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Civic Exchange

Hong Kong Pollution Ownership

One thing is clear: It’s time to take ownership

In this article – the final in a four-part series on Hong Kong’s air pollution – Douglas Woodring, Associate for Civic Exchange offers solutions for ways in which Hong Kong manufacturers can help clear the air. “P2E2” is one effective program that gives guarantees to banks who can then lend to Hong Kong-based “Environmental Service Companies” (EESCOs) in order to supply environmental technology and services to factories in Guangdong. “The beauty of this program is that the factory pays nothing,” Woodring writes.

Imported Air – We Own Much of the Problem

In last month’s article, we learned that the poor fuel mix in Guangdong is a major contributor to our air problems. We now focus on the users of that fuel – the factories, which for better or worse, are largely owned by Hong Kong companies. So far, however, we have seen that these factories are not owning up to the extensive problems they are creating for us, as we end up importing the impacts of their poorly managed production processes.

Sources of air pollution in Guangdong include inefficient coal-fired power plants lacking effective emissions controls, growing vehicle fleets, heavy industry and the manufacturing sector. Many believe the view is wrong that Hong Kong can do nothing about our air imports, and to date, our side has failed to effectively tackle emission reduction on the part of Hong Kong-owned manufacturers.

In 2003, “manufacturing” accounted for 45 per cent of all public power consumption in Guangdong. Due to the shortfall in supply and transmission problems with Guangdong’s power grid, almost all of the factories in Guangdong developed alternate power sources which tend to be run on coal or poor quality fuel. In some cases, it is cheaper to run generators full time, rather than using the public grid at all, but in others, it is simply a necessity, which could change if and when the supply of power from the grid is greater than the increasing demand. One alarming fact is that the manufacturing sector’s consumption of coal was two thirds that of the power sector’s, increasing at a rate of 20 per cent from 2000 to 2004. Considering coal’s use for public electricity, as well as its direct use of coal, the manufacturing sector is responsible for 75 per cent of all coal used in Guangdong – most of which is not “clean” coal.

Similarly, manufacturing uses 90 per cent as much diesel in its generators as is used by the transportation sector – much of it with high sulphur content coming from smaller, unregulated refiners. To put this danger into perspective, California has just done a study that shows that 70 per cent of all health problems relating to air pollution come from diesel fuel (though remember that California does not have the wide use of coal that China has). These results should be a wake-up call to all of us in Hong Kong, where over 60 per cent of our locally created vehicle emissions come from our extensive diesel fleet.

The Clean Air Map is still Uncharted

The problem of addressing manufacturing air pollution in Guangdong is a difficult one. Things should improve somewhat by 2008 when the power grid increases overall supply (unless expansion of the manufacturing base outstrips this new supply, which has been the case in the past). Sources of cleaner fuel are generally not available, in part due to national fuel pricing controls and some sectors (textiles, paper, food and nonmetal mineral products) have shown a marked increase in direct coal use to augment the use of grid power. Despite the hope of cleaner fuels and increased public electricity supply, the near term prospects are not bright for the following reasons:

  • Coal will remain the major source of power generation and a major industrial fuel in Guangdong;
  • Those sub-sectors relying on coal or heavy fuel oil are likely to continue to self-generate because it is cheaper;
  • Constraints in the public power supply are not just in generation, but in transmission line capacity;
  • To initiate a large clean-up, higher quality fuels must be readily available, which is unlikely until price controls are eased;
  • Higher energy prices provide an incentive for manufacturers to switch to cheaper, dirtier fuels;
  • There is little hope that voluntary measures will result in worthwhile improvements. Stringent environmental mandates must be enforced on manufacturing;
  • Slow improvements in manufacturing emissions now will be compounded with an exponentially expanding Guangdong motor vehicle fleet.

Is there Blue Sky on the Horizon?

We know how to reduce pollutant emissions from within Hong Kong, but the fact that we have not done more to clean up our own act is a failure of political will to face up to the higher costs of implementing fundamental changes. Unfortunately, we have not come even so far as to seriously evaluate what the options are for making a major dent in our pollution imports. Guangdong’s rapidly increasing motor transport sector is likely to prove the most challenging to deal with in environmental terms, but at this point, manufacturing is the most important contributor to our air shed, and these issues can, and should be, quickly addressed through both cleaner fuel use and energy efficiency programs.

