THE Centre of Environmental Technology is a non-profit-making organisation founded and funded by the Private Sector Committee on the Environment. CET's charismatic executive director Mr Stephen Lam Wing-hong explained that the primary objectives were the generation, marketing and implementation of projects which would have a direct impact on the territory's environment. A firm believer in the carrot-and-stick policy for encouraging success and punishing failure in environmental terms, Mr Lam nevertheless strongly favoured the positive aspects of the equation. ''We have initiated the Governor's Award for Industry : Environmental Performance to promote a wider appreciation of the vital role of environmental protection among Hongkong's manufacturers,'' he said. ''The award recognises businesses which have incorporated into their manufacturing processes, practices which are either not harmful to, or positively enhance, the environment,'' he added. ''But we need to go much further than that in Hongkong. The private sector can do only so much, and there are many steps that have to come from the Government,'' he said. In particular, Mr Lam wanted to see the establishment of powerful incentives for small-and medium-sized businesses ''to get on the green path''. In the United States, one approach successfully employed was offering tax incentives to companies with good environmental practices. ''That is obviously almost pointless here. It would be an exercise in futility, because tax rates are already so low.'' Other options exist, said Mr Lam, and chief among these would be the development of a revolving fund to encourage businesses to install environmental pollution control systems. The fund would lend earmarked resources at very low or even zero interest rates to businesses for the specific purpose of aiding environmental projects. Repayment periods would be longer than normal, allowing the company to appreciate the benefits well before the costs became due. Repayments to the fund would simply be lent out again to other businesses in a never-ending cycle. The logic of this idea is that it solves the cost/benefit question. It also bridges the gulf between the bigger industries, which now broadly accept the principle of ''the polluter pays'', and the small businesses which still perceive environmental concerns as an added burden. ''This approach is also very popular in the United States, where it has had a particularly dramatic impact on small businesses,'' he said. ''A measure such as this put in place here would hardly break the bank, or the Treasury,'' said Mr Lam. ''If the notion of the Government subsidising environmental protection is unacceptable, then it could be renamed 'a partnership for the future' instead. The name is irrelevant, but taking action is vital.''