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Opportunities for Swiss Companies in the Hong Kong Cleantech Market. March 2012. osec.ch


Opportunities for Swiss Companies in the Hongkong Cleantech Market. Title.

The Hongkong Clean Technology Market.

Language.

English

Number of pages.

28

Author.

Other Industry reports

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Fiducia Management Consultants http://www.fiducia-china.com/

Are you interested in other industry reports for other sectors and countries? Please find here more of them.


Table of Contents. 1

Executive Summary

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2

Market Overview

5

2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.3.7 2.4 2.4.1 2.4.2 2.4.3 2.4.4 2.4.5 2.4.6 2.4.7 2.4.8 2.4.9 2.5

Facts about Hong Kong .................................................... 5 Cleantech Market and Evolving Landscape ...................... 6 Hong Kong Environmental Protection Policies .................. 7 Air Pollution Control Ordinance ......................................... 7 Ozone Layer Protection Ordinance ................................... 7 Water Pollution Control Ordinance .................................... 7 Waste Disposal Ordinance ................................................ 7 Environmental Impact Assessment Ordinance .................. 8 Product Eco-responsibility Ordinance ............................... 8 Motor Vehicle Idling (Fixed Penalty) Ordinance ................ 8 Environmental Projects ..................................................... 8 Cleaner Production Partnership Programme ..................... 8 Green Procurement .......................................................... 8 The Ecopark and Recovery of WEEE ............................... 8 Green Building .................................................................. 9 Green Transportation ........................................................ 9 Tax Reduction ................................................................... 9 Development of Green Technology ................................... 9 Hong Kong-Guangdong Cooperation .............................. 10 CEPA Provisions .............................................................. 11 Exhibition: Eco Expo Asia – Environmental Technologies International Trade Fair ............................. 12 Non-Governmental Organisations and Councils / Government related Organisations ................................. 12

2.6

3

Market Segmentation

3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.3 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5

Air Pollution Control ........................................................ 13 Business Opportunities in Air and Environment.............. 13 Air Quality in Hong Kong ................................................. 13 Air Problems and Solutions ............................................. 13 Pilot Programme – Electric Vehicles (EVs)...................... 13 Waste Water Treatment .................................................. 14 Business Opportunities in Waste Water Treatment ........ 14 Water Quality in Hong Kong ............................................ 14 Water Treatment Technology Employed in Hong Kong ... 14 Water Problems and Solutions in Hong Kong ................ 14 Solid Waste Treatment .................................................... 15 Business Opportunities in Solid Waste ............................ 15 Solid Waste in Hong Kong .............................................. 15 Waste Problems and Solutions in Hong Kong ................. 16 Energy from Waste ......................................................... 17 Success Story in Hong Kong ........................................... 17

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3.4 3.4.1 3.4.2 3.4.3 3.4.4

Energy Efficiency Improvement ....................................... 18 Opportunities Arising from Energy Efficiency ................... 18 Hong Kong Energy Efficiency Programmes .................... 19 Showcase Projects .......................................................... 19 Upcoming Tenders and Projects ...................................... 20

4

Market Projection

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5

Doing Business in Hong Kong

22

5.1 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.1.6 5.1.7 5.1.8 5.2

Why Hong Kong? ............................................................ 22 Taxation........................................................................... 22 The Rule of Law .............................................................. 22 Clean Government .......................................................... 22 Availability of Talent ......................................................... 22 Immigration Policies ........................................................ 22 International Lifestyle ...................................................... 22 Well Developed Infrastructure ......................................... 22 Summary......................................................................... 22 Hong Kong and Switzerland ............................................ 23

6

References

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7

Glossary

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8

Appendix

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1 Executive Summary A. Hong Kong, as one of the most developed internationalised cities in the region, has put significant efforts into developing the Cleantech sector to achieve sustainable growth. To target the fast growing local and regional Cleantech market, this report provides insights and action guidelines to Swiss companies who plan to expand their footprints in Hong Kong. 1) Hong Kong as a Base Hong Kong, part of China, near the Pearl River Delta (PRD), is a global business hub. With low taxes, robust intellectual property rights and skilled international talent, Hong Kong can provide Swiss companies with a supportive business environment to set up presence. It can not only serve as a gateway to China, but is also an excellent place for the foundation of a global enterprise. 2) Local/Regional Market Development The Cleantech market in Hong Kong reached approximately HKD 6.5 billion (CHF 770 million) in 2011 with 25% annual growth rate projected for the next 5 years. Together with Guangdong, the total estimated Cleantech market could reach HKD 90 billion (CHF 10.6 billion) in 2018. 3) Environmental Challenges  Air Pollution: with local emission of pollutants and the regional smog from the rapidly growing PRD area, the Hong Kong air pollution index reached a record high of 5 times the normal level in March 2012  Waste Water: all fresh water is imported from mainland China and the tap water cannot reach the direct drinkable standard. Marine pollution from ships, local and PRD swage have a significant impact on the local environment  Solid Waste: high solid waste per capita. The current 3 landfills will run out of space in 2018. However, the incineration plant project was rejected due to the negative environmental impact on the local community  Energy Efficiency: 90% of electricity consumption is caused by lighting and air conditioners in buildings, while less than 10% of the existing buildings use green construction materials 4) Direct Opportunities The government is the main driving force in Cleantech while the private sector also participates proactively. We identified a numberof projects in the following sectors that are worth targeting for Swiss companies: 4

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B.

C.

D.

Air Pollution Control 1.Charging stations and energy storage for E-vehicles 2.Fuel and exhaust gas purification equipment 3.Air purification technology in workplace Waste Water Treatment 1.Water catchment and treatment 2.Treatment works for municipal and industrial waste water 3.Water purification systems Solid Waste Treatment 1.Disposal site/ waste incineration site planning, designing, engineering, monitoring and operation 2.Recovery of valuable materials 3.Engineering of recycling technology Energy Efficiency Improvement 1.Green building design and construction 2.Building power management consulting 3.Energy saving technology for lighting and air conditioners 4.Green construction materials

5) Entry Barriers  Lack of connection and bargaining power as small and medium-sized enterprises (SMEs)  Lack of local knowhow and resources to set up and operate the company in the start-up phase  Original products, technologies and services might not be directly applicable to the Hong Kong and China market 6) Entry Strategy  Participate in the Eco Expo Asia to probe potential  Work with Swiss Business Hub and Hong Kong government, approach local councils, chambers and companies to educate and build up relationships  Set up a private limited company in Hong Kong to target local market and cooperate with local players  Partner with reliable local professional service providers for outsourcing operations e.g. book keeping  Set up research and development (R&D) center in Hong Kong to localise technology  Expand into the Chinese market (e.g. manufacture in Pearl River Delta, set up sales network in China) In conclusion, by using Hong Kong as their springboard to China, Swiss companies can access a significant market with their expertise.


2 Market Overview 2.1 Facts about Hong Kong Hong Kong is a Special Administrative Region (SAR) of the Peoples’ Republic of China (PRC). It is situated on China’s South Coast, bordered by the PRD, and ideally located at the heart of the Asia-Pacific region. Hong Kong’s location and infrastructure enable accessibility to all of Asia’s key markets and to half of the world’s population within 5 hours flight time. Exhibit 1: PRD & Hong Kong

As a founding member of the World Trade Organization (WTO), Hong Kong is a free and open trade port with no barriers and no tariffs on the import or export of goods. As a SAR of China, Hong Kong plays an important role in importing and developing technology for the rapidly expanding Chinese market. Exhibit 2: Hong Kong vs. Switzerland Factors

Hong Kong 2

Switzerland 41, 285 km2

Land Area

1,104 km

Population

7 million

8 million

GDP (PPP) per capita 2011

USD 49,417 (CHF 45,122)

USD 49,151 (CHF44,880)

Source: Hong Kong & Switzerland Government Website

Under the principle of “one country, two systems” since 1997, Hong Kong's capitalist system will remain unchanged until 2047. It enjoys a largely independent political system and a transparent government administrative process. The judiciary system is independent and separated from executive and legislative functions. Perhaps more importantly, Hong Kong is one of the world’s leading global financial centres and trade hubs serving international markets with goods and services. The PRD region is immediately to the north of Hong Kong, where China’s largest and most productive manufacturing region is located.