Normally, the most cost-effective first step in reducing air pollution is to upgrade the fuel being used, either by fuel switching (e.g., from solid to liquid, or liquid to gas) or when staying within a certain type of fuel to move toward ones with lower sulphur, and less of other contaminants. Due to limited options for fuel suppliers and their ability to locally source fuel of higher quality, energy efficiency in combustion and end-use seems to be the next best option. Better process design also has the advantage of potentially being a net cost-saver to the manufacturer through lower energy bills. The Hong Kong Government should look for ways to encourage such moves, for example, through investment assistance for energy efficient equipment, and codes of practice on the part of Hong Kong-owned and managed manufacturing plants.

An excellent program, recently launched with the help of the Asian Development Bank and the IFC is called “P2E2” (Pollution Prevention and Energy Efficiency), and is based on a five-year-old cooperative framework agreement between the US Environmental Protection Agency and the State Environmental Protection Administration of the PRC. This program gives guarantees to local banks, who can then lend (on very favourable terms) to Hong Kong based “Environmental Service Companies” (EESCOs) in order to supply environmental technology and services (from any country) to factories across the border. The beauty of this program is that the factory pays nothing. Yes, nothing. The EESCO is paid back based on the cost savings that are generated from a five-year service contract with the factory, and verified by an approved third party firm. Future service contracts can then be renewed, as improved technologies for further savings and pollution reductions are introduced. EESCOs can also gain the benefit of pollution credits that they have generated from such contracts, which can then be sellable in the growing market of pollution emission credit trading. This is arguably one of the most innovative market incentive mechanisms anywhere in the world today, and Hong Kong companies have an enormous opportunity to take advantage of this, both to help China’s growing pollution problems, as well as to be a leader in any of the developing Asian countries.

In order to combat our dire air quality situation, the Hong Kong Government should be explicit in stating that we have a direct interest in Guangdong’s energy use. The Government should be working with Guangdong in areas which aim to:

  • End price controls on petroleum products through the implementation of a market based pricing system;
  • Discouraging (and if possible, ban) the use of high sulphur fuel, with moves to facilitate the comprehensive use of low sulphur content fuels;
  • Ban the use of coal with sulphur content above 1.5 per cent, and as feasible, require the use of fuel gas desulphurisation controls;

We should then work with Hong Kong’s owned manufacturers to invest in energy efficient equipment and processes (with the help of programs like P2E2). At the same time, Hong Kong’s business associations should work with its members to raise the awareness about their responsibility toward reducing the Territory’s “imports” of air pollution from across the border. Energy audits should be highly encouraged, with Hong Kong companies hopefully taking the lead in energy conservation across the border, as well as demanding the use of clean fuels.

Hong Kong faces a unique problem due to the jurisdiction issues across the border. It is time, however, that our own factories face up to the enormous burden they are putting on our territory, at the expense of all of us. Effectively, we are subsidising these factories for their low cost production, and the economics of this action cannot continue unabated. If so, we will continue to pay the price in terms of high health costs, premature deaths and lost competitiveness due to declining living standards. Solutions are possible, but we must act on them now with, both locally, and with the powers that be across the border.

Losing Sight of Hong Kong’s Harbour

Losing Sight of Hong Kong’s Harbour

Douglas Woodring, Associate, Civic Exchange pens his second article for Britain in Hong Kong on the burning issue of Hong Kong’s worsening air pollution. He brings our attention, this time, to local marine emissions and the negative impacts they are having on our air quality.

Impact of Marine Emissions

Hong Kong’s greatest asset is its harbour, yet as we all know, this has become harder and harder to appreciate with clarity as air pollution appears to be steadily on the increase. We often focus on vehicle, power plant and industrial emissions as the culprits, but what about marine emissions? What impact does living next to two of the world’s top four busiest ports have on our air quality, and what is being done about it?

Unfortunately, the answer is that port traffic is a significant contributor to the deterioration of our air quality, and that a lot more can be done to make improvements. Based on transportation figures, in 2004, more than 225,000 vessels arrived in Hong Kong. Of them, 16% (36,000) were ocean going vessels and 84% (190,000) were river vessels (38% ferries and 62% cargo vessels). As it stands today, marine air pollution is not regulated within the Air Pollution Control Ordinance which is the main regulatory control mechanism for emissions within Hong Kong.

