Real progress on either front will require a lot of hard work. Commissioning weighty reports from expert committees and making snazzy policy presentations will achieve little. Establishing a genuine market will mean long negotiations to agree a regulatory regime for emissions covering not only Hong Kong but also Guangdong and possibly the broader Pearl River Delta region.

That is a daunting prospect but the rewards could be substantial.

The global market for environmental finance is growing quickly. According to a report published last week by the United Nations Environment Programme, new investment in sustainable energy sources last year hit US$70.9 billion, up 43 per cent from 2005. If mergers and acquisitions in the field are factored in, the total investment came to more than US$100 billion.

With the lion's share of that money being invested in the European Union and the United States, almost all of the financing business has been captured by centres in Europe and America. For example, the US leads the world in clean energy venture capital and London in carbon trading. Last year, Frankfurt took the top slot in listing securities issued by sustainable energy companies.

Over time, however, the dominant European and US environmental finance centres are likely to lose market share to Asia. Last year, the mainland ranked third behind the EU and US in investment in sustainable energy projects, with almost US$4.5 billion invested including through mergers and acquisitions, more than double the 2005 amount.

That investment growth is only likely to accelerate, partly through Beijing's domestic efforts to reduce pollution and partly because it is often cheaper for international companies to fund offsetting emission reductions in the mainland than to cut the amount they emit directly at home. By 2012, the mainland is expected to lead the world in such offsets with certified emission reductions of 950 million tonnes of carbon dioxide, the UN study says. At current market prices for 2012, that trade will be worth almost US$30 billion.

Increasing investment in reducing emissions creates an opportunity for Hong Kong to establish itself as a regional centre for environmental finance but grabbing a share of the pie will not be easy. At the moment, mainland clean energy companies wanting to list typically bypass Hong Kong and head for New York's Nasdaq market or London's Aim, where there is deeper analyst and investor coverage of the sector. Emission offsets are typically arranged by London brokers.

To win a share of the market, Hong Kong needs to develop its own reservoir of environmental finance expertise. One obvious way would be for the new administration to push to set up a cross-border 'cap and trade' regulatory scheme to reduce emissions of pollutants.

Initially, efforts should focus on cutting emissions of health-threatening pollutants such as sulphur dioxide rather than greenhouse gases such as carbon dioxide. Even so, hammering out the details will be tortuous and time-consuming.

The effort should be worthwhile. The regulatory and commercial expertise gained would help attract other environmental financing business here, augmenting Hong Kong's status as an international financing centre. And the initiative could also help clean up our air which would go a long way to improving the city's quality of life.