Hong Kong's carbon trading move too little, too late: analysts

Hong Kong has joined the international carbon trading structure with a promise to slash emissions, but analysts say the move will fail to produce any serious reductions in greenhouse gases.

"It is a bit of an impotent gesture and is about four years too late," said Shane Spurway, head of carbon banking at Fortis Bank.

In a low-key press release sent out just before a public holiday weekend earlier this month, the city's Environmental Protection Department said it had set up the legal framework to allow projects that could sell on their reductions in carbon emissions.

"These projects will help further reduce Hong Kong's greenhouse gas emissions," a spokesman for the department said in the statement.

But experts doubt that the belated decision will help reduce harmful carbon dioxide (CO2) emissions.

Spurway said the projects that could have benefited from the early introduction of the scheme had already been planned and so would not be able to gain carbon credits under the Clean Development Mechanism (CDM).

The mechanism, which was set up by the international community in Kyoto, Japan in 1997 and came into force in 2005, aims to reduce greenhouse gas emissions by creating a worldwide cap and trade system.

Developed countries, mainly in Europe, place a limit on the amount of gases factories can emit. To meet their obligations, the polluting industries can either reduce their own emissions or buy carbon credits from people who have made reductions, often in the developing world.

The reductions in the poorer parts of the world are easier and cheaper than the developed world and so have attracted the most investment.

China has been the biggest beneficiary, according to the World Bank which says it now produces more than 70 percent of all the world's CDM projects, targeting such heavily-polluting industries as cement and chemicals.

Until now, Hong Kong has been unable to access financing for such projects, meaning that completed landfill or power station projects have been less profitable.

The delay in agreeing the scheme has meant any projects already planned are ineligible, as schemes must prove they would only take place with the extra investment, the so-called "additionality test".

China Light and Power, a major Hong Kong energy firm with operations across the world, said there were no plans to begin CDM projects in Hong Kong.

"While we welcome the government's announcement on CDM, right now we do not have any projects that would use it," a spokeswoman told AFP.

Hong Kong and China Gas Company, which operates major landfill projects in Hong Kong which may have benefited from an earlier adoption of CDM, declined to comment.

Christine Loh, from think tank Civic Exchange which has been a vocal critic of Hong Kong's environmental record, said the move showed that business, so often the driver of policy here, was finally getting interested in the issue.

"The financial community can see carbon trading getting to a level where the world is talking about it. They can see the new assets of the future -- clean air and clean water," she said.

Both Loh and Spurway said a more significant step by the Beijing and Hong Kong governments would have been to allow Hong Kong companies operating in China to benefit from carbon-related finance to cut emissions.

Currently, Hong Kong companies are treated like foreign enterprises in China. If they want to instigate schemes that would create carbon credits, they have to set up a joint venture with a Chinese firm, which many are unwilling to do.

"You have something like 90,000 Hong Kong-owned factories (in China), but because of the joint-venture requirement, they are probably a bit reticent to set up there," said Spurway.

The Hong Kong General Chamber of Commerce welcomed the government's move, saying it would "enable Hong Kong to contribute directly to the global effort against climate change".

But it added that it hoped Hong Kong companies would be able to get greater benefit from carbon reduction activity in China.

Hong Kong has faced strong criticism from campaigners for its environmental policy on issues ranging from the appalling air pollution to the failure to ban plastic bags.

Business groups have argued the poor air quality, blamed on the thousands of factories just across the border in China's manufacturing hub, is damaging the city's ability to attract top managers and compromising its position as an international finance centre.

© 2008 AFP

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