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October, 2008:

Gains From Natural Gas Power Will Be Lost If Consumption Soars

Updated on Oct 03, 2008 – SCMP

I refer to the article by Secretary for the Environment Edward Yau Tang-wah (“A cleaner, cheaper energy future for Hong Kong“, September 23).

Replacing coal with natural gas for electricity generation is no doubt a great step towards controlling the sulfur dioxide (SO{-2}) emissions that are a significant source of damage to the air quality in Hong Kong. It is also good news for consumers in Hong Kong to hear that the excessive capital outlay and direct environmental impact will be minimised with the change of plan to build the liquefied natural gas terminal on the mainland instead of on the Soko Islands.

While this plan seems to echo our government’s commitment to tackle the air pollution problem, it has unfortunately also shown the administration’s political myopia.

Excessive SO{-2} emissions are a direct consequence of excess energy demand.

If the government does not seek to reduce energy use in tandem with switching to cleaner fuel, no sustainable change is going to happen.

In a way, the removal of the HK$10 billion capital outlay for the Soko Islands plant (hence the cost of power is likely to remain at the present level) almost encourages consumption.

It gives consumers a false sense that “it is okay to use power now because it is clean”.

Nevertheless, CLP Power and Hongkong Electric are for-profit organisations. They would be shooting themselves in the foot if they endorsed plans that reduced consumption.

Finally, another closely related problem is that nearly half of our air pollution comes from north of the border.

It is of no use if only Hong Kong regulates the use of coal for fuel and the desulfurisation requirements. The same standards must be applied in cities in the Pearl River Delta in order to achieve the intended results.

Pollution is a difficult problem. The lobbying will get ugly and some aspects of the economy will be compromised, but we must trust that the Hong Kong government is aware of what needs to be done and will endeavour to achieve what is best for us.

Michelle M. Lee, Mid-Levels

Mainland Firms To Increase Emission Reduction Projects

Mainland Firms To Increase Emission Reduction Projects
Future Of Carbon Credit Trade Dim As Global Pact Nears End

Eric Ng – Updated on Oct 02, 2008 – SCMP

The mainland is expected to supply more than half the credits for greenhouse-gas emission trading worldwide until 2012, but the future of such trade remains uncertain as no agreement has been hammered out for when the current global pact expires.

Emission reduction projects on the mainland would cut 116.83 million tonnes of carbon dioxide discharged in each of the next four years, or 52.17 per cent of the global total, according to United Nations data. That represents a sharp increase from 16.61 million tonnes in May 2006, or 30.67 per cent of the global total.

So far, 1,551 projects have been approved by Beijing while 269 projects have also been accepted by and registered at the UN, accounting for 23 per cent of the global total.

Developers of pollution-cutting projects earn so-called carbon credits that can be sold to polluters in countries with mandatory emission limits, primarily in Europe and Japan, which are committed to reduction targets.

Annual greenhouse-gas emission credits from the mainland would amount to more than US$2.5 billion under the Clean Development Mechanism (CDM), according to a report by World Wide Fund for Nature on China’s emission reduction credits market.

Beijing also collects a levy from a percentage of the credits depending on the type of project.

Feng Shengbo, an associate researcher at National Development and Reform Commission Energy Research Institute’s CDM Project Management Centre, said the government had so far collected more than 100 million yuan (HK$112.48 million), which would be used to help the nation combat climate change.

The most popular projects on the mainland include the replacement of ozone-depleting refrigerants, wind and hydro power generation and energy efficiency improvement.

Of the emission reduction volume in projects approved by the central government, about 23 per cent or 27.45 million tonnes came from the five national state-owned power generation firms.

China and India are among the developing nations that have ratified the Kyoto Protocol, a global pact on greenhouse gas reduction, but they are only required to report their emissions and are not committed to any targets.

The United States rejects emission limits set by protocol, but it is widely expected the country, together with China and India, which are among the world’s largest polluters, will commit to some form of reduction after the protocol expires in 2012.

However, Merrill Lynch director of Asia-Pacific commodities solutions Jennifer Jiang Hongbo said uncertainties over the regulatory environment after the protocol expired and Beijing’s ban on credit sales beyond that meant no such credits had been sold so far.

“This has brought valuation challenges for such trade,” she said. “In addition, the sellers prefer to save the credits for themselves ahead of potential emission reduction commitments by China.”

China Resources To Buy More Gas Projects

Reuters in Hong Kong – Updated on Oct 02, 2008 – SCMP

China Resources Gas Holdings, the urban gas distributor to be bought by China Resources Logic this month, intends to buy 22 projects from its parent while seeking to invest in an industry rival, a top executive from the firm said on Thursday.

China Resources, which now operates gas distribution projects in seven cities, plans to buy another 22 already-operating city gas projects from its unlisted parent firm at “an appropriate time”, general manager Wang Chuandong said.

Mr Wang declined to give a timeframe or cost for the acquisition, but said the parent company â the sprawling beer-to-retail China Resources conglomerate â is also in talks to acquire another 20 city gas projects across the mainland.

China Resources, which vies with Xinao Gas, China Gas and Hong Kong and China Gas in piping gas across the world’s No 2 energy consumer, is also in talks to take a stake in rival Zhengzhou Gas, a distributor in the central province of Henan.

CR Logic, which used to make semiconductors, proposed in August to buy China Resources Gas for HK$3.8 billion, transforming itself into the city gas distribution flagship for the entire group.

The erstwhile technology company is now considering selling out of its cement business in the long run, to focus on the fast-growing gas business, said Ken Ong, executive director and CFO of CR Logic.

Gas demand is expanding at a double-digit percentage clip as Beijing, which relies on coal to fire three-quarters of its energy but hopes to reduce emissions of pollutants by a tenth by the end of the decade, pushes more environmentally friendly fuel.