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Following is a speech by the Secretary for the Environment and Food Bureau, Mrs Lily Yam, at the resumption of the second reading of the Appropriation Bill 2001 in the Legislative Council meeting today (April 4)(Translation).

Madam President,

I would like to thank the members - together with the parties and organisations on whose behalf several of them spoke - who commented on environmental issues. Over the past two years or so, more and more members of the community understand that the quality of our environment is a crucial factor in the economic and social prospects for our city. This understanding is reflected in members' speeches.

A member remarked that a quality environment is important to attracting quality talent to Hong Kong. That is certainly so. But it is only part of the reason why a better environment is good for Hong Kong. Clean air is important for everyone's health. A clean harbour is an asset for everyone in the city. Effective waste management is essential for everyone's enjoyment of his home.

The recurrent expenditure allocated to the Environment and Food Bureau in the new financial year has been increased by 7.1% in real terms, reflecting the importance the Administration attach to improving the environment and food safety.

But my colleagues and I are well aware that what counts is not how much resources we could get, but how well we use our resources to provide quality services. As a few members have remarked, we have to provide well-planned, cost effective services. I am determined to ensure that this is the case for the Environment and Food Bureau as well as the three departments under it.

As a matter of fact, we are making good progress in implementing the Enhanced Productivity Programme and expect to be able to achieve the target of the Programme of making a 5% productivity gain as scheduled by 2002/03. The Agriculture, Fisheries and Conservation Department will reach that target a year earlier, within this financial year.

The progress report that we presented to this Council's Environmental Affairs Panel in January this year set out the substantial improvement in water quality and waste management achieved over the last decade. During the past two years or so, thanks to support from this Council, we have also made good progress in reducing vehicle emissions.

During the new financial year we will be fully commissioning the Stonecutters Island treatment works, thus more than doubling the volume of sewage that is given a high level of treatment throughout the territory. It will bring major improvements to harbour water quality. With the introduction of greater efficiency, the unit cost for operating this plant, at 69 cents a cubic metre, is less than half the average unit cost of treating sewage at older plants in the territory.

Although much has been done, we are conscious of the need to do more. We have learned from past experience how to deliver services better. We also have to develop new infrastructure and programmes to meet the ever-growing needs of this rapidly changing city. However efficient we are, it is inevitable that these new investments and programmes, which are needed to clean up the consequences of past actions and to ensure a better environment in future years, will require greater financial commitment.

In his budget speech, the Financial Secretary raised the subject of "green taxes" and challenged members and the community at large to think about how the recurrent consequences of that commitment will be met. This is obviously an area requiring much more attention and debate by the community. The more discussion on the subject, the better it is for the formulation of effective, comprehensive and coordinated policy and measures, including fiscal measures, on environmental protection necessary to realize the policy objectives.

I welcome the range of support that has come from members for adopting a "stick and carrot" approach. So far we have seen many carrots but very few stick. While members who have spoken generally endorse the implementation of measures that will make the polluters pay for cleaning up, I note the caveats and cautions that they have put forward.

Let me set out more fully how the Administration views the range of financial instruments that can be used to influence the behaviour of individuals and businesses to reduce the damage done to the environment.

To realise the "polluter pays" and "stick and carrot" approach supported by members, there are three types of financial instrument - rewards, charges for services, and deterrents - that we can use to improve our environment in an effective and sustainable way.

By rewards, I mean measures such as adjusting existing taxes, duties or charges to encourage environmentally friendly behaviour. Let me cite a few examples -

(i) a lower duty was set on unleaded petrol in 1991 to encourage its introduction;

(ii) since 1994, we have exempted electric vehicles from first registration tax;

(iii) in 1999 we announced that no duty would be charged on LPG for use in motor vehicles; and

(iv) a year later duty on ultra-low sulphur diesel was reduced to encourage switching from conventional diesel.

In addition, in the last couple of years concessions have also been made on land allocation, including special arrangements for LPG filling stations and for waste separation and recovery businesses.

