Implications of the 12 th Five-Year Programme for Hong Kong Businesses

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Candace Thornton
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1 Implications of the 12 th Five-Year Programme for Hong Kong Businesses Wing Chu Economist April 2011

2 2 Energy conservation and environmental protection: a priority in 12 th Five-Year Programme Rapid economic development leads to serious pollution problems - Policy focus in the 11 th Five-Year Programme Energy conservation & emission reduction + controlling high energy consumption, high pollution and resources consumption ( 兩高一資 ) Priority in the 12 th Five-Year Programme - Green development, building a resource-saving, eco-friendly society Strengthen energy conservation and management Step up environmental protection efforts Increase investment in energy-saving and emission reduction technologies Accelerate the development of 7 new strategic industries, including energy-saving and environmental protection industries

Five-Year Programme - Green development, building a resource-saving, eco-friendly society Strengthen energy conservation and management Step up environmental protection efforts

3 3 Pollution problems stemming from industrial development and rapid urbanisation Guangdong Jiangsu Shandong Zhejiang Hebei Henan Liaoning Sichuan Electricity consumption (2009) 1,488 1,325 2,081 2,471 2,344 2,941 3,610 3, ,000 4, million kw h Jiangsu Zhejiang Guangdong Shandong Guangxi Fujian Henan Hebei Industrial waste water discharge (2009) million tonnes Population density (person/sq km) Guangdong's urbanisation indicators Population density Ratio of urban population (%) Ratio of urban population Source: China Statistical Yearbook; Guangdong Statistical Yearbook - Rapid industrialisation and urbanisation cause pollution and pose threats to the living environment and people s health

3 25.6 0 10 20 30 100 million tonnes Population density (person/sq km) Guangdong's urbanisation indicators 800 600 400 200 39.3 411 55.0 486 60.7 511 63.1 526 63.4 63.

4 4 The PRD example - green and sustainable development a major strategy in economic development Integrated Plan on PRD s Environmental Protection ( ) Strengthen control on industrial environment Enhance water environmental protection and prevent cross-sector water pollution Speed up reduction of atmospheric compound pollution in the region Build an integrated environmental monitoring platform -improve the energy structure, set stringent green entry thresholds, raise pollution control standards for industrial activities protect drinking water and build cross-sector integrated water pollution prevention systems control emission of volatile organic compounds, promote desulphurisation and denitrification, reduce emission of particulate matter strengthen the environmental monitoring and legal supervision systems Guangdong Targets PRD Targets No. of days with above grade 2 air quality 90% of a year 355 days of a year 355 days of a year Compliance rate of drinking water quality 95% 95% 100% Urban sewage treatment rate 60% 80% 90% Compliance rate of waste water discharge 90% 90% 100% Urban household garbage detoxification rate 80% 85% 100% Tightened measures: (1) energy conservation; (2) pollution control

monitoring platform -improve the energy structure, set stringent green entry thresholds, raise pollution control standards for industrial activities protect drinking water and build cross-sector

5 5 Rapid expansion of PRD energy-saving market Enterprises asked to cut energy consumption - Hong Kong-invested companies in PRD have received notice from mainland authorities requesting them to draw up and implement energy-saving plans - Regulation of Guangdong Province on Energy Conservation: new fixed asset investment projects subject to government approval must undergo energy efficiency evaluation and review, and energy-consuming facilities falling short of prescribed standards must be upgraded Guangdong's total energy consumption Standard coal (million tonnes) % % % 20% 16.7% 11.6% 11.3% 14.3% 11.1% 5.8% 10% 7.7% 5.6% 0% Annual growth rate End-user energy consumption (standard coal in million tonnes) Annual grow th rate Source: Guangdong Statistical Yearbook

evaluation and review, and energy-consuming facilities falling short of prescribed standards must be upgraded Guangdong's total energy consumption Standard coal (million tonnes) 300 250 200 150 100

6 6 Rapid expansion of PRD energy-saving market (2) Incentives to enterprises - Reduced expenditure on energy - Low-carbon production in tandem with green sourcing requirements of European and US buyers - obtain credit support from banks more easily under the green credit policy - Enjoy tax benefits and/or government fiscal incentives

requirements of European and US buyers - obtain credit support from banks more

7 7 Rapid expansion of PRD energy-saving market... (3) PRD small-and-medium service companies not meeting all market needs - PRD s strong demand for various energy-saving services Energy-efficient air-conditioning Recovery of residual heat and pressure Green lighting Power system enhancement Utilisation of new energy sources - Meeting the needs of industrial clients energy consumption by manufacturing sector: 57%

various energy-saving services Energy-efficient air-conditioning Recovery of residual heat and pressure