The constitution guarantees the essential features for effective business, in particular:  Rule of law and an impartial judiciary  Open market, with no import duties  Low, simple tax regime  Freely convertible currency  Free flow of information


2.2 Cleantech Market and Evolving Landscape Hong Kong’s Cleantech sector has grown very quickly over the last few years and is expected to continue its growth in the future. According to the figures provided by the Hong Kong Census and Statistics Department, the annual growth of the clean technologies market value is 12.4% in 2009 and 19.3% in 2010. Employment has grown to 36,080 people in 2010, which is approximately 1% of the total employment of Hong Kong. In 2011 the total market value was estimated at HKD 6.5 billion (CHF 770million).

On 25 January 2012 Yale University and Columbia University released the Environmental Performance Index (EPI), to evaluate environmental sustainability. Switzerland scored 77/100 which ranked first out of 132 countries, while China ranked 116. That reflects the strain rapid economic growth imposes on the environment. A good example is that on 22 March, 2012, the Air Pollution Index in Hong Kong reached a record of 500, which is significantly above the normal value of 100 due to a sand storm from northern China.

Table 3: Environment Technologies Market Greenpeace, a non-governmental environmental organisation, encouraged the government to set an enhanced pollutant standard in line with World Health Organisation’s (WHO) interim target. They also set up their own index to evaluate the air pollution against WHO guidelines to increase community awareness on environmental protection.

Source: Census and Statistic Department, Hong Kong Trade Development Council, Fiducia Analysis

There are approximately 370 companies in the Cleantech area, which consists of mainly small and medium-sized enterprises. They focus on the following six business areas:      

Water conservation and pollution control Air and odour pollution control Energy conservation Waste treatment, disposal and recycling Noise control and mitigation Environmental consulting services

Some companies are also engaged in import/export, wholesale trading of products of Cleantech equipment, waste and scrap. As one of the most densely populated areas in the world, the pollution in Hong Kong has become one of the city’s main policy concerns in recent years.

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With continuously increasing community awareness and sustainable development over the past decade, the government has allocated significant resources to tack the pollution problem and to protect the environment. One of the significant approaches is to tighten the legislation related to environmental issues. Compared to Switzerland, whose environmental protection policies started as early as 1876, Hong Kong only introduced environmental protection policies in the 1950s. During the 1970s industrial development was very vigorous, so pollutant emissions were a major issue. The problem got worse in multiple aspects, such as noise, air, water and solid waste. At an early stage Hong Kong moved from the focus on dealing with environmental nuisances (1959-1977) to a period during which the institutional infrastructure and necessary laws and regulations were created to establish a conventional command and control regime (1980-1994), giving it a framework which deals with the environmental issues. In 1989 the government laid down a comprehensive 10-year programme to tackle the pollution problems by publishing a White Paper entitled “Pollution: A Time to Act”. Under this framework new legislative requirements were introduced to step up control over air, water, waste and noise. Moreover, new environmental-oriented companies engaged in the provision of services, technologies,


equipment and products emerged, which can be divided into 1) environmental equipment and products and 2) services in the environmental industry. After the re-organisation of the Hong Kong Government in 2007, the Environment Bureau was formed to oversee the formulation and implementation of policies on environmental protection, conservation, energy and sustainable development, etc. In a response to the global financial crisis in 2008, the Chief Executive established the policy Task Forces on Economic Challenges. The collective members identified six key industries for Hong Kong. The six industries include Education, Medical Services, Testing & Certification, Environmental Industry, Cultural & Creative Industry and Innovation & Technology, all of which can take advantage of government incentives for further development. The Hong Kong government developed a framework specifically for monitoring their economic contribution. China’s12th Five-Year-Plan that was announced in March 2011clearly states support from central government for Hong Kong to develop the six industries.

2.3 Hong Kong Environmental Protection Policies The environmental protection in Switzerland is well known as comprehensive, effective and flexible. It is defined as a state aim in the Swiss Constitution Article 2. The principles of the policies have been realigned and one of the main objectives is to increase the efficiency of action on environmental policies. In Hong Kong, the Environmental Protection Development (EPD) was established in 1986, in order to coordinate and carry out pollution prevention and control activities. The EPD has the overall responsibility to formulate new policies on environmental issues. They advise the government on measures for the prevention and reduction of pollution. Currently, Hong Kong is applying a number of international environmental protection conventions and has enacted a series of environmental legislations and announcements covering 10 areas. The EPD is responsible for the enforcement of the measures containing pollution control legislation.

2.3.1 Air Pollution Control Ordinance The Air Pollution Ordinance provides for the control of activities that produce air borne pollutants. Major emitters, such as power plants and cement plants are obliged to follow specified processes e.g. industrial activities such as composition of materials, fuel usage and subjected to stringent licensing control. Emission caps on respirable suspended particulates (RSPs), sulphur dioxide (SO2), nitrogen oxides (NOx) and volatile organic compounds (VOCs) have been imposed on all power stations through the license agreement since 2005. Under the ordinance, effective from 1 October 2008, all commercial and industrial processes are required to use ultra-low sulphur diesel. Under the ordinance, the control of smoke applies to open burning, construction dust and volatile vapour from petrol filling stations. To promote good Indoor Air Quality (IAQ), the management programme introduced the IAQ Certificate. Only issuing bodies accredited by the Hong Kong Accreditation Service are entitled to assign the IAQ certificates and reports. The government also restricts the emission for newly registered vehicles. Starting in June 2012 they must meet the Euro V exhaust emission standard.

2.3.2 Ozone Layer Protection Ordinance Joining global efforts to protect the ozone layer, as of 1 January 2010, Hong Kong banned the import of products containing hydrochlorofluorocarbon (HCFC), a chemical which reduces the ozone layer.

2.3.3 Water Pollution Control Ordinance The Water Pollution Control Ordinance divides Hong Kong into 10 water control zones and 4 supplementary water control zones. All discharges into these zones are subject to licensing control, which is limited to Effluent Standards (a restriction imposed by the government on waste water discharges).

2.3.4 Waste Disposal Ordinance The Waste Disposal Ordinance provides a framework for control of the collection, treatment and disposal of all waste types. The disposal of livestock waste is also under the regulation of the ordinance. Furthermore, the government has introduced “cradle-tograve� control on chemical and clinical waste.


2.3.5 Environmental Impact Assessment Ordinance The purpose of the Environmental Impact Assessment (EIA) Ordinance is to identify emitters that potentially cause damage to the natural habitat and have an impact on cultural heritage and mitigation measures on environmental pollution through standardised processes.

2.3.6 Product Eco-responsibility Ordinance The government promotes the Producer Responsibility Scheme (PRS), a key policy tool to reduce waste, recover and recycle with the slogan “Reduce, Re-use, Recycle”, also known as the “3Rs”. The PRS concept requires manufacturers, importers, wholesalers, retailers and consumers to share the responsibility for the collection, recycling, treatment and disposal of end-life products and to put a focus on avoiding and reducing the environmental impacts caused at the post-consumer stage.

2.3.7 Motor Vehicle Idling (Fixed Penalty) Ordinance As at 15 December 2011 the Motor Vehicle Idling (Fixed Penalty) Ordinance prohibits the driver of a motor vehicle from idling the engine of his or her motor vehicle for more than 3 minutes. In addition to all of the above ordinances, other ordinances that provide a legal basis for other areas of environmental protection include:  Hazardous Chemicals Control Ordinance  Dumping at Sea Ordinance  Noise Control Ordinance

2.4

Environmental Projects

In order to support the environmental industry, the government has taken the initiative to deploy a number of Cleantech projects to accelerate its development. Business opportunities are available for Swiss companies throughout the environmental projects.

