Hong Kong’s two utilities have agreed to a new regulatory scheme which will encourage them to cut pollution, and which could serve as a model for mainland China.
Hong Kong Electric (HKE) and China Light and Power (CLP) have agreed to a new Scheme of Control that encourages higher service standards and improved environmental performance while also promoting the use of renewable energy. The new scheme will run for ten years from January 2009.
Under the new scheme, HKE and CLP are permitted to a return of 9.99 per cent on average net fixed assets, with 11 per cent for renewable assets. Their environmental performance with respect to emissions will also be monitored.
If either company exceeds regulatory limits for any pollutant, then its allowed rate of return will be reduced by between 0.2 and 0.4 per cent. If they cut their pollution by more than required, then they will be permitted to raise prices and earn bonuses of 0.05 per cent to 0.1 per cent on their rate of return.
HKE and CLP will also be allowed to charge slightly more for electricity as they make progress in using more renewable energy.
The government hopes that the new scheme will tackle the problem of smog in Hong Kong and it is thought that a similar incentive-and-penalty scheme could be used in mainland China to overcome pollution problems.