Why Hong Kong needs higher, not lower, electricity tariffs

Paul Stapleton is left puzzled by the government’s self-congratulatory stance on bargaining down future power bills, when conservation aims are already struggling against profligate consumption by Hongkongers in a low-tariff environment

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Light decorations at Queensway Plaza in Admiralty in 2012. Hong Kong’s new power deal partly addresses air pollution and climate change, but appears to ignore the effects of wasteful consumption. Photo: Felix Wong

Published: 12:46pm, 1 May 2017Updated: 4:16pm, 2 May 2017

Environment minister Wong Kam-sing’s announcement of a cap on guaranteed earnings for Hong Kong’s two electricity suppliers raises a puzzling issue. While the reduction should benefit consumers and notify the two firms that their duopoly does not have a free rein, what stood out was Wong’s claim that the agreement could see tariffs cut by up to 5 per cent. This windfall for consumers appeared to be something to be proud of. And why not? Doesn’t everyone appreciate lower utility bills?

But why is an environment minister, expected to be a champion of green causes, advocating the single most detrimental factor for the conservation of resources? I speak of the universally recognised, most effective way to change consumer behaviour – price incentives. Any leader of environmental causes should be taking all steps possible to maximise the most effective measures to boost conservation. Instead, our minister is trumpeting one of the worst steps.

Environment secretary Wong Kam-sing (centre) with CLP Power vice-chair Betty Yuen and Wan Chi-tin, HK Electric managing director, at a press conference to announce the new scheme of control agreements with the two power companies, on April 25. Photo: Sam Tsang

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A good parallel is the price of cigarettes. Many governments slapped heavy taxes on tobacco years ago, and these continue to rise. Hundreds of studies have shown that as taxes have risen, tobacco sales have fallen dramatically. Heavy taxes on cigarettes in many countries have had a much greater deterrent effect than ugly photos on the packages.

Such is the power of price incentives – even for an addictive substance like nicotine. Smokers, like most others, are price sensitive.

If consumers become acutely aware that their power bill is connected to the use of their air conditioner, behavioural change can result

Likewise, if consumers become acutely aware that their power bill is connected to the use of their air conditioner, behavioural change can result. And this is only the mild discomfort from choosing to use an energy-light fan over an energy-hungry air conditioner, as opposed to a highly addictive substance.