2.4.1 Cleaner Production Partnership Programme According to the information from the Hong Kong Productivity Council, EPD has been planning an extension programme for the Cleaner Production Partnership (CPP). The programme started in 2008 when the government provided HKD 93 million (CHF11 million) for a period of 5 years and which it will continue for another 8

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5 years. The program is aimed at Hong Kong-owned factories in the Pearl River Delta region. They are encouraged to adopt cleaner production technologies and improve energy efficiency, reduce air pollutant emissions and treat waste water. The programme targets industries which:  Involve production processes resulting in substantial emission of air pollutants  Use large quantities of environmental damaging chemicals or materials  Consume large quantities of fuel and energy Supporting the Hong Kong-owned companies through the CPP offers potential business opportunities for Swiss companies. 2.4.2 Green Procurement Starting from early 2000, the government amended its procurement regulations requiring departments to take into account environmental considerations when purchasing goods and services. Currently, over 100 companies are listed under the government Green Procurement regulation. The government will continue to expand the scope of green purchasing to make Hong Kong a green city through legislation and specific green measures. The government also promotes green procurement measures in the public sector. 2.4.3 The Ecopark and Recovery of WEEE Published in 2005, the government has set out the strategy on waste management, which places emphasis on waste reduction and recovery in the paper "A Policy Framework for the Management of Municipal Solid Waste (2005-2014)". This includes allocating suitable land, encouraging research and development, introducing environmental legislation and providing effective support measures. However, based on data from October 2012, a total of 13,458 tonnes of solid waste were generated per day, of which 3.3 million tonnes (48%) were recovered and 3.4 million tonnes (52%) were disposed of at landfills. The latter is creating a real and pressing burden on the landfills. If the current rate of solid waste generation continues, the landfills’ capacity will run out in 6 to 10 years’ time. Government is planning new measures to handle the situation. In the meantime, Hong Kong households and business establishments dispose of more than 70,000 tonnes of computers and electrical and electronic equipment each year. In order to reduce the quantity of waste electrical and electronic equipment (WEEE) disposed of at landfills, the government introduced the


programme, which aims to channel WEEE for re-use and recycling instead of disposal.

(CHF 4.7 billion). A concept of green space in the city has been brought out for developing the green buildings.

In January 2011, the Ecopark WEEE Recycling Centre was established to endorse proper disposal of used electrical appliances to reduce the pressure on the landfills. The WEEE collection is focusing on major designated items such as TV sets, microwave ovens, refrigerators, audio equipment, air-conditioners and mobile phones. The WEEE is brought to the recycling centre for inspection and/or repair. Items that are beyond repair are dismantled and the re-useable components are recovered for recycling.

The advantages of Swiss technology for energy efficiency offered in the areas of heating, ventilation, air-conditioning, building shell, insulation, and minergie building standard are all remarkable and can be adopted and used in Hong Kong.

The Ecopark is now located in Tuen Mun with a site area of 20 hectares. It was developed in two phases to provide land for use. Currently, a total area of 14 hectares has been occupied by the recycling industries. Also, a total area of 4 hectares of land has been put up for recycling of waste cooking oil, computer equipment, metals, plastics, wood and batteries. Exhibit 4: EcoPark Phase Planning

Source: http://www.ecopark.com.hk/en/about.aspx

2.4.4 Green Building The Building Energy Efficiency Ordinance enacted in November 2010, stipulates energy efficiency standards for key installations in new buildings such as air conditioning, electrical, lift and escalator and lighting installations to reduce energy usage. A HKD450 million (CHF52 million) Building Energy Efficiency Funding Scheme has been set up to give incentives to building owners to conduct energy-cum-carbon audits to upgrade the energy efficiency in their buildings. In the next decade, the two largest development projects in Hong Kong are West Kowloon Cultural District project and East District Development project with a total investment of HKD40 billion

2.4.5 Green Transportation A HKD300 million (CHF35.4 million) pilot Green Transport Funding Scheme has been set up to encourage the public transport sector as well as commercial vehicles to test low-carbon transport technology, e.g. electric vehicles. The First Registration Tax on electric vehicles will be waived to encourage the use of electric vehicles in Hong Kong. Under this sector, Swiss Cleantech business has expertise in the areas of planning and integrating public transportation, carsharing, CO2 compensation schemes for air travel, e-bikes, etc. 2.4.6 Tax Reduction The government introduced tax reduction for the environmentally friendly facilities of Hong Kong companies to encourage technology upgrades. For capital expenditures on environmental protection equipment, the cost can be deducted 100% in the same year. For buildings which have environmentally friendly installations, the depreciation period can be shortened from 25 years to 5 years. Based on this scheme, Hong Kong companies have incentives to adopt new technologies from Switzerland.

2.4.7 Development of Green Technology With the aim of transforming innovation and technological advancement into value creation that benefits Hong Kong and mainland China, the Hong Kong Science and Technology Parks (HKSTP) aspires to be a centre for excellence in green technology. HKSTP offers comprehensive laboratory services to support the R&D of green technology. HKSTP has many enterprises which are devoted to developing technologies related to environmental protection and clean energy. They comprise of Hong Kong companies as well as environmental enterprises from other countries. Started in early 2011, HKD4.9 billion (CHF580 million) was invested in the construction of phase 3 of the HKSTP. The first building will be put into use in 2014, while the whole phase will be completed by 2016. The government took the initiative to boost the development of green technology to attract high-tech investments from private companies.


The design of phase 3 embraces the concept of eco-friendly for a sustainable development in diversifying the economy and supporting a greener future in Hong Kong.

programme incorporates industry focus support services to address the needs of new companies during key stages of development, including marketing, training, consultancy, mentoring programmes.

Exhibit 5 HKSTP Phase Planning HKSTP is located near the Chinese University of Hong Kong and within a 1 hour drive from Hong Kong University, the Hong Kong University of Science and Technology, the Hong Kong Polytechnic University, City University of Hong Kong and Hong Kong Baptist University. Swiss companies are able to find intellectual talent among these universities which produce 6,000 graduates in scientific and engineering disciplines each year.

Source: http://www.hkstp.org/HKSTPC/

Andrew Young, Vice President of Sales & Marketing at HKSTP commented that HKSTP is one of the best choices for Swiss companies to set up in the heart of technological innovation for Greater China and Asia. The clustering effect of local universities and cleantech companies provides powerful synergies.

HKSTP provides tremendous networking and collaboration opportunities. Ricky Ma, the Head of the Greentech &Precision Engineering Cluster commented that with the recognition that an effective network can be a significant boost for business, HKSTP holds regular activities e.g. business matching to bring the companies, experts and investors together so that enterprises can realise business opportunities and raise venture capital for commercialisation programmes.

Phase 3 development is HKSTP’s latest addition with fitted R&D offices and research facilities. 4,000 research and development positions in green technology will be created to accommodate about 150 worldwide green technology companies.

Furthermore, the “Shenzhen – Hong Kong Innovation Circle” (which started in 2007 with the aim of comprehensive promotion and enhancement of technology collaboration between Shenzhen and Hong Kong) opens up greater opportunities for Hong Kong and the PRD. Swiss companies are able to generate more business from China.

Hong Kong is the first city to introduce electric vehicles amongst Asia. Together with the Hong Kong Polytechnic University, the EuAuto Technology Limited has developed an electric vehicle model, named “MyCar”, which is now available for sale in Europe and Hong Kong.

2.4.8 Hong Kong-Guangdong Cooperation If Swiss companies enter the Hong Kong market, it also opens up the market in China, especially with regard to the PRD.

Mainland Chinese company BYD has set up an R&D office in the HKSTP and is collaborating with the Hong Kong Automotive Parts and Accessory Systems R&D Centre and the Hong Kong Productivity Council to promote the development of electric vehicles, including the new generation zero-emission electric vehicles designed for the public transportation system in Hong Kong. With the development of HKSTP, Hong Kong has become an important hub of global innovation for environment technology development. In addition to the specialised R&D facility to support lab engineering and the world class conference facilities, HKSTP also offers a full service incubation programme to assist new businesses during their vulnerable inception stages. This 10

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In China’s 12th Five-Year-Plan, one of the top priorities is to accelerate the building of resource savings and an eco-friendly society through environmental protection. In January 2009, the National Development and Reform Commission (NDRC) announced the "Outline of the Plan for the Reform and Development of the Pearl River Delta”, establishing Hong Kong/Guangdong cooperation as a national policy. In recognition of the importance of joint efforts to tackle the environmental problems, the Hong Kong-Guangdong Environmental Protection Liaison Group (EPLG) was set up as early as 1990 to enhance the cooperation and coordination on environmental management and pollution control efforts in areas of mutual concern across borders.


