Chinese officials have clearly determined that wealth generation alone won’t deliver greater economic and social maturity. Energy efficiency, renewables, clean technologies and environmental protection are essential as well. Hong Kong should take heed.
In fact, the relative weighting afforded to the environment as against the economy in the recently released 12th Five Year Plan is truly stunning.
The plan calls for the current rapid pace of growth to be slowed substantially, from the 11.2% average of 2006-2010, to 7% for the upcoming five-year period. It aims to deliver more sustainable, energy-efficient growth through an array of interlocking targets and policies.
When Chinese policymakers set themselves a goal, they spare no policy tool in its pursuit. Thus traditional inputs to wealth creation – land, water and coal – are all to be limited.
On the supply side, trillions of yuan will be invested in cleaner, more carbon-efficient power generation and distribution. On the demand side, energy-intensive industries will face increasing constraints, while consumers will be encouraged to purchase greener, reusable or recyclable products. Experiments with market mechanisms, such as taxing and trading, will inform broader efforts to put a price on carbon.
As any business leader knows, the proof of a plan is in its execution. China is undertaking a radical transformation of its economy, on a scale never before attempted. Even if it hits every target, its carbon footprint will rise. But two central tenets will help ensure China’s low-carbon movement is a one-way journey. The first is an increasingly transparent policy and legal regime to spur business investment. The second is an industrial policy favouring clean technology and clean energy, to position China for market leadership. Both will be reinforced as targets are codified into regional and sub-regional laws and regulations.
Where does this leave Hong Kong? It leaves it with a growing “regulatory gap” between the special administrative region and the mainland. This could grow into a “market gap” and a “skills gap” in the nascent low-carbon marketplace. Hong Kong needs to act quickly and with clarity of purpose, to avoid jeopardising its future competitiveness.
The good news is that it has a starting point. In September, environment secretary Edward Yau proposed a climate strategy for Hong Kong. The target was to cut carbon intensity by 50% to 60% from 2005 levels by 2020, equivalent to absolute carbon emissions reduction of 19% to 33%.
The proposal relies heavily on shifting power generation from carbon-intensive coal to nuclear power, with smaller increases in gas and renewable energy. It also calls for improving building energy efficiency, reducing emissions from transport and creating fuel from waste.
Hong Kong now should aim for a dialogue on how to meet its energy needs, climate-change objectives and air–quality goals. Imported nuclear power has been a successful part of Hong Kong’s strategy for some time. The Climate Change Business Forum [CCBF – the author is chairman of its executive committee] supports a well-informed public that can more confidently endorse decisions regarding how to pursue these goals in the future, with a view toward safety, emergency response, communications and long-term energy security.
The government has identified some of the right levers for a comprehensive climate-change plan. But alone they will not be sufficient to deliver the transformation Hong Kong needs to remain competitive. In our view, Hong Kong needs what China has: a comprehensive plan using every policy and market tool at our disposal.
Such a plan would incorporate demand-side management for both businesses and consumers. It needs to discourage wasting energy, and promote actions to use energy more wisely. Hong Kong should also work closely with China on carbon pricing, to ensure that it can partake of whatever scheme is introduced, provided they are fair across sectors and that there is assurance that funds are channeled into environmental projects.
The Hong Kong SAR government holds a unique set of powers that, properly wielded, could jump-start the low-carbon strategy. As creator of laws, it can introduce progressively stringent requirements for energy generation and use. As keeper of public health, it can ensure that health is at the centre of its cost-benefit analysis of energy and pollution laws. As guardian of the environment, it can guarantee protection for biodiversity in our land and marine areas. And as market maker, it can create a surge in local demand for carbon-smart goods and services.
Government can also exhibit leadership by example. This means measuring, reporting and reducing carbon. Yau has asked CCBF companies to set aggressive targets for carbon reduction. The government should do the same, and be the first mover in setting such targets.
This will require whole-of–government thinking to run a carbon-smart city, and whole-of-government action to transition to a low carbon economy. Business leaders need to be on board. We think that they will be: a 2010 CCBF survey revealed that 82% of Hong Kong business managers see the value of investing in energy-efficient, low-carbon products and services. But only 31% are planning to make such investments. They are waiting for market demand and government action. Hong Kong should make them wait no longer.
Thomas Ho is CEO of Gammon Construction and chairman of the executive committee of the Climate Change Business Forum (CCBF), a platform for Hong Kong business leaders to collaborate on tackling climate change.
Homepage image by Kevin Lau