Marine emissions in Hong Kong are important for two reasons. Firstly, they are one of the only emission sources whose emissions continue to increase year on year, and secondly, although the absolute amount of marine emissions are less than motor vehicles, are emitted in the heart of Victoria Harbour and are released close to the ground level and within a few kilometers of the densely populated Kowloon peninsula. They pose as serious health risk. In fact, Nitrogen Oxides (NOx) and Sulphur Dioxides (SO2) have both been on the constant increase in Hong Kong since 1990, with both almost doubling in the past 10 years. Each of these pollutants are contributors to the haze and grey skies that are seen in our city, with NOx being a source of ozone creation which is widely considered to be dangerous in terms of health and environmental impacts. A recent study by CLSA and Civic Exchange has shown that Hong Kong’s hazy days have increased from less than 10 per month in 1990, to over 25 per month in 2004.

Sulphur Oxides

While the extent of the influence of PRD regional based pollution has been long known, the influence of local marine sources on local SO2 levels is relatively new information which contributes to the mounting concerns over marine emissions. Ocean going cargo vessels are legally able to use high sulphur fuels with sulphur content up to 4.5%, which contrasts with current requirements and availability of road vehicle fuel in Hong Kong which is 0.005% for motor diesel and petrol/gasoline. Marine fuels are often called Heavy Oil or Bunker Fuel, and these contain high amounts of sulphur which forms SO2 upon combustion, along with substantial amounts of elemental-carbon, nickel and vanadium, all which have significant health implications for affected populations. To put this all into perspective, recent studies show that marine vessels around Kwai Chung are responsible for 36% of total SO2 concentrations measured at the Hong Kong Environmental Protection Department’s air quality measuring stations. Surprisingly, local power plants were only responsible for 7% of total SO2 concentrations at the same stations. Furthermore, marine vessels burning high sulphur fuel appear to be the major source of SO2 in specific locations within the heart of the urban area. To further show the severity of marine vessels’ contribution to sulphur oxides (SOx), ships anchoring at Tokyo’s port emit eight times more SOx per year than the total amount emitted by autos in six Tokyo Wards along the bay.

An Overlooked Problem?

In some aspects, marine pollution has been overlooked as a problem source, partly because marine vessels do not operate on land where the human population moves about each day. Similarly, there are various local and international bodies that govern marine transport, and because ocean going vessels move from port to port, a higher level of international cooperation and understanding of these problems is necessary in order to effectuate a policy on emissions which can be widely accepted, adopted and monitored.

Currently, most of the shipping industry (for ocean going vessels) feels that shipping regulation should be undertaken and enforced uniformly on an international basis through the United Nation’s International Maritime Organisation (IMO). Regulatory issues in the PRD then involve consideration of three different jurisdictions: (i) Hong Kong’s, (ii) Mainland China’s, and (iii) the international jurisdiction of the IMO. International pollution controls are primarily implemented through the MARPOL Convention, of which Annex VI “Prevention of air pollution from ships” came into force in May 2005. This sets limits on SO2 and NOx emissions, and prohibits deliberate emissions of ozone depleting substances. Currently 27 countries have ratified Annex VI, representing 64% of the world’s tonnage in ships. Hong Kong and China have yet to ratify Annex VI, with only Japan and Singapore complying with this annex within Asia. Hong Kong authorities have stated that they expect to ratify Annex VI within 2006 and in any event their current regulations are largely compliant with its requirements.

The IMO also enables regions to be declared Sulphur Emission Control Areas (SECA). To date there are two SECAs in the world which require ships to reduce SOx emissions within their boundaries through using cleaner fuels within those zones. Other emission reductions are also being achieved, largely in the US and European Union, through the reduction of vessel speeds within harbours, changing to cleaner fuels while operating auxiliary engines when approaching harbour, retrofitting ships with emission reduction equipment and the use of shore-side power while docked at port. It is unlikely that Hong Kong will be able to establish a SECA under the IMO regulations. This is largely because in order to achieve SECA status, Hong Kong and Mainland China, being two adjoining countries, must jointly apply and each must have already ratified Annex VI. Moreover, each must have individually taken strong measures nationally to reduce marine emissions before SECA status is granted. Neither Hong Kong or the Mainland appears to have made any effort thus far to reduce marine emissions at its increasingly busy ports, with one commentator saying that “the [Chinese] government has made great efforts to reduce emissions from stationary sources and vehicle exhaust; however, emissions from ships are usually neglected.”