Key areas of cooperation under the framework agreement include:      

Taking joint actions to prevent and tackle air pollution Enhancing cleaner production in the region Promoting wider use of electric vehicles Cooperation in protecting marine water quality Promoting the development of circular economy Cooperation in ecology and marine resources conservation The government is working with Guangdong to build a green and high quality living area in the greater PRD region. In April 2010, Hong Kong and Guangdong signed a “Framework Agreement on Hong Kong/Guangdong Cooperation” to continue implementing the Pearl River Delta Regional Air Quality Management Plan in 2011-2020. Currently, more than 160 environmental technology service providers have registered with this programme, including manufacturing, testing, and consultancy services. It is also introducing electric vehicles to major PRD region cities such as Hong Kong, Guangzhou and Shenzhen, and jointly fostering research and development, manufacturing, general application and development of the relevant automotive components industry for electric vehicles in the PRD region. When Swiss companies cooperate with Hong Kong enterprises, including SMEs with limited capital, in installing energy saving and environmental systems, the enterprises can leverage the strength of Hong Kong’s financial services, and seek financial support from mainland China for financing environmental projects.

2.4.9

CEPA Provisions

In operation since 1 January 2004, mainland China and Hong Kong established the Closer Economic Partnership Arrangement (CEPA) for free trade in goods and services, as well as investment facilitation. Since the implementation of the second supplement to CEPA in January 2006, all products of Hong Kong origin, including those related to environmental protection can be imported into the Chinese mainland at zero tariffs. Incorporated as Hong Kong entities, Swiss companies are able to set up wholly-foreign-owned enterprises (WFOE) in mainland China under CEPA to provide architectural design and engineering services with the same requirement as mainland Chinese companies. Swiss companies and Hong Kong partners can set up construction engineering design enterprises in mainland China. Their track records in Hong Kong and mainland China can be used

by both authorities for assessing their application for enterprise qualification. Under the Supplement IV of CEPA, starting from 1 January 2008, Hong Kong companies may set up wholly-owned enterprises in mainland China to provide the following environmental services     

Sewage discharge service Nature and landscape protection service Waste gas cleaning service Solid waste treatment service Other environmental protection service

According to Supplement V of CEPA, mainland China agreed that the Guangdong province can grant approval to Hong Kong companies to establish environmental pollution treatment facilities with effect from 1 January 2009. It has simplified the application for formalities by Hong Kong companies for permission to provide environmental services in Guangdong. This creates more opportunities for Hong Kong companies to expand into the PRD’s environmental service market.


2.5 Exhibition: Eco Expo Asia – Environmental Technologies International Trade Fair Trade and exhibition is one of the best ways for Swiss companies to promote Swiss technologies and test the market. Eco Expo Asia, one of the biggest Cleantech expos, is organised by Hong Kong Trade and Development Council (HKTDC) and Messe Frankfurt (HK) Ltd every year. The fair is an international trading platform which showcases the latest innovations in environmental protection industries from around the world. It is also a premier venue for environmental professionals from commercial, governmental and non-governmental spheres to meet and make quality business contacts. th

In 2012, the 7 edition of Eco Expo Asia attracted more than 270 exhibitors from 14 different countries and regions showcasing their latest environmental protection technologies. Each year from 2010 to 2012, there are more exhibitors and buyers. Thematic zones cover Air & Water Quality, Business of IP, Eco-Excellence, Ecofriendly Product, Energy Efficiency & Energy, Green Building Solution & Service, Green Transportation, Testing, Inspection and Certification as well as Waste Management & Recycling. Table 6 Statistics of ECO Expo Asia Year No. of No. of Trade Exhibitors Buyers 2012 271 11,550 2011 269 8,400 2010 266 8,011

No. of Public Visitors 2,559 2,100 2,000

The 8th edition of the Fair will be held on 28 to 31 October 2013. The details are at http://www.hktdc.com/fair/ecoexpoasia-en/

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2.6 Non-Governmental Organisations and Councils / Government related Organisations The non-governmental organisations (NGOs) are important market drivers of potential business opportunities for Swiss companies, especially SMEs. NGOs not only provide huge benefits to improve the community, but also advise government and companies on how to effectively use the environmental resources. Informal environmental educational programmes can be conducted by NGOs to increase public knowledge about environmental protection in society and raise awareness. Please refer to the list of main environmental organisations / associations at Appendix I. In additions to the NGOs, councils, inter- government organisations also provide huge supports for setting up environmental policies as well carrying out the government programmes in the district. Related to Environmental sectors, related councils are listed in Appendix II.


3 Market Segmentation In this report, we mainly focus on 4 categories of the Cleantech market in Hong Kong.    

2.1 Air Pollution Control 2.2 Water Waste Treatment 2.3 Solid Waste Treatment 2.4 Energy Efficiency Improvement

3.1 Air Pollution Control 3.1.1

Business Opportunities in Air and Environment

Swiss companies which specialise in air pollution treatment technology and air quality improvement can find business opportunities in the following subsectors:  Charging stations and energy storage for E-vehicles o The government is offering incentives for wide-use of electric vehicles in Hong Kong o ABB, as a leader in this field, has already established itself  Fuel and exhaust gas purification equipment o Government has funded HKD150 million (CHF17.7 billion) for car exhaust system upgrades to comply with strict emission standards o Advanced fuel processing systems will be adopted in projects such as the harbour area treatment scheme and integrated waste management facilities to meet the Euro emission standards  Air purification in the workplace

3.1.2 Air Quality in Hong Kong Local street-level pollution and the regional smog problem are two air pollution issues. Diesel vehicles are the main source of streetlevel pollution. Smog, however, is caused by a combination of pollutants from motor vehicles, industry and power plants both in Hong Kong and in the PRD region. The main air pollutants are respirable suspended particulates (RSPs), sulphur dioxide (SO2), nitrogen dioxide (NO2) and volatile organic compounds (VOCs). After a wide range of measures, the air pollutants mentioned above have dropped by 30% - 60%. Only NO2 has increased by 18% in 2010. Electricity generation is the largest source of emissions in Hong Kong, accounting for 50% of sulphur, 25% of nitrogen dioxide and 16% of RSPs in 2010.

Pollutants from the Pearl River Delta region account for approximately 60% to 70% of the pollution level in Hong Kong on an annual average. It is obvious that regional level pollution is serious and that more cooperation with the Guangdong province is needed to improve air quality in Hong Kong over a long period of time. 3.1.3 Air Problems and Solutions Initiatives in the Transport Sector  Set up of the Pilot Green Transport Fund (HKD300 million (CHF35.4 million)) – to encourage the innovation of green transport technologies  Designation of pilot low-emission zones (LEZs) - to have only low-emission franchised buses in busy corridors like Causeway Bay, Mong Kok district by 2015  The Euro V emission standards will apply to all newly registered vehicles  Allocation of HKD150 million (CHF17.7 million) to assist owners of petrol and LPG taxis and light buses to replace their old catalytic converters and oxygen sensors  Reduction of the charges on ocean-going vessels (OGVs) using low sulphur fuel while at berth in Hong Kong by half, starting from 3rd quarter of 2012  Tax reduction for those registering environmentfriendly vehicles

Power Sector  Under the Air Pollution Control Ordinance, the government imposed emission caps through technical memoranda. The policy tightens the new caps until 2017 at 41.5% of sulphur, 23.5% of nitrogen dioxide and 14.4% of RSPs.  3.1.4

Pilot Programme – Electric Vehicles (EVs)

Basic Information:  Piloting the wide-use of EVs in Hong Kong since 2009  11 EV brands from 6 countries operate in Hong Kong  1,000 EV charging stations have been set up  About 500 EVs are on the road  Registration tax lifted for EVs Collaboration with the industry:


To support this initiative CLP Power Hong Kong Limited and Hong Kong Electric both launched the EV Leasing Scheme for corporations as well as the general public 2 foreign companies, ABB (Hong Kong) Ltd and NEC Hong Kong Limited are EV facilities providers, together with the other 4 local enterprises implementing the pilot programme

3.2 Waste Water Treatment 3.2.1

Business Opportunities in Waste Water Treatment

Swiss companies that have expertise in providing integrated water treatment solutions with high-tech products and professional services can find opportunities in the following fields:  Water catchment and treatment  Treatment works for municipal and industrial waste water  Water purification systems

3.2.2 Water Quality in Hong Kong Hong Kong’s water quality has improved in recent years but is still not up to Swiss standards, especially in areas like Inner Deep Bay and Victoria Harbour. The overall marine and river water quality compliance with the statutory Water Quality Objectives (WQOs) is 75% and 88% respectively (2011). Main pollutants come from human and industrial sources and livestock farms. According to the Drainage Services Department’s 2010-2011 Environmental Report, the length of sewage network is 1,637 kilometres. There are 284 sewage treatment facilities (67 sewage treatment plants and 217 sewage pumping stations) and 979 million m3 of sewage in total was treated in 2011.

