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Counting the costs

SCMP – Jun 07, 2012

As the plan for a third runway gets ready for take-off, how do we ensure that the impact on Hong Kong’s living environment is fully accounted for? Kevin Poole argues against undertaking a study of the social return on investment, saying too many questions remain about its validity. Agnes Tsang believes such a study is critical if we are ever to know the true price of the project to our health and the natural world, on top of the well-publicised benefits.

On May 28, the Airport Authority submitted to the government the project profile for the environmental impact assessment of Hong Kong International Airport’s planned three-runway system. The authority is firmly committed to fulfilling all its statutory environmental requirements and, where possible, going the extra mile to assess other potential impact.

An important part of this involves considering the valuable feedback of our stakeholders, who have played a key role in the development of the airport’s master plan towards 2030.

Recently, some green non-governmental organisations in Hong Kong and legislators have voiced their belief that, in addition to the statutory environmental impact assessment, the authority needs to undertake a strategic environmental assessment, a social-return-on-investment study and a carbon audit.

As always, it is essential that we are clear about what these studies entail, as well as what meaningful value they may bring to the planning of a three-runway system.

The Airport Authority has conducted preliminary research on case studies worldwide of social return on investment, which we are keen to review in greater depth before mapping a way forward.

In fact, we have researched more than 30 published economic assessment studies on the aviation industry or airports across North America, Europe and Australia since 1998, and out of these, five covered social and/or environmental impacts. Four were done in Britain, including two for Heathrow airport’s proposed runway expansion.

Our research findings show that there is a lack of commonly accepted standards and approaches for conducting studies of social return on investment.

Furthermore, because analysis of these studies requires placing monetary value on impact that cannot be quantified in the marketplace, measuring these effects is heavily dependent on stakeholder feedback and individual judgment.

For instance, one of the studies assessing the social return on investment of Heathrow airport’s new runway expansion assigned a monetary value to quantify ”uncertainty and blight”. The assessment monetised the loss of pride in the residential communities near Heathrow whose residents felt that they were physically trapped and psychologically disempowered due to the uncertainty arising from the Heathrow expansion plan.

To date, no consistent standard for how best to assign a monetary value to impact indicators has been developed, and this limits the credibility of analysis of social return on investment and its ability to make meaningful comparisons across different projects.

Many of the issues of using such studies for project evaluation stem from the fact that it is relatively new. One of the few guidelines presently available, ”A Guide to Social Return on Investment”, was published by Britain’s Cabinet Office just three years ago.

As of today, most of the studies available on social return on investment have come from policy commentary put out by principally British-based charities and think tanks. Academic research done on the use of such studies is limited.

This is why it is critical to gain a better understanding of the social-return-on- investment approach. We need to ask questions on key issues such as:

  • How applicable is Britain’s experience of these studies to the Hong Kong context
  • In the absence of a standard of measurement, what values should be considered
  • How can stakeholders’ values and feelings towards different issues be monetised

A social-return-on-investment study has not been used for any development projects in Hong Kong. Given its lack of a meaningful track record in the local context and limited applications to the aviation industry worldwide, we cannot readily adopt such a framework in good faith at this time.

However, we understand that some of our stakeholders believe there should be a measurement of social impact, and we will continue to look at different social impact assessment approaches and evaluate their pros and cons.

Meanwhile, the Airport Authority has been conducting carbon audits on facilities on the airport island since 2008, and we would explore the most appropriate approach to assessing carbon aircraft emissions that can be influenced but not owned or controlled by the authority.

As for a strategic environmental assessment, this is mainly a land-use planning or development policy tool commonly used for town planning. The law, as it is, already requires the Airport Authority to take into account the accumulative environmental impacts of committed projects in the vicinity.

It should be noted that Hong Kong has a comprehensive process for environmental impact assessment.

However, like our stakeholders, we are concerned about the social impacts and carbon emissions related to a project of such scale and nature.

Rest assured that the authority is actively exploring these issues because it is committed to managing the planned expansion of Hong Kong International Airport responsibly and contributing to the growth of Hong Kong in a sustainable manner.