What Can We Do?

What then, can Hong Kong do to improve this situation within our jurisdiction and the PRD? Examples from the U.S. and Europe have shown that two different approaches are being explored and implemented: (i) the use of incentives for complying vessels in the form of reduced fees, shorter waiting time for dock space, and reduced inspection times, and (ii) taxation, differentiated dues and other penalties for failing to comply. In some cases, incentives given by individual ports have shown to be just as effective in cleaning up emissions as regulations handed down from national or supra-national bodies. Use of clean vehicles and equipment at the port itself must also be a coherent part of emission reduction policy.

Hong Kong’s high level of river traffic should also be a main focal point for making improvements, as this accounts for 84% of our marine traffic. In this case, close coordination and cooperation from the PRD will need to be put into place. Cleaner fuels and shore-based power are two of the most likely options for progress, but this then runs into issues relating to fuel policy and availability in the PRD which will be covered in the next article in this series.

In summary, marine pollution is an increasingly worrying contributor to our local air quality problems, and one which is having a clear health impact on the entire population of Kowloon. International protection through the designation of a SECA will be difficult without the support of many countries/ports in the region, and Asia is lagging behind other regions in respect to this type of coordinated response to marine emissions. Hong Kong’s main target for improvement should therefore be aimed at local port policies (Hong Kong and Shenzhen), and programmes to address the use of fuel and/or emission standards on the vessels that constitute the high volume of river traffic within the PRD. Lack of action in the marine industry will contradict any improvements that may be made in land-based emission improvements.

This is the second article in a four-part series on Hong Kong’s air pollution. The next piece will focus on fuel options in the Pearl River Delta, and how that can impact our situation in Hong Kong.

Further information on shipping emission reduction options is available in Civic Exchange’s recently released report “Marine Emission Reduction Options for Hong Kong and the Pearl River Delta”, March 2006, available at

Local Perspective on Hong Kong Air

Local Perspective on Hong Kong’s Air

We all know that our air is polluted, but are we getting the full information of its severity? Are we greatly underestimating the scale of our problem? Douglas Woodring, a concerned resident of Hong Kong and local think-tank, Civic Exchange have come together to answer these questions for Britain in Hong Kong.

UNFORTUNATELY, it took Hong Kong’s largest sporting event, the recent marathon, and one of our all too common “bad air” days, to really get people to understand that we are truly under threat from our air quality. Without the knowledge on where we truly stand, however, the calls to action from the community, and the incentive to make necessary improvements, have yet to occur in a way that would be expected in Asia’s world city.

Who is to blame?

Sadly, the main blame for our air quality is the industrial growth on the other side of the boundary, which we cannot easily rectify, although 70,000 factories in the Pearl River Delta are under Hong Kong ownership and should be held more accountable. This is true, but we also need to be able to demonstrate that we have done everything we can in Hong Kong to tackle our own local air pollution before we can fairly criticise emissions north of the boundary.

With little manufacturing remaining in Hong Kong, the numbers are clear. There are two main components of our local emissions: the excessively high dependence on poor quality diesel vehicles, and air pollution from power generation, particularly from coalfired plants, as natural gas and nuclear generation alternatives are significantly cleaner local fuel sources. It is good news, in that the targets are easy to define, but it is unfortunate for all of us that not enough has been done to make the real changes that are needed. Instead, we are all paying the price of a slow pace of change with our and our families’ health and quality of life.

API Index: HK vs. EU

The first issue to understand is the true level of pollutants in our air. Unfortunately, we are still being given Air Pollution Index (API) readings that are skewed by taking an average reading of various pollutants from the previous 24 hours. Moreover, the Air Quality Objectives that have been introduced for Hong Kong in 1987 are only objectives, but not actual standards. No one is accountable if they are not achieved. If you look at the API index based on European Union standards ( you will find an enormous difference in readings.

