Loose Cannon always has a chuckle when he sees, plastered in green ink across the back of a bus belching diesel fumes into the air, 'Environmentally Friendly Engine'. There's nothing friendly about diesel. Even in the most efficient engines, burning the fuel - still artificially cheap in Hong Kong at just $8 a litre - produces a deadly cocktail of toxic particulates and noxious gases. Using low-sulphur diesel certainly helps but it doesn't change the fact that thousands of people are sickened and killed every year from ultra-fine particulates spewed into the environment by passing buses and trucks. In 2000, the California Air Resources Board (Carb) concluded that diesel emissions created 70 per cent of the state's risk of cancer from airborne toxins. Carb determined that diesel pollution caused an estimated 2,700 cases of chronic bronchitis and about 4,400 hospital admissions for cardiovascular and respiratory illnesses every year, resulting in 3,000 premature deaths in the state last year. The health care costs from these effects reached US$21.5 billion every year, Carb said. These days, Hong Kong is a lot more polluted than Los Angeles - the Californian city with the nastiest air. We also import an indeterminate but sizeable amount of diesel pollution from our neighbours in Guangdong who burn a lot of the filthy fuel in inefficient backyard generators to make up for electricity shortfalls from the power grid. Using Carb's estimates, at least 6,000 people seek treatment at Hong Kong hospitals every year with illness caused by diesel combustion and 430 people will die prematurely. That calculation assumes that the health impact of diesel emissions in Hong Kong is no worse than it is in California and ignores that most of our population lives and works in heavily polluted areas. As health secretary York Chow Yat-ngok would testify, true health-care costs in Hong Kong are only marginally lower than those in the United States. That means Hong Kong is spending about $24 billion a year to care for people suffering from diesel-related illnesses. Add to those costs lost wages, lost productivity, funerals and defacement of buildings by the acidic by-products of airborne diesel pollutants. And don't forget opportunity costs - imagine, for example, how much more residential property along horrifically polluted Argyle Street in Mongkok would be worth if the thousands of trucks and buses passing through the neighbourhood every day were emission-free or at least burning gaseous fuel like natural gas. Retailers along such roads, too, would find their sales rising with every significant drop in the air pollution index. Then there are the less quantifiable impacts, such as the reduction in the quality of life and the loss of productive talent as educated professionals flee the city for healthier places to raise their families. These costs are very real but diesel users aren't paying them. Bus companies, logistic firms and other diesel burners can exclude them from their balance sheets - or 'externalise' them in economics jargon - because no one compels them to pay up. Environmental issues are not lost on Kowloon Motor Bus (KMB), which wants to be perceived as a good corporate citizen. It is sensitive to the impact of its operations and closely monitors its own environmental footprint. It has invested heavily in more efficient Euro-standard engines over the years and claims to have reduced per-bus particulate emissions by 76 per cent since 1992. KMB has even constructed the first solar-powered bus shelter, on Nathan Road near the Miramar Hotel (where, ironically, the air is usually thick with diesel exhaust). Such efforts won it the Business Environment Council's Environmental Performance Award in 2003. All of this, alas, is window dressing. Diesel is diesel, and burning it kills. Switching to low-sulphur diesel in highly efficient engines is akin to a Camel straights smoker switching to low-tar Dunhills. The cleanest diesel propulsion systems will always be far dirtier than those based on gas. All KMB buses consume diesel and the company has no discernible plans to change this soon. It led resistance to policies proposed in the 1990s that would have forced it and rival bus firms to switch to low-particulate gaseous fuels such as natural gas, and still cites 'technical impediments' to deploying gas-powered buses in Hong Kong. Note that bus operators in Sydney and even resource-poor New Delhi manage to run their entire fleets profitably on natural gas - although in both cases governments mandated the changeover from diesel. But what if KMB were compelled to include externalised costs when calculating the operating expenditure for each of the 4,300 diesel engines it fires up every day? Hong Kong has about 160,000 registered vehicles, of which 2.7 per cent are owned by KMB. Their buses burn considerably more diesel every day than, say, a Toyota Hi-Ace, so we'll increase KMB's proportion of responsibility for diesel emissions by a modest factor of two, to 5.4 per cent. Assuming presently externalised annual costs of diesel combustion total a conservative $60 billion, KMB in a perfect market should be presented with a bill for $3.24 billion every year. The company, which posted net profits of $731 million last year, may suddenly find the 'technical impediments' to alternatively-fuelled buses are not insurmountable.