8 Environmental system services pollution control Guangdong has the largest number of pollution sources in China (taking up 10.2% of national total) Guangdong s major pollution sources Major pollution sources Regions with major pollution sources Industries 44.7% Pollution control facilities 0.1% Household 23.8% Agriculture 31.5% - Guangdong government plans to introduce Environmental Assessment and Planning Early Intervention System in PRD Source: Guangdong s First National Survey of Pollution Sources, Jun 2010 Units (10,000) Pollutant emission standards made one of the approval criteria of a project s environment impact assessment - More stringent pollutant emission standards will be imposed on heavy pollution industries like industrial boilers, building materials, petrochemicals, dyeing and electroplating Shenzhen Guangzhou Foshan Dongguan 5.7 Jiangmen Zhongshan 8

9 9 Environmental system services pollution control (2) Strong demand for pollution control services - More stringent emission standards drawn up by the central and provincial governments ( 國家標準地方標準 ) Riding on opportunities in industrial upgrade and industry relocation - Planning and constructing pollution control systems in new factories and facilities being invested - In encouraging industry relocation, the government will at the same time strengthen control on pollution

industrial upgrade and industry relocation - Planning and constructing pollution control systems in new factories and

10 10 PRD environmental system services pollution control (3) Further potential in the market - Guangdong plans to raise substantially the treatment rates of various pollutants in the next decade - E.g., by 2020, the ratio of urban sewage treated and the ratio of waste water meeting discharge standards are targeted to increase from 61.2% and 92.3% to 90% and 100% respectively Guangdong s efficiency in controlling pollution Ratio of industrial waste water meeting discharge standards Ratio of urban sewage treated Ratio of industrial sulphur dioxide emissions meeting standards Ratio of industrial smoke and dust emissions meeting standards Ratio of industrial particulates emissions meeting standards Remark: 2009 figures Source: Guangdong Statistical Yearbook

11 Opportunities under CEPA CEPA facilitates the participation of Hong Kong companies in the following ways: Hong Kong companies may set up wholly-owned enterprises on the mainland to provide architectural design services and engineering services (including environmental protection design and engineering services) Hong Kong companies may set up wholly-owned enterprises on the mainland to provide various environmental protection services: (1) Sewage services; (2) solid waste disposal services; (3) waste gas clear-up services; (4) noise abatement services; (5) nature and landscape protection services; (6) other environmental protection services; (7) sanitation services Guangdong may approve the qualifications of Hong Kong service providers for setting up enterprises to operate environmental pollution control facilities in the province 11

provide various environmental protection services: (1) Sewage services; (2) solid waste disposal services; (3) waste gas clear-up services; (4) noise abatement services; (5) nature and landscape

12 12 Demand characteristics in favour of Hong Kong services Professional experience in project management & technology integration - mainland + foreign technology / equipment offer total solutions to clients - HK s independent services enjoy a good reputation in the mainland e.g. energy audit and verification services - UN report: China needs 62 key specialised and general technologies yet about 70% of these core technologies are currently beyond its grasp

13 13 Demand characteristics in favour of Hong Kong services (2) Financing arrangement plays crucial role - Hong Kong the international financial hub: a diverse range of financing services - Hong Kong is a designated region for environmental financing projects under the Pollution Prevention & Energy Efficiency Programme (P2E2) jointly implemented by China and the US Advantages in Guangdong-Hong Kong cooperation - Framework Agreement on Hong Kong/Guangdong Cooperation (signed in April 2010) Cleaner Production Partnership Programme Offers on-site assessment on clean production Help Hong Kong green service providers build up their track records

(P2E2) jointly implemented by China and the US Advantages in Guangdong-Hong Kong cooperation - Framework Agreement on Hong Kong/Guangdong Cooperation (signed in

14 Thank you! 14

Legislative Council Panel on Commerce and Industry. The 15 th Working Meeting of the Hong Kong/Guangdong Co-operation Joint Conference

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