Toward a low carbon Hong Kong: A proposal from the institutional perspective

Climate change adversely affects people’s life in many aspects all over the world. While it is a natural phenomenon, it is also induced by human activities that include the use of fossil fuels for combustion in daily life, emitting greenhouse gases in the atmosphere. As the balance of climate system has been disturbed, it is not surprising that extreme weather events, such as very hot days and flooding, occur more frequently and more intensive than ever. Hong Kong, as an international city, should shoulder its responsibility of controlling the emissions of greenhouse gases. Using the Hong Kong annual data from 1990 to 2008, this article estimates a simple econometric model to demonstrate that electricity consumption is the major factor contributing to the variations in CO2 emissions. To complement the traditional ways to reduce CO2 emissions by restricting the consumption of electricity and other fuel, we propose two alternative methods to reduce electricity consumption by: (1) charging the supply of electricity at progressive rates for commercial and industrial end-users; and (2) setting up a cap and trade market for greenhouse gas emissions by local electricity companies. Both methods offer incentives to electricity users to self-discipline themselves to restrict the demand for electricity, hence reducing CO2 emissions in turn. ► The use of electricity is the mostly responsible for the increase in CO2 emissions. ► Flat or progressive rates should be charged for non-residential users. ► Local electricity companies should set up a cap and trade market for CO2 emissions. ► Both methods offer incentives to electricity users to restrict their demand.