urgent timeframe for action than climate change. Stagecoach is a founder member of the UK Industry Taskforce on Peak Oil and Energy Security (ITPOES), which is seeking to engage government more proactively on the peak oil threat, and also to alert the public to the significant impact on consumers. We believe collaborative contingency planning by government, industry, and communities is urgently required to accelerate independent energy supply within the UK and maximise the opportunities from cleaner, alternative energy sources.

2.3 Crucially, meeting the challenge of climate change will require more than technological change through measures such as widespread adoption of electric vehicle technology. Moves towards more sustainable electric cars may cut emissions, but it will not address the problem of congestion, which impacts economic productivity. Government studies show that 8% of UK road traffic is already being affected by heavy congestion and, without action, this will increase by a further 30% by 2025, with the potential to cost business and freight an extra £10 billion a year.

1 Politicians must face up to the fact that it will require lifestyle changes from consumers and we believe this will require a mix of regulation and incentives.

2.4 We also recognise our business has a significant impact on the environment. We are working hard to reduce our own carbon footprint and make our business as sustainable as possible, while offering high-quality, easy-to-use services to attract more passengers and contribute to a virtuous cycle of reduced environmental impact.

3.0 Risks and opportunities

3.1 Climate change is a major factor influencing our business and transport operations, bringing with it both risks and opportunities. These include: • Regulatory risks o Government legislation introducing carbon credits (eg Carbon Reduction Commitment) o Government taxation policy (eg fuel tax) o Environmental criteria to qualify for Government grants (eg Bus Support Operators Grant) o Regulation affecting vehicle emissions (eg European legislation on engine standards) o Low emissions zones introduced by transport authorities • Physical risks o Increasing impact of extreme weather, such as flooding and ice, on transport infrastructure, such as the road and rail networks o Risk to operational facilities and transport fleets located near to rivers or in coastal locations from rising sea levels o Changes in consumer travelling habits due to weather changes o Reduced passenger comfort resulting in public transport being seen as less attractive o Climate change generated modal shift from car to public transport has the potential to increase the weight of buses and trains, leading to reduced fuel efficiency. • Opportunities o Bus and rail have a carbon advantage over car travel that we can use to increase our market share o Involvement in trials and development of new low-carbon technologies that can reduce cost to our business o Government strategies to decrease global carbon emissions from surface transport are supporting public transport growth o Climate change induced modal shift from car to public transport has the potential to free up road space for buses and coaches, leading to reduced congestion, better traffic flows and improved fuel efficiency o Stagecoach research has established that consumers are more likely to travel with a company whose ethics support the environment and that they will pay more for greener public transport. o Taking action to reduce carbon emissions now will reduce long-term costs from compliance, clean-up and purchasing carbon credits

3.2 For those reasons, we believe it is important to look closely at any solution that can improve the efficiency of our operations or reduce our carbon footprint. We are working with a range of stakeholders in Government and transport to minimise the risks of climate change on our business. Through our Carbon Management Programme, we are also raising awareness of these issues with our employees, our customers and other stakeholders.

2 4.0 Impact of the Climate Change (Scotland) Act

4.1 The Climate Change (Scotland) Act is a positive piece of legislation. It will help provide a focus for greenhouse gas reductions and moves towards a low carbon economy through far-reaching carbon reduction targets for 2020 and 2050. However, it is essential these targets are supported by action from the public and private sector, and individual consumers in particular.

4.2 Stagecoach Group is represented on the Scottish Government’s new 2020 Delivery Group, which brings together a wide range of expertise from central and local government, business, trade unions and NGOs to examine in detail the actions needed across Scotland to meet the aspirations of the Act.

4.3 Stakeholders need to build practical and effective partnerships and focus on entrepreneurial and innovative thinking. In terms of transport, we need greater leadership and more bold and imaginative pro-public transport policies from local and national politicians.

4.4 Most importantly, however, the success of the Act will depend on successful engagement with consumers. A Stagecoach survey of more than 13,000 consumers across the UK in 2008 found that consumer environmental concerns are growing, and that changing attitudes are flowing through into signs of changing behaviour. Environmental and health concerns, as well as price and concessionary travel schemes, were key drivers of this trend. Nevertheless, our experience suggests that green marketing messages to consumers are not effective in isolation.