3.2.3

Water Treatment Technology Employed in Hong Kong In Switzerland, about a third of the drinking water is drinkable without treatment. In Hong Kong, all of the drinking water needs treatment. Moreover, the sea water has been seriously polluted by economic development. In order to improve the water quality of Hong Kong, a number of major projects are currently underway. The most significant one is Harbour Area Treatment Scheme (HATS) with a total of HKD27.1 billion (CHF3.2 billion) of investment and is under construction until 2014. The Stage 2B-the final phase of HATS is under review to build up new biological treatment facilities which will bring good opportunities for companies in this field. 14

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Waste water treatment technologies adopted in Hong Kong are mainly chemically enhanced treatment and disinfection technologies. The market of more advanced water treatment systems now is driven by the rising concerns of healthcare and environmental clean-up issues. Both the government and the private sector are actively taking part in this process. Industries that either consume large amounts of water (i.e. food and beverages) or need ultrapure water (i.e. pharmaceuticals) will upgrade their water treatment equipment because of market demand as well as the strict implementation of environmental regulations. Drinking Water Treatment There are 21 water treatment stations in Hong Kong. During the treatment process, raw water is combined with chemicals to remove impurities. Clarified water then flows into filters of sand and mineral coal for removal of the more finely divided particles. Chlorine and hydrated lime are then added for disinfection and pH adjustment. Fluoride is also added for dental protection. In addition, a small amount of residual chlorine is maintained in the treated water to prevent contamination. Sewage Treatment  Chemically enhanced primary treatment (CEPT) o First used in the treatment process of the Stonecutters Island Sewage Treatment Works of HATS Stage 1 o Chemicals (ferric chloride and polymer) are added to the sewage to facilitate faster settlement of suspended solids. The settled sludge is then removed from the sewage resulting in a clear substance which is discharged to the sea.  Double-decker sedimentation tanks o 38 Double-decker sedimentation tanks are adopted to handle a huge sewage flow of 1.7 million m3 per day under HATS Stage 1.  Disinfection o Ultra-violet (UV) irradiation disinfection systems used for the treatment of secondarily treated waste water o Chlorination/de-chlorination technology has been used after CEPT for sewage treatment of HATS Stage 2A  Other sewage treatment technologies, such as ozonation and membrane filtration are still under investigation by the government. 3.2.4

Water Problems and Solutions in Hong Kong Sewage Master Plans (SMPs)


SMPs provide a blueprint of the sewage infrastructure required to collect sewage in the whole of Hong Kong and direct it to treatment facilities. Plan Details are at: http://www.epd.gov.hk/epd/english/environmentinhk/water/prob_sol utions/plan_sewerage.html Harbour Area Treatment Scheme Stage 2 This scheme is an overall sewage collection, treatment and disposal scheme for areas on both sides of Victoria Harbour. The government plans to complete the first part of Stage 2 by 20132014, subject to the communities’ need for full operating costs to be recovered through a sewage services charging scheme. Upon completion, HATS can treat all sewage generated from the harbour area and will ultimately serve a population of 5.7 million. The scheme details are at: http://www.gov.hk/en/residents/environment/water/harbourarea. htm Demonstration Scheme on Reclaimed Water Uses in the North District 70-80% of fresh water in Hong Kong comes directly from Dongjiang (East River) in neighbouring Guangdong province, and 20-30% comes from local catchments. This scheme uses reclaimed water treatment facilities to treat domestic sewage, and deliver the reclaimed water for designated users via pipelines or water tanks, as appropriate for toilet flushing, irrigation and water features. It also demonstrates and promotes the suitability and acceptability of reclaimed water. The scheme details are at: http://www.epd.gov.hk/epd/english/environmentinhk/reclaimedwate r/p5.htm Development of Desalination Facilities in Hong Kong The government commenced a plan and investigation study for a desalination plant in Tseung Kwan O. The feasibility study of the agreement for desalination plans are at http://www.wsd.gov.hk/filemanager/en/content_190/CE2112_Brief_ 20120625.pdf Polluter Pays Principle Aimed at recovering the operating and maintenance cost of the public sewage facilities, a sewage services charge was introduced in Hong Kong on 1 April 1995. Trade effluent will be charged with additional fees on top of the above services charge, called “Trade Effluent Surcharge”. The principle details are at http://www.dsd.gov.hk/EN/Sewage_Services_Charging_Scheme/P olluter_Pays_Principle/index.html The Voluntary Water Efficiency Labelling Scheme (WELS) This scheme is a water conservation initiative of the government. WELS intends to cover the common types of plumbing fixtures and

water-consuming appliances. Products participating in WELS will have a water efficiency label which will help consumers choose water efficient products for water conservation. WELS has been implemented in phases for different groups of plumbing fixtures and appliances. The scheme details are at http://www.wsd.gov.hk/en/plumbing_and_engineering/wels/index. html

3.3 Solid Waste Treatment 3.3.1 Business Opportunities in Solid Waste Swiss companies in the Cleantech industry will see significant market demand in the following subsectors:  Planning, designing , engineering, construction and operating waste incineration plants/ disposal sites  Recovery of valuable materials  Engineering and construction of recycling facilities

3.3.2 Solid Waste in Hong Kong The solid waste disposal is a top priority in Hong Kong, which is a potential area for Swiss companies to help to tackle the problems and install effective incinerators to reduce the waste. In 2011, the solid waste disposed at landfills was nearly 5 million tonnes. Domestic waste accounted for 2.2 million tonnes, construction waste was 1.2 million tonnes, commercial waste was 0.86 million tonnes, special waste was 0.41 million tonnes and industrial waste was 0.24 million tonnes. Municipal solid waste (MSW, including domestic waste, commercial waste and industrial waste), construction waste and special waste accounted for 67%, 25% and 8%of the total respectively. There are 3 strategic landfills with a total capacity of 140 million m3 and 6 refuse transfer stations and a system of refuse transfer facilities with a total capacity of 8,800 tonnes a day in Hong Kong. The unexpected growth in waste loads will make the 3 landfills’ capacity run out in 2014, 2016 and 2018 respectively. Currently, the recycling rate of MSW in Hong Kong is 48% and the rate is expected to reach 55% in 2015 by launching a wide range of measures.

Exhibit 7


Quantities of Solid Waste Disposed of at landfills in 2006 to 2011

Council due to the negative environmental impact to the local community. New technologies are needed to carry out the project. A Policy Framework for the Management of Municipal Solid Waste (2005-2014) In order to reduce the generation of waste and cut down the amount of waste sent to the landfills, the government initiated a policy framework. The target of this framework is to reduce the amount of MSW by 1% per annum, reduce the total MSW disposed of in landfills to less than 25% and increase the recycling rate of MSW to 45% by 2014.

Source: EPD, Fiducia Analysis

Exhibit 8 Recycling Rate of MSW in 2006 to 2011

Source: EPD, Fiducia Analysis

3.3.3 Waste Problems and Solutions in Hong Kong Landfilling to treat solid waste is a major practice in Hong Kong and almost 80% of the total solid waste generated is disposed at landfills. With the 3 strategic landfills running out their capacity in 2018, sound environmentally friendly technology for solid waste treatment is an urgent need for the market. In Switzerland, no MSW has been sent to a landfill since 2009. Moreover, Switzerland achieves a high recycling rate, 51% in 2009. No doubt, Switzerland is a leading economy in solid waste management. Incineration technology is now a major alternative to landfilling in Hong Kong .The project phase 1 of integrated waste management facilities which adopt this technology, is planned for construction in 2013 and expected to be completed in 2018 with a total investment of HKD 11.38 billion (CHF1.34 billion). However, the project proposal so far, has been rejected by the Legislative 16

