CLIMATE CHANGE DEMARCHE: ENGAGING HONG KONG AND

UNCLAS SECTION 01 OF 02 HONG KONG 001661

SIPDIS

SIPDIS
SENSITIVE

STATE FOR EAP/CM AND OES/EGC
STATE FOR OES/ENV AND OES PDAS
NSC FOR WILDER
STATE PASS CEQ FOR BERGER, VAN DYKE
DOE FOR INTERNATIONAL/HARBERT, PUMPHREY AND GEBERT
EPA FOR INTERNATIONAL/MCASKILL

E.O. 12958: N/A
TAGS: SENV ENGR SOCI EAID EPET TRGY KPAO CH HK MC
SUBJECT: CLIMATE CHANGE DEMARCHE: ENGAGING HONG KONG AND
MACAU ON ENERGY AND THE ENVIRONMENT

REF: A. STATE 75287


B. STATE 80334

C. HK PD RESULTS REPORT MAY 11 2007


1. (SBU) Summary: AmConGen Hong Kong has actively engaged
the governments and the general public of the Hong Kong and
Macau Special Administrative Regions on U.S. climate change,
renewable energy and other environmental programs. Post
developed and actively promoted the Pollution Prevention and
Energy Efficiency Initiative (P2E2),a financing model that
allows Hong Kong and mainland Chinese companies to reduce
their energy usage and improve polluting factories without
incurring any upfront costs. There are currently about 30
projects in various stages of development using these P2E2
technologies in China. We are facilitating additional
financing for the installation by Hong Kong companies of P2E2
technology upgrades at factories, power plants and real
estate projects throughout the mainland. Following up on
Council on Environmental Quality (CEQ) Chairman James
Connaughton's visit last year, the Consul General showcased
American technological innovation and the need for
market-based solutions to combat environmental problems
during a recent speech. The Hong Kong government (HKG) and
press responds favorably to this message. HKG officials have
begun to showcase U.S. approaches towards reducing air
pollution as an appropriate solution to environmental
degradation problems in the Pearl River Delta (PRD) region of
southern China. Consulate staff also met Macau energy and
environmental officials to explain U.S. initiatives and the
need for sustainable economic growth. The Macau Special
Administrative Region government (MSARG) responded by
requesting additional information and collaboration with the
U.S. Department of Energy the Environmental Protection Agency
on developing long-term energy and environmental strategies
in the PRD. Consulate staff have actively engaged civil
society groups and schools on the U.S. approach to
environmental protection and sustainable development with
another outreach event planned for late June. END SUMMARY.


2. (U) Since 2005, AmConGen Hong Kong has developed and
promoted the P2E2 program, a market-based financing model
that encourages investment in pollution-reducing technologies
at mainland Chinese factories and power plants. The program
enables firms in mainland China -- some 80,000 of which are
owned by Hong Kong investors -- to upgrade their facilities
with the help of Hong Kong Environment and Energy Service
Companies and Hong Kong banks. The project has begun to
yield results in addressing air, water and ground pollution.
Through fostering increased energy efficiency, the program
also helps participating companies gain a competitive edge
over their rivals. The idea that pollution prevention and
increased energy efficiency are profitable is an important
message to convey to investors in the cut-throat business
environment of southern China. To date, there are
approximately 30 P2E2 technology projects under development
in China and, through the Asian Development Bank and IFC,
AmConGen Hong Kong is facilitating the commitment in 2007 of
up to US$800 million in new loan guarantees and loans to Hong
Kong commercial banks for this initiative. This program not
only allows us to publicize the U.S. approach to climate
change, but also provides Hong Kong and mainland Chinese
companies with a reliable market-based platform to reduce
emissions through technological innovation.


3. (U) On May 11, the Consul General spoke publicly to the
Chinese General Chamber of Commerce in Hong Kong about U.S.
efforts to increase energy security through recent fuel
initiatives and investments in clean energy research and
technology, including highlighting recent mandates for the
use of ultra-low sulfur diesel, expanding the market for
hybrid vehicles, and developing biofuels and new renewable
energy sources. Extensively drawn from material provided by
CEQ, the speech highlighted the importance of the market and
the role that businesses can play in spurring innovation and
in promoting energy efficiency. This message has been
well-received by HKG officials. Hong Kong Secretary for the
Environment, Transportation and Works Sarah Liao has quoted
the Consul General by name when discussing American
market-based approaches to clean energy and pollution
prevention during her recent public speeches on climate
change and the environment.


4. (SBU) Twelve local and international media representatives
attended the event and the Consul General's lengthy question

HONG KONG 00001661 002 OF 002


and answer session on U.S. efforts to improve the environment
and diversify our energy sources. Radio Television Hong
Kong and five Hong Kong newspapers, including Oriental Daily,
Ming Pao, The Sun, South China Morning Post and (the
pro-Beijing) Ta Kung Pao (with a combined circulation of
816,000) covered the speech with positive reports. Over 60
members of the local community attended, representing the
Chinese General Chamber of Commerce, environmental
organizations, industry representatives, and the HKG. USINFO
also ran an article based on the speech, which is available
on the websites of AmConGen Hong Kong and the Chinese General
Chamber of Commerce in Hong Kong.


5. (SBU) Hong Kong is working to diversify its energy
sources. China Light and Power (CLP) recently increased its
use of coal in its power plants due to a dwindling supply of
natural gas in Hainan, a large island off the coast of
Southern China. It is now working with the HKG to build an
LNG terminal on a remote island in Hong Kong to secure a
stable supply of natural gas and decrease its dependency on
coal. Although some local environmental groups oppose the
project due to its potential impact on sea life, HKG
officials generally support the construction of the new
terminal as it would expand the territory's energy sources,
make it less dependent on Hainan and other PRC sources for
its LNG, and contribute to improved air quality. To date,
Hong Kong has not invested much money in renewable energy.


6. (SBU) EconOff recently visited Macau to discuss energy and
environmental issues with Arnaldo Santos, Director of the
MSARG Office for the Development of the Energy Sector and
Vong Man Hung, Acting President of the Executive Committee of
the MSARG's Environment Council. Due to tremendous economic
growth of the gaming sector and the accompanying development
of hotel, transportation and convention industries, Macau i
struggling to meet its energy needs. Macau larely relies on
diesel for electricity production and is working with
mainland Chinese counterparts o build nw power plants and
LNG terminals, and o develop renewable energy sources in the
PRD. nlike Hong Kong, Macau is tying its energy security
very closely to mainlad China. But, officials expressed a
keen interet in learning more what Macau can do to promote
lean energy in mainland China as the territory's ai quality
is adversely impacted by Chinese polluton. Santos was
particularly interested in sharing technologies and best
practices with U.S. counterparts for harnessing wind, solar
and other forms of renewable energy in a compact urban area.
Both Santos and Vong requested increased collaboration with
the Department of Energy and Environmental Protection Agency.
They also invited USG energy and environment specialists to
Macau when they next visit mainland China or Hong Kong.


7. (U) Post has conducted active public diplomacy programs to
support the President's energy and climate change initiatives
-- from op-ed pieces in the local press to public events on
the importance of sustainable development and economic growth
at schools and with other civic groups. Post plans an
additional outreach event in late June on sustainable
development with a focus on the importance of balancing
preservation and economic growth.
Cunningham