But rewards alone cannot achieve all our environmental objectives. Furthermore, they are a drain on the public purse. Environmental services, such as waste collection and disposal or sewage treatment, require funding. At present we spend a huge amount of money to provide environmental services. The second type of financial instrument the Administration can use if to make people or businesses that produce the waste or pollutants pay for these services through user charges. Not only would such charges encourage efficiency, they would also provide strong incentive for waste producers to conserve resources and find new ways to avoid waste and pollution.

Up to now we have made relatively little use of user charges for environmental services. The burden for providing such services has therefore fallen unfairly on taxpayers. There is a charge for chemical waste treatment. This recovers 33% of the variable operating cost of the treatment plant. Even so, it has been effective in encouraging producers to introduce cleaner technology, thus helping to reduce both the volume of chemical waste needing treatment and the volume of chemicals going into the local environment.

The sewage charge that we have introduced since 1995 recovers only about half of the operating and maintenance costs of sewage services. In addition, we levy a charge on 30 trades and industries that produce strong effluent. This reflects the extra costs incurred in cleaning the public sewers and treating the effluent. It is the one existing charge where the full operating cost is being recovered. I appreciate the concerns that members of the restaurant trade have about the cost of appealing for adjustment of the charge in individual cases. We are committed to resolving these concerns and have made proposals for simplifying the procedures to reduce the cost for appeals. I very much hope that agreement can be reached with the trade on a revised appeal mechanism quickly.

The main area in which user charges are not being applied is that of municipal and construction waste. Experience elsewhere has shown that user charges for waste are one of the most effective instruments to encourage the community and specific sectors in it to reduce waste and to support programmes for separating, recovering and recycling useful material.

However, before we consider user charges for waste, there have to be services and facilities ready to handle separated materials, so that waste producers do have real alternatives available. We also have to be satisfied that we have in place adequate arrangements for handling of recovered materials. We are addressing these issues. I will shortly be announcing an action plan to step up the reduction, separation and recovery particularly of domestic waste.

With the hard work of all concerned, I am pleased to note a slight reduction in the amount of municipal waste sent to the landfills last year - 55,000 tonnes less in 2000 than in 1999 - and an increase in the amount of materials recovered for recycling from 1.54 million tonnes in 1999 to 1.76 million tonnes in 2000. But over 6.5 million tonnes of waste material were still put into the landfills last year. Therefore, we need to make more progress, particularly in the area of separation and recovery of domestic waste.

Some members urged us to present an early proposal for levying landfill charges for construction and demolition waste. Last year 2.7 million tonnes of such waste were sent to the landfills, about 20% of which was inert material that could have been used as public fill if separated from the waste. Much of the remaining waste could have been avoided through better construction methods. We are working on a package of measures to reduce and re-use such materials. To work out an effective system for administering landfill charges, we have had a number of meetings with the producers of construction waste and the middle men, the truck drivers. We will consult members on the scheme once the proposal has been finalised.

The third type of financial measure is to levy a surcharge on environmentally unfriendly products or emissions so as to provide strong financial deterrent to using such products or producing such emissions. We have so far not launched any such initiatives in Hong Kong. Elsewhere, there are levies on plastic bags and other packaging materials, landfill taxes in addition to waste disposal charges and taxes on sulphur dioxide emissions from industries or power companies. We need to examine the feasibility of such measures as we take our environmental protection effort forward.

Madam President, in closing I would like to repeat my thanks to the many members who have spoken in support of the polluters pay principle. As with all aspects of protecting the environment, it is easy for us to agree on the general principles - we want clean air, a clean harbour, less waste. In order to achieve those objectives, bold actions, including both rewards and deterrents, have to be taken. Sadly, my experience has been while rewards will be welcome, any deterrent is likely to face opposition and reason is always found for why either nothing should be done, or somebody else should do something first.

As always my colleagues and I will listen carefully and respond where we see genuine need or difficulty. We have a duty to protect the health of this city and the quality of the environment we live in. I know that many in this Council share my sense of urgency, that we must act more extensively, more effectively and in a more sustained manner to improve our environment. I look to your full support in this financial year for all the spending and other measures that we will bring before you.

End/Wednesday, April 4, 2001

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