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Policy tools to achieve these targets are:  Use waste charges to discourage wasteful habits, producer responsibility schemes and landfill disposal bans to reduce waste and support the recycling industry  Introduce modern waste treatment technologies for bulk reduction and disposal  Extend the existing landfills in a timely manner Integrated Waste Management Facilities (IWMF) The IWMF will substantially reduce the bulk size and minimise the landfilling of waste. The project will be conducted in several phases. The 1st phase will adopt advanced incineration (combustion of organic substances), which complys with the most stringent international emission standards from Germany, Singapore and Japan. The core treatment technology will have a treatment capacity of 3,000 tonnes each day. Further benefits of IWMF are generating energy that can provide electricity for more than 100,000 households and reducing Greenhouse Gas (GHG) in Hong Kong. The full completion for operation of the IWMF is expected in 2018. Sludge Treatment Facilities and Organic Waste Treatment Facilities Sludge Treatment Facilities are mainly used to reduce the sludge waste disposal generated by the HATs. A 90% reduction in the volume of waste disposal at landfills will be achieved after full operation of these facilities. Organic Waste Treatment Facilities aim to recycle source-separated organic waste (mostly food waste) to reduce the landfill disposal. Chemical Waste Treatment Clinical Waste Treatment Chemical waste and clinical waste are disposed at the Chemical Waste Treatment Centre (CWTC) in Hong Kong. The centre now is contracted to Ecospace Ltd, a local waste treatment company. The charge for using the CWTC for disposal of clinical waste is HKD 2,715 (CHF 319.9) per 1 tonne. Construction Waste Disposal Charging Scheme


Prior to using government waste disposal facilities, construction waste producers needed to open a billing account with the Environmental Protection Department and pay a construction waste disposal charge. The following government waste disposal facilities accept different types of construction waste:

3.3.4 Energy from Waste Waste-to-energy is the process by which the energy content of wastes is converted into heat or electricity using various types of technologies. The major types of waste-to-energy technologies include landfill gas utilisation, anaerobic digestion and thermal treatment with energy recovery.

Table 9 Construction Waste Disposal Charging Scheme Government waste disposal facilities

Type of construction waste Charge per accepted tonne (HKD)

Public fill reception facilities

Consisting entirely of inert construction waste

Sorting facilities

Containing more than 50% by 100 weight of inert construction waste

Landfills

Containing not more than 50% 125 by weight of inert construction waste

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Outlying Islands Trans- Containing any percentage of 125 fer Facilities inert construction waste Source: epd, gov.hk

Others  Recycling of rechargeable batteries and electronic equipment: Rechargeable batteries contain some hazardous and other substances that can be recycled. To encourage battery recycling, collection points are located in stores and railway stations throughout Hong Kong. 

Source separating domestic waste for recycling: The programme was launched in January 2005 and aims to make it more convenient for residents to separate waste at source. This is done by encouraging and assisting property management companies to provide waste separation facilities on each building floor, and broadening the types of recyclables to be recovered. Community Recycling: A Community Recycling Network has been set up to arouse public awareness about recycling, and to encourage public participation in waste recovery by providing collection points for low-valued recyclables, including waste plastics, glass bottles and small waste electrical and electronic equipment.

Landfilling Landfilling has been the main disposal practice for municipal solid wastes since the 1960s. In Hong Kong, electricity generated by landfill gas power generation facilities is mainly for on-site use of landfills. With the agreement of the EPD, landfill gas can also be used off-site, such as to produce town gas. Anaerobic Digestion Anaerobic digestion is principally applied in sewage treatment process with energy as a by-product. Organic waste treatment facilities in Hong Kong use this technology to reduce the landfill disposal and generate about 28 million kWh of surplus electricity which will be adequate for use by 6,000 households after the completion of the facilities. Thermal Treatment Thermal treatment with energy recovery is still in the conceptual and testing phases. Since thermal treatment is much more efficient in energy recovery than landfills, the wide-spread use of this technology is expected to generate a great amount of electricity for end-users, but also prolong the life of strategic landfills with “bulk waste reduction”. Currently, the energy-from-waste is the main by-product of the treatment process in Hong Kong. The more important use of these technologies, especially anaerobic digestion and thermal treatment is to provide an alternative way for disposal of MSW, other than landfill. 3.3.5 Success Story in Hong Kong SITA Waste Services Limited Background:  The SITA Waste Services Limited is a subsidiary of the French-based Suez Environment S.A. company – a world leader exclusively dedicated to water and waste management services with 65K employees worldwide  They provide complete waste management service, including municipal, commercial and industrial waste collection, urban cleansing and transfer station design


Operation in Hong Kong:  11 solid waste transfer stations  2 of 3 strategic sanitary landfills  7 restored landfills  1 wholly-owned subsidiary Waylung Waste Services Limited that engages in waste collection, street cleansing and composting

Exhibit 11 Energy End-use by Sectors 2010

3.4 Energy Efficiency Improvement Energy end-use in 2010 in Hong Kong was 276,950 Terajoule in total and has slightly increased compared to the end-use in 2009. Energy end-use is comprised of electricity, oil & coal products and town gas & liquefied petroleum gas (LPG). Electricity is 53.7% of the total end-use energy, followed by oil & coal products 29.3%, town gas & LPG 16.4% and renewable energy 0.6%. Exhibit 10 Power Consumption in Hong Kong 2010

Source: Hong Kong End-use data 2010, EMSD, Fiducia Analysis In 2009, the fuel mix in energy gereration was 54% coal, 23% gas and 23% nuclear.The Environment Bureau’s Consultation Document proposed a new fuel mix: less than 5% coal, 50% nuclear, 40% natural gas and ~5% renewable energy by 2020 in order to tackle carbon emissions.

3.4.1 Opportunities Arising from Energy Efficiency Swiss companies have business opportunities from the energy efficiency that can be achieved through green technologies and products.

Source: Hong Kong End-use data 2010, EMSD, Fiducia Analysis

According to Hong Kong End-use data, 61% of town gas & LPG is for cooking and hot water, 31% for transport. 90% of oil & coal product apply for transport as well. Nearly 90% of the total electricity consumption is from the building sector, which has drawn enormous attention and efforts from the government and investors.

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Professional Services Such As Energy Design and Energy Audit on Buildings According to Energy Audit Codes (EAC), all commercial buildings and commercial portions of composite buildings will be required to carry out energy audits every 10 years. When registered as an energy assessor, Swiss companies can provide this service which is also an excellent way to enter the Hong Kong market. Green building standards have drawn great attention in Hong Kong and the Building Environmental Assessment Method (BEAM), which was established through a private initiative in 1996, has published two assessment standards: one for new and one for existing buildings. Although the BEAM private standard is widely used and accepted in its field, the EAC standard is gaining popularity because it was formulised in an ordinance by the government. Different standards are in competition with each other and the opportunities for Swiss companies arise from advising companies implementing these standards.


Products and Technologies on Energy Efficiency Green-building technology is becoming more popular and more environmentally friendly materials are being used. Energy efficiency is also a rising concern in selecting building products. Not only has the government developed a set of energy efficiency schemes and codes, citizens are also more environmental sensitive and are likely to choose energy efficiency products to save energy and expenditure in the long term. Swiss companies with a leading position in the energy efficiency field, such as airconditioning and building shell technologies, will find a market demand in Hong Kong. Due to their extensive experience and professional technologies and services as first movers in the global energy efficiency sector, Swiss companies can make use of Hong Kong’s increasing population density, growing public awareness and incentives from the government.

providers in Hong Kong that provides electricity for 5.7 million people in Hong Kong) plays a leading role in researching and promoting smart grid in Hong Kong. Mr. Paul Poon, the COO of CLP anticipates that the first practical region-wide application may be charging electric vehicles via the smart grid in Hong Kong.

3.4.3 Showcase Projects District Cooling System (DCS) at Kai Tak Development (KTD) Basic Information: 2008-09 Policy Address pledged to implement:   

3.4.2 Hong Kong Energy Efficiency Programmes The government has proposed reducing the energy waste by at least 25% by 2030 (2005 baseline). In order to meet the target, a set of energy schemes, codes and pilot projects have been developed and implemented in Hong Kong. Main Energy Efficiency Programmes in Hong Kong have been listed in Appendix III. It is expected that for new buildings, the implementation of the Buildings Energy Efficiency Ordinance will result in energy savings of 2.8 billion kWh in the first decade of full operation equivalent to a reduction in carbon dioxide emissions of approximately 1.96 million tonnes. Unlike some other areas under these programmes that rely significantly on the government’s leadership, the areas that are more market-oriented, such as domestic appliances and building services installations have drawn great attention to some of the major market players. Active players in the energy efficiency industry act quickly to grasp the opportunities. Jardine Engineering Corporation (JEC), for example, also a Registered Energy Assessors (REAs), has provided water-cooled air-conditioning systems in major landmark buildings such as Chater House, Mandarin Oriental Hotel and The Link in Hong Kong.

