EVOLVING DISCUSSION OF AIR POLLUTION'S

C O N F I D E N T I A L HONG KONG 002509

SIPDIS

SIPDIS

STATE FOR EAP/CM AND OES/E
STATE PASS EPA

E.O. 12958: DECL: 06/16/2031
TAGS: ECON ENRG SENV CH HK
SUBJECT: EVOLVING DISCUSSION OF AIR POLLUTION'S
CONSEQUENCES AND REMEDIES

Classified By: EP Chief Simon Schuchat; Reasons: 1.4 (b/d)


SUMMARY/COMMENT
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1. (C) Positive reaction to the Consul General's (CG) recent
speech encouraging business to be proactive in addressing
worsening air pollution suggests a growing realism and
sophistication in the local smog debate. Shortly after the
speech, a local NGO published a report listing dramatic
health consequences of air pollution for Hong Kong's
population. We found it encouraging that a key Hong Kong
Government (HKG) environmental contact did not contest the
report but instead told us of its potential utility to help
the government move forward in addressing pollution issues.
Separately, the Secretary for Environment, Health, and
Welfare (SETW),in a recent meeting with the CG, offered
insight into how electricity pricing exacerbates the
pollution that drifts toward Hong Kong from Guangdong
Province. She also suggested that the HKG might be able to
assist the private sector by providing experts to advise
small-and medium-sized enterprises on available environmental
technologies and equipment. END SUMMARY/COMMENT

SPEECH DRAWS POSITIVE REACTION
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2. (U) On June 6, the CG delivered a speech, "Taking Action
on Pollution," to a joint gathering of the American and Hong
Kong General Chambers of Commerce. The focus was on how the
local business community could and should take proactive
action to supplement ongoing government efforts to address
regional air quality issues. Hong Kong companies own or
finance over 70,000 factories in the Pearl River Delta (PRD),
and the resulting emissions are a significant part of the
worsening air quality here. These firms could help
ameliorate the situation while at the same time improving
their own bottom lines by using a market-based financing
model that encourages investment in pollution-reducing
improvements. The seeds of this model, referred to as
"P2E2," (pollution prevention and energy efficiency),emerged
from the U.S.-China Commission on Commerce and Trade. This
post's FCS office is actively working with local banks and
corporations to match the availability of loan guarantees
with the installation of P2E2 equipment in PRD factories.
The result is that companies now have an option to install
P2E2 equipment with no up-front costs and then enjoy improved
profits once the equipment is paid for out of initial cost
savings resulting from lower energy use.


3. (SBU) Media reaction was positive, emphasizing the
speech's focus on the role of the business community and
quoting the FCS Chief as saying that since May last year,
three enterprises and 20 environmental protection consultant
companies had already shown an interest in joining the P2E2
program. On June 14, columnist Chip Tsao wrote in the
mass-circulation pro-democracy Apple Daily (circ 350,000)
that Hong Kong's air pollution was so serious hat it was
driving foreigners away. He described the CG "and many U.S.
businessmen" as taking the lead to criticize the HKG for
claiming Hong Kong is an international city -- but having
Third World air pollution. (Comment: Although he
misunderstood the CG's message, Tsao, like other media,
assessed that such remarks would force the HKG to deal with
the situation. End Comment)


4. (SBU) Environmental Protection Department (EPD) Deputy
Director Roy Tang praised the CG's speech, saying that it fit
in well with his department's own message that air pollution
in Hong Kong is a shared responsibility between government,
business, and private citizens. Tang's views were in line
with comments made after the speech by other attendees. Many
of those present told us that it was refreshing to hear views
on air pollution that focused on solutions rather than
problems.

HKG-PRIVATE SECTOR ENGAGEMENT
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5. (C) The CG met with SETW Sarah Liao in advance of his
speech and inquired on possible HKG support for private
sector initiatives against air pollution. She commented that
it would be difficult to provide direct subsidies to private
sector efforts, but the HKG is able to supply experts to
advise SMEs on pollution-related technical solutions and
equipment designs. Liao said that the HKG is waiting for a
proposal from the Federation of Hong Kong Industries -- FHKI,
an organization that aims to advance the interests of local
manufacturers -- on public-private collaboration concerning
air quality. EPD's Tang separately told us that his
organization has been waiting several weeks for the proposal.
The lack of action is hardly surprising, he said, given that
EPD has been "wrestling" with FHKI on banning the use of
industrial grade diesel oil and also arguing against the
organization's attempts to obtain permission for more
widespread use of highly polluting bunker (ship) fuel. He
added that the EPD is still refraining from "exposing" the
FHKI's environmentally unfriendly tendencies but may be
forced to act as public pressure grows with regard to air
pollution.

ALARMING NGO REPORT
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6. (C) Tang also told us that a recent report by Hong Kong
NGO Civic Exchange, detailing the health consequences of
worsening air quality, might actually help EPD push its
longer-term agenda within the HKG. The report, released June
8, dramatically laid out the annual health costs to Hong Kong
of its smog: 1,600 lives, USD 2.7 billion in medical costs,
64,000 hospital "bed days," and 6.8 million family doctor
visits. Tang did not contest the assessment and went so far
as to say that while the report contained little new
information, it was consistent with the findings of a 2002
analysis that EPD itself had done. Tang, however, termed the
short-term impact of the report as painful for the HKG and
said he suspects that Civic Exchange founder Christine Loh
timed the release to coincide with other negative press
accounts of Hong Kong's worsening air pollution.

WHO STANDARDS
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7. (SBU) SETW Liao criticized soon to be published World
Health Organization (WHO) standards for PM 2.5 particulates
(2.5 microns or less),predicting that almost no developed
cities, including Hong Kong, New York, and Los Angeles, would
be able to meet them. EPD's Tang agreed, noting that even
the WHO itself cautions that each country needs to take into
account practical considerations for local conditions. The
public has to understand that the HKG will do what it can but
the outcome will depend in great part on outside influences.
As long as the public is given the right amount of
information, it can make an informed choice. It is important
to present the people of Hong Kong with a "menu with clearly
listed prices" of air pollution policy options, Tang said.

CHINA FACTOR
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8. (SBU) SETW Liao said that power companies in Guangdong
told her that they were still generating surplus electricity
that they could not sell off. Energy pricing in the PRD is
two-tiered, she explained, and once consumption hits a
certain threshold, charges rise. Many companies are
unwilling to pay the premium and choose to switch on their
cheaper, but heavier polluting, private diesel generators
instead. EPD's Tang observed that the National Development
and Reform Commission (NDRC) does not anticipate a major
power shortage in Guangdong for the rest of the year. This
will give local authorities a window of opportunity to "close
in" on the illicit use of the polluting generators.
Cunningham