The EU claims that it is “very unhealthy” when there are 50 micrograms of pollutants per cubic metre of air, where Hong Kong’s “very unhealthy” level is only reached at 180 micrograms. The day before the Hong Kong marathon, the levels in Central reached almost 300 (based on the EU index). Based on the EU index, the readings are above 200 in Central more often than not, yet our local API index reports the same days as just under 80. With nearly 20-year-old Air Quality Objectives in place, Asia’s world city is out of step with standards set in other parts of the world, and until our API index readings and interpretations of their content are inline with those of the developed world, our decision makers will continue to underplay the urgent need for change.

Road blocks

Hong Kong has the highest percentage of “diesel” road miles driven per capita out of any major developed city in the world. This is a major challenge for Asia’s world city. Tokyo recently embarked on a stringent campaign to limit diesel vehicle use in the city during the day time, while California has declared diesel a carcinogen. The European Commission is also preparing to introduce more stringent limits on diesel particulate emissions, reducing it to a level five times lower than the current Euro 4 standard, as the soot produced primarily by diesel cars has been blamed for a variety of respiratory problems. Daimler Chrysler has recently said that it will equip all of its diesel models with particulate filters starting this year in the Netherlands, Switzerland, Germany and Austria. This is because the community there demands it. Why can’t these filters be used here in Hong Kong?

In contrast, one of Hong Kong’s bus operators is applying for a new 10-year licence, yet the government has yet to set new minimum standards in its type of engines or pollution control equipment, and only 10 out of 752 buses in operation are of Euro III standards. In fact, out of Hong Kong’s licenced bus fleet, 83 per cent out of 4,025 buses are below Euro III standards. One recent response from a government official to the expedition of the replacement of buses to Euro III standards was “that there is a need to adopt a gradual and cautious approach in considering bus replacement.”

Hazardous to health

Locally, Nitrogen oxides (NOx) are primarily produced from power generation and transportation. They affect living materials, building materials and contribute to acid rain. NOx are also a key ingredient of ground-level Ozone, of which diesel fuels are a significant contributor. A 2005 study commissioned by CLSA and prepared by Civic Exchange shows that Ozone concentrations are rising rapidly in Hong Kong, the results of which can be eye and lung irritation, with long-term recurring exposure potentially
causing chronic health problems.

Dialogue has started to introduce Euro V fuels, where the Sulphur content is five times lower than that of current diesel. This will have very little impact, however, if the quality of the majority of Hong Kong’s diesel engines used is not brought up to date. Serious efforts should be made to phase out older diesel vehicles of all types, retrofit others with the most sophisticated particulate traps, and make sure that the fuel used is of the highest quality. This also means making sure that fuels from across the border, where sulphur content is from 50 to 500 times that of Hong Kong, do not make their way onto our roads.

Polluter pays

In terms of energy production in Hong Kong, with the Scheme of Control under review, it would be timely for the introduction of coal-fired emission control equipment to be introduced under a new regulatory regime, which includes environmental performance targets. Hong Kong needs to embrace the “polluter pays principle”. In this regard, a combination of ‘carrot and stick’ comprising bold leadership, world standards, meaningful penalties, attractive incentives and civic education all need to be utilised to deliver necessary improvements.

One solution recommended by economist Philip Bowring’s recent South China Morning Post article suggested an ‘energy tax’, which would simply mean that those who use the most of our resources pay accordingly. Since there is no longer a significant industrial base in this city, this option appears to have merit, also prompting conservation and energy efficiency along the way, which few seem to have the true incentive to pursue today. Until older polluting vehicles are phased out, part of the proceeds from such an ‘energy tax’ could be used to help convert, modify and greatly improve the tens of thousands of outdated diesel vehicles that travel (and idle) on our roads every hour by retrofitting state of-the-art pollution traps and filters.

The options for improvement, that we have in Hong Kong can control, are fairly straightforward, but we all have to want improvement. Unfortunately, not all of us ask for it with such urgency because we are not aware of what is really happening when we are given air pollution readings, which are out of step with international standards. The choice is ours, but we need to put the goal posts in the right places so that we can judge the results and bring accountability to the system.