Costing HKD 3,650 million (CHF430 million) and covering 1.73 million m2 Cooling Capacity: 284 Megawatt A Northern DCS plant and a Southern DCS plant with a seawater pump room

 Benefits (after completion):  Better utilisation of building space  Benefits to the district environment  Savings in electricity consumption  Consumes 35% less electricity than air-cooled (A/C) systems and 20% less electricity than water-cooled (W/C)  Saving up to 85 million kilowatt hour (kWh) per annum for the KTD Exhibit 13 DCS at Kai Tak Development

For building materials, Hong Kong relies on imported raw materials and semi-finished goods which are then further assembled in mainland China. The smart grid technology, which uses information intelligence in the public infrastructure sector, has not become fully operational in Hong Kong yet. Extensive studies and trials need to be conducted before the technology will be able to fully accommodate the specific needs of its users. There is still a long way to go. At present, CLP Power Hong Kong Ltd (one of the two electricity

Source: District Cooling System at Kai Tak Development, 2012


ZCB (Zero-Carbon Building) Basic Information: (Details at http://zcb.hkcic.org)  First zero-carbon building in Hong Kong located in Sheung Yuet Road, Kowloon Bay, Kowloon  14,700m2 and 45% more efficient than the current standard  Showcase project and open for public visits/tours  Won the Grand Award (New Building) in the Green Building Awards in 2012 Exhibit 14 Construction Industry Council, ZCB

Source: http://www.arup.com/Home/Projects/CIC_ZCB.aspx

3.4.4

Upcoming Tenders and Projects

Hong Kong Government In the second half of 2012 a 3-year project was implemented to conduct energy-cum-carbon audits in around 120 public buildings and facilities with a relatively high level of electricity consumption. Hong Kong Productivity Council The “Carbon Smart” programme will provide a subsidy funded by the Environment and Conservation Fund of up to HKD 30,000 per company to around 200 companies that conduct the energy-cumcarbon audits, in particular SMEs, to provide an incentive to the commercial sector to get involved. Hong Kong Green Building Council (HKGBC) In order to develop an online green building product database that aims to link manufacturers and suppliers of green building products, the HKGBC offers a tender system on its website called the Development of an Online Green Building Product Listing Service.

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4 Market Projection “Hong Kong is a potential market for Cleantech development with annual projected growth of 20-30% over the next 3 years.” Mr. Daniel M Cheng (President of Hong Kong Environmental Industry Association, Deputy Chairman from Federation of Hong Kong Industries) commented. Based on Mr. Cheng’s projection, the total environmental market will be HKD15.9 billion (CHF 1.87 billion) by 2015. Table 15: Environmental Market Projection

Building energy efficiency improvements include the areas of green building raw materials, related technologies, design and management. The cooperation with Swiss companies will bring win-win situations for both Swiss SMEs and Hong Kong enterprises: 1) With no local major manufacturing plants, Hong Kong mainly relies on imports, especially in terms of knowledge transfer from foreign companies in the Cleantech industry. 2) Hong Kong is an ideal platform for doing business in Asia, in particular because of its market access to mainland China. Swiss SMEs can cooperate with local firms for an easier market entry as local firms have established connections for expanding the business in mainland China and can ease the problem of product localisation.

Source: Interviews, Fiducia Analysis

Future trends and drivers:  Air Pollution Power generation and shipping are the main sources for air pollution in Hong Kong. Companies introducing clean fuel, renewable energy, and clean technology are addressing the key initiatives for tackling the air pollution problems.  Water Waste Water is one of the world’s most valuable resources. Commercial activities typically consume much of the scarce fresh water. The water efficiency management programme aims at optimising the use of water in order to achieve an environmentally sustainable development in Hong Kong.  Solid Waste The government’s latest discussion is to charge each household for the waste. Knowledge and management transfers are required from advanced countries / cities.  Energy Efficiency Green building is a big potential market that is expected to experience rapid industry expansion over the next five years.


5 Doing Business in Hong Kong 5.1 Why Hong Kong? The Globalisation Index 2011, released by Ernst & Young in cooperation with the Economist Intelligence Unit (EIU), shows that Hong Kong has the highest level of globalisation of the world’s 60 largest economies, making Hong Kong one of the most favourable places to do business in an international context. 5.1.1 Taxation According to Forbes Tax Misery Index 2009, Hong Kong has the lowest tax misery in the Asia-Pacific-Region and the third lowest in the world. The Hong Kong profits tax of a standard 16.5% is a territorial tax based on the source of income only within the territory of Hong Kong soil. Earnings and capital gains outside of Hong Kong soil are not taxed. Furthermore there is an unlimited carryover of losses. 5.1.2 The Rule of Law The rule of law is fundamental to Hong Kong’s success. All people are equal in front of the law and all have access to the justice system. Under the 50 year autonomy declaration imposed after the hand-over of Hong Kong to China, Hong Kong has complete financial autonomy and independence of its monetary system up to 2047. According to the Political & Economic Risk Consultancy Ltd, which publishes intelligence reports about East and Southeast Asian countries, Hong Kong has the best judicial system in Asia. In addition, according to Asian Corporate Governance Association’s “CG Watch 2012”, the sixth survey of corporate governance in Asia, Hong Kong has the best corporate governance in Asia. The system of intellectual property protection in Hong Kong is comprehensive. It covers trademarks, copyrights, patent and designs, plant varieties, and trade secrets. 5.1.3 Clean Government Hong Kong is one of the most corruption free economies in the world. Thanks to its anti-corruption system, embodied in the Independent Commission Against Corruption (ICAC), Hong Kong investigates the integrity of government departments, local councils, members of Parliament, ministers, the judiciary and the Chief Executive on an independent and regular basis. A clean government ensures that companies are free to pursue their business interests without concerns of the influence of government officials.

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5.1.4 Availability of Talent Hong Kong has a total of 8 universities, three of which are listed in the world’s top 50 institutions, as compiled by the Times Higher Education QS World University. This ensures the availability of highly educated professionals and a qualified workforce. Hong Kong possesses a rich talent pool comprised of local and overseas university graduates. 5.1.5 Immigration Policies In order to attract professionals, talent and investors to ensure its continued competitiveness, Hong Kong focuses on promoting friendly immigration policies. Currently, it offers four types of visas to foreign nationals: work, study, establish or join in any business or to take up residence in Hong Kong. 5.1.6 International Lifestyle Hong Kong is a city with a fusion of East and West. The official languages of Hong Kong are both Chinese and English, being the gateway and bridge to mainland China. 5.1.7 Well Developed Infrastructure The electricity grid is state-of-the-art, the supply of electricity and water supply is more than adequate, readily and reliably available. The telecommunications system is fully digitized. The government’s Go Wireless Stay Connected initiative has improved facilities and resulted in over 7,900 WiFi hotspots available in public libraries, recreational and cultural venues and even major parks for people living in Hong Kong. 5.1.8 Summary Hong Kong is ideally located to act as a gateway for foreign companies into mainland China. As a result, it is able to take advantages of the emergence of China as a global economic powerhouse. Hong Kong has one of the highest per capita GDPs in the Asian Pacific region, so domestic demand is a key driver of the economy.


5.2 Hong Kong and Switzerland Switzerland is a society, which is fair, egalitarian, open and transparent, combining social welfare with very strong private enterprises. Switzerland has one of the highest ratios of large companies and world famous brands per capita in the world, and it is also one of the most innovative societies globally. Switzerland and Hong Kong are both small economies among big players. However, collaboration between the two economies will be much easier as both territories are inherently identical in various aspects including their free economy and business transparency. According to the statistics from the Hong Kong government, the average annual growth rate in bilateral trade between Hong Kong and Switzerland from 2007 to 2011 was 20.3%. In 2011, Switzerland ranked 12th amongst Hong Kong’s trading partners in the world. The total trade between the two countries amounted to 10.23 billion EUR. About 8.7% of the total trade between Switzerland and mainland China was routed through Hong Kong. Since 2012, close to 200 Swiss companies have their offices in Hong Kong where they engage in banking, insurance, pharmaceuticals and other businesses. Among them, over 100 are regional headquarters or regional offices. Furthermore, over 2,000 Swiss citizens live in Hong Kong and Macau. To boost the Hong Kong economy, the central government in Beijing has granted Hong Kong a number of concessions, cooperation initiatives and easier access to mainland China (i.e. the CEPA roadmap) which strengthens the position of Hong Kong in the world. In June 2011, Hong Kong and the European Trade Association signed a Free Trade Agreement (entered into force on 1 October 2012) which covers trade in services and goods as well as investment, and other trade-related issues like protection of intellectual property. It contains an administrative assistance clause in accordance with the international standard. The agreement will contribute to the further positive development of bilateral economic relations between Hong Kong and Switzerland. Hong Kong and Switzerland also signed a comprehensive agreement on the avoidance of double taxation (CDTA). It contains an administrative assistance clause in accordance with the

international standard. The agreement will contribute to further positive developments of bilateral economic relations. The agreement entered into force on 15 October 2012, and is effective from 1 January 2013 with regard to Swiss taxes, and from 1 April 2013 concerning Hong Kong taxes. This is the first such agreement between the two parties InvestHK’s Innovation & Technology team can provide practical support to biotechnology and pharmaceutical companies wishing to set up in Hong Kong.