Kevin Poole is deputy director, projects, at the Airport Authority

Environmentalists are not against development. We believe that a healthy natural environment is a pre-condition for sustainable development. The various green groups in Hong Kong may have different concerns about the construction of a third airport runway, but we agree on one thing: the need to conduct an assessment of social and environmental costs, also known as a social-return-on-investment analysis, for this mega project.

We need it because a third runway will have a huge environmental impact in Hong Kong. More importantly, chief executive-elect Leung Chun-ying committed himself to it during his election campaign.

The public is becoming more aware of the limitations of the environmental impact assessment required by law. This type of study measures only the environmental impact at the project level. It was never a tool designed for environmental protection.

In Hong Kong, our main problem is a lack of comprehensive environmental planning. This leads to constant conflicts and cumulative impact. Without holistic planning to put development projects in the context of a natural environment with limited capacity, many push rules to the maximum and feel no responsibility to protect the larger environment.

Sadly, a holistic approach to planning is far from becoming a reality in Hong Kong. In the meantime, we must kick-start the process to measure the true environmental and social costs of the runway project.

Today, people talk more about sustainable development. We have begun to realise that we are reaching the limits of both what we can bear, in terms of living conditions, and what the environment can sustain. So when the impact of an infrastructure project is judged to be beyond compensation or the scope of mitigation in the statutory study, something must be done.

On the third runway, Hong Kong must look into other measures to avoid or address its impact before a decision is made.

The costs of an infrastructure project are much more than just the construction costs: a value should be put on quality of life, including clean air and people’s health. If we run the numbers again, taking into account all these factors, the benefits of a project may be different from the original projections.

When the average citizen is asked whether “Hong Kong should have a bigger and nicer airport”, the answer is a very predictable “yes”; people always want something better. The questions that need to be asked are: “Who will pay for it?”, “Who will make money out of it?” and “Who will suffer if the costs outweigh the benefits in the end?”

It is not wise to say, “Let’s spend a fortune to build it first and then find out, 10 or 20 years later, what the damage will be”. The third runway will be Hong Kong’s most expensive infrastructure project and will involve reclamation the size of Victoria Harbour. Yet, outside the mandated impact study, no attempt has been made to scientifically evaluate the project’s far-reaching environmental impact and social costs. Such evaluation follows the principles of sustainable development and is adopted in best practices overseas.

Most environmental groups are not demanding a stop to the project; they are asking for a thought process that calculates the true costs and benefits of the runway.

Hong Kong should understand the costs of, say, losses to fisheries, noise pollution and health impact. Take carbon tax. The Airport Authority has not taken into account the impact of such a tax on demand for air travel in its projections. Yet, Australia has already imposed a carbon tax on the aviation industry, while the European Union requires Hong Kong airlines to comply with its emission trading scheme. Mainland China, too, is considering a carbon tax.

The need to address social costs has been widely recognised by the community, including Leung, who said at a forum in March that infrastructure project development should consider not only economic benefits but also benefits to the community. He said a process parallel to the environmental impact assessment should take place to consider social costs.

The Legislative Council’s environmental affairs panel passed a motion on April 23 calling for a social-return-on-investment study, a strategic environmental assessment and a carbon audit of the project before construction begins.

The public, too, supports further study. A poll commissioned by Greenpeace and WWF in January found that over 70per cent of the people surveyed agreed that social and environmental costs need to be considered. This compares with the Airport Authority poll that found 73per cent of people supported building a third runway.

The authority says there is confusion over which methodology to use to conduct a social-return-on-investment study. It makes no sense to hide behind this self- created confusion. The green groups have done enough work – holding forums, writing papers, conducting surveys – to show the authority how the process could be conducted. However, these efforts have been ignored for almost a year now.

Would it be a joke to say Hong Kong can build the best airport for 2030 but is ignorant about calculating its costs? We hope the Airport Authority will begin to take its social responsibility seriously and start to respond to the community’s expectations.

Agnes Tsang is manager of conservation strategy at WWF – Hong Kong

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