VZCZCXYZ0001
PP RUEHWEB

DE RUEHHK #2509/01 1670740
ZNY CCCCC ZZH
P 160740Z JUN 06
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 7319
INFO RUEHOO/CHINA POSTS COLLECTIVE

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 
--------------- 
 
¶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 
------------------------------ 
 
¶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 
----------------------------- 
 
¶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 
------------------- 
 
¶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 
------------- 
 
¶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 
------------ 
 
¶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