6 References 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

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Construction Industry Council Census and Statistic Department District Cooling System at Kai Tak Development, 2012 Electrical and Mechanical Services Department ENG World, Smart grid: electricity’s future guardian angel Environmental Protection Department European Environment Agency Hong Kong Electrical and Mechanical Services Department Hong Kong End-use data 2010, EMSD Hong Kong Government News Hong Kong Science & Technology Parks Hong Kong Trade Development Council Hong Kong’s Climate Change Strategy and Action Agenda 2010 Invest Hong Kong JEC magazine, Jan 2012, Issue 22 Legislative Council: Panel on Environmental Affairs, Jul 4th, 2012 Relative Significance of Local vs. Regional Sources: Hong Kong’s Air Pollution, 2007 Transport Department


7 Glossary BEAM: Building Environmental Assessment Method CAGR: Compound Annual Growth Rate CDTA: Avoidance of Double Taxation CEPA: Closer Economic Partnership Arrangement CEPT: Chemically Enhanced Primary Treatment CWTC: Waste Treatment Centre DCS: District Cooling System EAC: Energy Audit Codes EPD: Environmental Protection Development EPI: Environmental Performance Index EPLG: Environmental Protection Liaison Group EIA: Environmental Impact Assessment Evs: Electric Vehicles HATS: Harbour Area Treatment Scheme HCFC: Hydrochlorofluorocarbon HKSTP: Hong Kong Science and Technology Parks HKGBC: Hong Kong Green Building Council IWMF: Integrated Waste Management Facilities KTD: Kai Tak Development LPG: Liquefied Petroleum Gas MSW: Municipal Solid Waste NDRC: National Development and Reform Commission NGOs: Non-governmental Organisations IAQ: Indoor Air Quality LEZs: Low-emission Zones OGVs: Ocean-going Vessels PRC: Peoples’ Republic of China PRD: Pearl River Delta PRS: Producer Responsibility Scheme R&D: Research and development REAs: Registered Energy Assessors RSPs: Respirable suspended particulates SAR: Special Administrative Region SMEs: Small and medium-sized enterprises SMPs: Sewage Master Plans SO2: Sulphur dioxide UV: Ultra-violet VOCs: Volatile organic compounds WEEE: Waste Electrical and Electronic Equipment WELS: The Voluntary Water Efficiency Labelling Scheme WHO: World Health Organisation WQOs: Water Quality Objectives


8 Appendix Appendix I: Environmental Organisations /Associations

Appendix II: Councils / Government related Organisations

Care for Our Community- District design (http://www.carehk.com.hk/) Clear the Air-Air pollution (http://www.cleartheair.org.hk/) Conservancy Association- Heritage conservation (http://www.conservancy.org.hk/) Friends of the Earth HK- Renewable energy, excessive packaging, household conservation, recycling schemes(http://www.foe.org.hk/ ) Green Lantau Association- Lantau Island’s natural environment (http://www.greenlantau.com/) Greenpeace- Energy conservation, food safety (http://www.greenpeace.org/hk/) Green Power- Nature conservation, renewable energy (http://www.greenpower.org.hk/ ) Green Sense- Building density, waste minimization (http://greensense.org.hk/) Green Student Council- No plastic bag, recycling schemes (http://www.greeners-action.org/modules/AMS/) Hong Kong Organic Farming Association- Organic farming (http://www.organicfarm.com.hk/) Kadoorie Farm & Botanic Garden- Nature conservation (www.kfbg.org.hk/) Save Our Shorelines- Coastal development (http://www.saveourshorelines.bizland.com/) Save the Street Market- Preserving open bazaars and wet markets SEE Network- Sustainable development (http://www.projectsee.net/) WorldWide Fund for Nature- Marine conservation (www.wwf.org.hk) Care for Our Community- District design (http://www.carehk.com.hk/) Clear the Air-Air pollution (http://www.cleartheair.org.hk/) Conservancy Association- Heritage conservation (http://www.conservancy.org.hk/) Friends of the Earth HK- Renewable energy, excessive packaging, household conservation, recycling schemes (http://www.foe.org.hk/ ) Green Lantau Association- Lantau Island’s natural environment (http://www.greenlantau.com/) Greenpeace- Energy conservation, food safety (http://www.greenpeace.org/hk/) Green Power- Nature conservation, renewable energy (http://www.greenpower.org.hk/ )

Business Environment Council (http://www.bec.org.hk/eng/index.aspx) Environmental Contractors Management Association (http://www.ecma.org.hk/) Environmental Protection Department, HKSAR (http://www.epd.gov.hk/epd/eindex.html) Federation of Hong Kong Industries (http://www.industryhk.org/) Green Council (http://www.greencouncil.org/eng/index.asp ) Hong Kong Electronics Industries Association (http://www.hkeia.org/) Hong Kong Environmental Industry Association http://www.hkenvia.org/zh/ Hong Kong General Association of Re-cycling Business Hong Kong Productivity Council (http://www.hkpc.org/) Hong Kong Indoor Air Quality Association http://www.hkiaqs.org.hk/ Hong Kong Science and Technology Parks Corporation http://www.hkstp.org/HKSTPC/ Professional Green Building Council http://www.hkpgbc.org/ The Hong Kong Association of Energy Services Companies Limited (http://www.haesco.hk) The Hong Kong Green Manufacturing Alliance (http://www.gma.org.hk/) The Hong Kong Institute of Architects (http://www.hkia.net) The Hong Kong Institution of Engineers (http://www.hkie.org.hk/)

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Appendix III: List of Main Energy Efficiency Programmes in Hong Kong Programme

Implementation Time May 2008

Mandatory Energy Efficiency Labelling Scheme Voluntary Energy June 2011 Efficiency Labelling Scheme Building Energy Codes September 2012 (BEC) Overall Thermal Transfer February 2012 Value (OTTV) on building envelope Energy Audit Codes (EAC)

September 2012

Fresh Water Cooling Towers Scheme for air conditioning systems (FWCT Scheme) Registered Energy Assessors Regulation (the "REA Regulation")

June 2000

March 2011

Conversion of Diesel 2001 Taxis to LPG taxis and Set-up of LPG Refilling Stations Pilot Smart Metering November 2012 Project (smart grid area, private initiative)

Main Points

Notes

Applies to 5 electrical products

Under the Energy Efficiency (Labelling of Products) Ordinance

Covers petrol passenger cars,12 different types of household appliances and 7 different types of office equipment Includes 4 key types of building services installation: lighting, air-conditioning, electrical, lift and escalator OTTV for building Tower must not exceed 30 Watt/m2 and for Podium must not exceed 70 Watt/m2

Under the Buildings Energy Efficiency Ordinance Under the Building (Energy Efficiency) Regulation

Applies to commercial buildings and commercial portions of composite buildings; Energy audits of central building services installations required Applies to non-domestic premises in designated areas

Under the Buildings Energy Efficiency Ordinance

Conducts energy audits

Any person who wishes to be registered as a REA for the purposes of the Ordinance should apply to the Director of Electrical and Mechanical Services

Over 99.9% of taxis are LPG taxis and 61 LPG refilling stations in operation

Includes approximately 3,000 residential CLP Power Hong Kong Ltd initiated and customers and 1,400 small to medium-sized cooperated with Itron and Cisco enterprises (SME) Technology


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