4.5 For that reason, politicians need to pursue policies that will also help deliver a price, speed and accessibility advantage to public transport modes. Continued investment in the quality and capacity of the country's rail and bus networks and infrastructure is essential if we are serious about making Scotland and a more sustainable country in which to live, work and travel. Transport is often combined with walking or cycling as part of an integrated journey by bus or train, providing an opportunity to combine greener and healthier living campaigns.

4.6 Stagecoach’s emphasis on sustainable business pre-dates the Climate Change (Scotland) Act, but is consistent with the principles that underpin the legislation. Our strategy centres on steps to address the risks and opportunities facing our business, how our individual employees can incrementally help deliver change and how we can help our customers lead more sustainable lifestyles.

4.7 Our Group-wide Carbon Management Programme (CMP) provides a strategic approach to assessing the impact of climate change and identifies short, medium and long-term risks and commercial opportunities to the business. We are focused on: • Meeting our regulatory obligations • Investing in more fuel efficient vehicles • Using alternative, renewable fuels • Training our people in more efficient driving techniques • Saving energy at our offices and depots • Conserving and recycling water • Reducing and recycling waste • Reducing business travel • Offering affordable bus and rail travel • Developing green travel plans and incentives for our people, customers and other organisations

3 4.8 The key outputs of the CMP are: • defined Global Carbon Footprint for Stagecoach Group • implementation plans for emissions reduction across the Group • set of agreed tailored carbon reduction targets for each division • robust, consistent system for measuring and monitoring carbon emissions and performance against the targets across the whole business • voluntary disclosure of our carbon footprint to the Carbon Disclosure Project

4.9 We are committed to continuous improvement in environmental management and endeavour to go beyond strict compliance with the law. In addition, we encourage our business partners, suppliers and contractors to manage their own environmental affairs in the spirit of this policy. Stagecoach Group is a signatory to the Copenhagen Communiqué on Climate Change, and wrote to a number of its peers in the transport sector encouraging them to sign up to the Communiqué.

5.0 Transport priorities

5.1 We believe a range of potential carbon reduction technologies should be investigated to ensure Scotland and the UK faces up to two massive converging challenges – oil depletion and climate change – both of which require massive changes. More importantly, modal shift to greener, smarter bus, coach and train travel and measures to support these modes will make or break our efforts to deliver a reduced oil-dependant, low carbon transport future.

5.2 Technology Lower carbon technology for cars is advancing rapidly, with mainstream hybrids and a push for mass-market electric vehicles and a supporting plug-in charging network. Buses and coaches are also benefiting from advances developed for cars and the first hybrids are on the road. Continued focus is required on the development of cleaner engines, trials of sustainable biofuels, fuel-efficient driving training programmes and in-cab technology, as well as steps to cut the weight of vehicles. Rail is already a relatively energy efficient mode of transport, with a lower environmental impact than other modes and a good combination of high speed and efficiency. Ongoing electrification must be a priority, as well as greater use of regenerative braking and designs for more efficient rolling stock.

5.3 Policies to support modal shift Long lead times for rail improvements mean we need to plan ahead now for tomorrow’s railway, including more rolling stock, infrastructure work to lengthen platforms to take longer trains as well as the investigation of the potential for new lines, particularly for high-speed rail. There needs to be a long term strategy which looks beyond the current five-year programme to a timeframe that allows the public and private sectors to invest in increased capacity and enhancements which encourage people to switch from cars and planes. High-speed rail could deliver modal shift from domestic airlines. However, the significant cost and timescale, plus passenger projections pointing to some rail lines being full up by 2020 or 2025, mean we also need actions that deliver quick wins.

5.4 Buses and coaches are a flexible mode of travel that can deliver this quickly with relatively low levels of investment. Even switching to public transport one or two days a week can have a huge collective carbon reduction impact. Policies to support modal shift to bus and coach should include:

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• Dedicated bus and coach lanes • Priority for coaches on some of the country’s most congested motorways, including hard shoulder running. • Targets for transport authorities setting minimum bus speeds. This would improve fuel efficiency and have a resultant impact in terms of carbon emissions. • Rewards for transport authorities meeting bus priority targets. This could involve an incentive based system whereby transport authorities meeting targets would qualify for extra central Government funding. The normal approach in such circumstances would be to ring-fence this income for transport. But by giving authorities the freedom to spend it in areas such as health or education, for example, it would encourage far more buy-in. • Consistent car parking pricing to deliver a price advantage to public transport. • Integration of sustainable transport policies with land use planning, rather than developments that encourage high car dependency. • Investment in bus and coach park and ride, which has a proven track record in reducing journey times, a major influence on commuter transport choices. For every 1,000 park and ride spaces, research suggests there are 250,000 less car journeys per year. It is not just a tool for the commute to work market. There is also potential for sites near key motorway junctions. Looking to the future, park and ride facilities present a massive opportunity to act as electric vehicle recharging hubs. These could be used by major fleet operators, and consumers could charge their electric vehicles while using bus park and ride to get to work. • More use of workplace travel plans, which business costs, improve staff retention and reduce commuter car travel by 10 to 30 percent. • Tailored solutions, such as demand responsive transport, for rural and less densely populated areas. • Pro-bus and coach fiscal measures, including: o Bus Scrappage Fund to incentivise operators to switch to newer, greener technologies. o Zero fuel tax for the bus and coach sector. o Better access to Government R&D funding to boost manufacturing in the bus and coach sector. It is innovation in this sector that operators depend on to continue to deliver an environmental advantage over the car.

6.0 Carbon reduction partnerships

6.1 Stagecoach Group firmly believes that a key element of the response to climate change should be the development of “green partnerships” designed to reduce carbon emissions and encourage more sustainable lifestyles. For business there is a commercial opportunity, competitive advantage and reputation benefit. The public sector also faces a major challenge to protect our environment, while the financial imperative to meet targets and regulation is increasing. Below are some examples of how we are working together with other stakeholders.

5 6.2 Greener Journeys Stagecoach Group is a leading member of Greener Journeys, a UK bus and coach industry campaign aimed at encouraging people to switch from cars to buses and coaches. The Greener Journeys campaign has launched a manifesto recommending a raft of policy initiatives to encourage modal shift that would deliver 50% more savings in transport CO2 emissions than currently planned under existing Government policies. Bus and coach operators believe that technological advances alone are not enough to achieve the carbon reductions required to tackle climate change and modal shift must be a key priority. The manifesto, The One Billion Challenge, was launched in October 2009. It demonstrates that if people switch from car to bus or coach for just one journey in 25 it would mean one billion fewer car journeys on UK roads over the next three years.

6.3 Greener Journeys is calling on the Government to: • Set targets for local authorities to encourage modal shift • Introduce a fairer tax regime for bus and coach passengers • Bus scrappage scheme to drive investment in low-carbon buses • Promote bus priority, park and ride and other measures to cut car commuting • Encourage bus travel to reduce “school run” traffic Further information on the campaign is available at www.greener-journeys.com.

6.4 Scottish Government 2020 Delivery Group Brian Souter, CEO Stagecoach Group, is a member of the Scottish Government’s new 2020 Delivery Group. The group brings together a wide range of expertise from central and local government, business, trade unions and NGOs to examine in detail the actions needed across Scotland to meet its ambitious climate change targets and make it a model of international best practice. The group met for the first time in December 2009.

6.5 Scottish Sustainable Transport Group Stagecoach is a member of the Scottish Sustainable Transport Group. The group’s objective is to identify significant projects that have the potential to contribute to Scottish Government targets on sustainable transport, support economic development and establish Scotland as a centre of excellence in this area. Stagecoach is working in partnership with other businesses with expertise in energy provision, vehicle manufacture, battery technology as well as central and local government. Members include Stagecoach Group, Scottish and Southern Energy, Allied Vehicles, Intelligent Energy, Scottish Enterprise, and Scottish Development International.

6.6 Reverse vending project, Aberdeenshire In partnership with Aberdeenshire Council, Stagecoach has launched Scotland’s first reverse vending recycling initiative, offering discounted bus travel in return for used drinks cans and plastic bottles. A hi-tech reverse vending recycling machine has been introduced at Ellon Park and Ride facility which allows commuters to recycle their plastic drinks bottles and drinks cans and get Stagecoach ‘green points’ in return which can then be redeemed for discounted bus travel.

6 6.7 Green travel incentives Stagecoach has partnered with major employers to promote intelligent car use and provide better value public transport. One example is a partnership with The Royal Bank of Scotland Group to offer employees a tax incentive to make more use of public transport and save money on bus travel. Annual bus travel with Stagecoach is available to RBS staff through the bank’s employee benefits scheme RBSelect. The scheme allows RBS employees to receive the bus travel benefit free from income tax and National Insurance. Bus travel can be booked online or via a dedicated Stagecoach/RBS call centre, with employees issued with 12 monthly megarider tickets over the course of a year.

