Why Hong Kong needs higher, not lower, electricity tariffs

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.

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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.

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.

The price of electricity in Hong Kong is not especially high compared with the rest of the world. This may be why shops can afford to blast cool air onto the pavement on hot summer days.

While it is true that the deal negotiated by the government includes replacing dirty coal with cleaner natural gas, this only partly addresses two deep-seated problems: air pollution and climate change. The ignored flip side is our profligate consumption, which will only be exacerbated by lower electricity tariffs. Thus, rather than allowing the price of electricity to drop, the government should be raising it, while subsidising those who cannot afford it in other ways.

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Instead of lauding their bargaining skills while touting a reduction in our monthly bills, the Environment Bureau should focus more on their true agenda and propose using excess funds to further subsidise renewable energy.

Paul Stapleton is an associate professor at the Education University of Hong Kong