7.0 Barriers to change

7.1 Transport in Scotland is influenced by policy at Scottish Government level, as well as EU regulation and UK Government policies on taxation. There are currently a number of areas where policy is working against public transport and its efforts to tackle climate change and damaging the modal advantage of bus and coach travel. Steps need to be taken to redress the balance of the relative cost/convenience of different transport modes and many of these can be put in place quickly.

7.2 Taxation policies • We have seen some move towards carbon-based taxation for vehicles. There have also been fuel duty increases affecting car travel. However politicians in Scotland and elsewhere in the UK have backed off controversial measures such as road pricing which would benefit public transport. • Buses and coaches pay an element of tax on fuel, while domestic airlines are exempt. Airlines receive a £9billion tax break every year through exemptions in fuel duty, which could be used instead to invest in more carbon-efficient public transport and reduced fares. • Restrictions placed by HMRC on the use of salary sacrifice schemes to cover public transport actively work against the wider take-up of bus travel. HMRC rules state such schemes can only cover home to workplace travel, and specifically exclude bus operator unlimited travel network tickets that encourage more sustainable public transport and less use of cars.

7.3 Public transport operating costs • Bus and coach operators in the UK have faced increases in running costs that are well above retail price inflation. Overall bus and coach operating costs in the UK went up 6.2% for the 12 months to 30 June 2009 and increased by 8.7% in Scotland at a time of low inflation/deflation for consumers. • Regulation on Euro engines has reduced the fuel efficiency of new buses and coaches and added to operator costs, which have already risen significantly. • Movements in the Euro-sterling exchange rate have also pushed the price of spare parts up by a third in the past year. • All of these factors have put pressure on the cost of fares for passengers. It has undermined efforts to attract car users to public transport services, which could reduce their carbon footprint.

7.4 Cost of adopting new technologies • The cost of adopting new technologies is also still prohibitively expensive for bus and coach operators, with hybrids for example 50% more expensive than standard vehicles. As a result, we would support the introduction of a Bus Scrappage Scheme with public funding support for using more carbon- efficient technologies, such as electric vehicles and hybrids.

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7.5 Allocation of road space • More focus is needed on the allocation of road space to the most fuel and carbon efficient modes of transport. Measures such as bus priority lanes would make public transport faster, more reliable and a more attractive alternative.

7.6 Capacity and budgetary crunch • Sustained investment in bus coach and rail facilities around the UK will be needed to cope with any significant shift from private car to public transport. Buses and coaches are a flexible mode and have far greater capacity to scale their operations quickly. There is also available capacity in the short term. However, the danger is that rail faces a capacity crunch. Current peak commuter capacity is already being exceeded on some routes and this will become more widespread over the next decade without urgent investment. There is a need for more rolling stock, infrastructure work to lengthen platforms to take longer trains as well as the investigation of the potential for new lines, particularly for high-speed rail. • All of these urgent priorities come as we face an impending squeeze on public sector investment due to the economic downturn that may last years. It is crucial that public transport, with its wider social and economic benefits and crucial role in tackling climate change, is made a priority.

8.0 Regulation and incentives

8.1 We believe a mix of regulation and incentives is required to change behaviours. Our experience suggests incentives are particularly important in engaging consumers, but should also be considered in budget allocation for local authorities (see 5.0 Transport priorities).

8.2 As a core principle, it is crucial regulation tackles greenhouse gas emissions at source and results in genuine reductions. It should not produce perverse outcomes such as the over-availability of allowances as part of emissions trading schemes. Regulation must also take account of the ability of businesses and consumers to access alternative greener technologies and the overall role certain sectors (eg public transport) play in reducing overall carbon emissions.

8.3 We believe there is merit in consideration of a wholesale overhaul of the taxation system to make it carbon-based. This would centre on rewarding low-carbon users and shifting the taxation burden to high carbon users. This carbon-based taxation system could have important social inclusion benefits, including the potential for low income groups (who in general have lower carbon footprints) to be taken out of the income tax system altogether.

Steven Stewart Director of Corporate Communications Stagecoach Group January 2010

Note • Further information on Stagecoach Group’s climate change strategy, our initiatives and our performance, including video case studies, can be found online at http://www.stagecoachgroup.com/scg/csr/environment/

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