The year 2035 has been earmarked to be an “important and magical year” for Hong Kong’s energy transition.
This is according to Tse Chin-wan, Hong Kong’s secretary for environment and ecology, in an opening speech at the recently concluded COP29 summit held in Baku, Azerbaijan. Speaking at the China Pavilion, he elaborated on the city’s plans to achieve net zero by 2050, and highlighted how it will tap nuclear to do so.
Hong Kong must increase the share of atomic power it imports from neighbouring mainland China by up to 70 per cent by 2035, if it intends to halve carbon emissions in the same year, in comparison to 2005 levels, said Tse.
The city will achieve the goal through cross-border electricity transmission infrastructure and put an end to coal-generated energy in the city by 2035, he pledged.
While the plans are ambitious – with the city’s largest electricity provider CLP also noting that nuclear energy will power much of Hong Kong’s future – the lack of regulatory measures to enforce climate goals and mechanisms to hold the government and carbon emitters accountable, coupled with contradictory future development plans, could throw a spanner into Hong Kong’s net zero plans.
What the city desperately needs, critics say, is a clear and well-thought-out plan that transparently takes stock of current progress and illustrates how Hong Kong will achieve net zero – not just pledges.
“You hear a lot from the government; sometimes they talk about renewable energy, sometimes they talk about nuclear, sometimes they talk about hydrogen. But there’s a lack of concrete substance or details when it comes to planning for the 2050 net zero transition,” said Karen Ho, head of corporate and community sustainability at WWF Hong Kong.
‘Red’ rating for governance and accountability
A March 2024 policy review of Hong Kong’s green finance policies published by Greenpeace East Asia and CarbonCare InnoLab, a Hong Kong-based non-governmental organisation, pointed to missing accountability and the lack of quantifiable targets in the government’s green plans. Both called for increased accountability from the government and for regulators to set more measurable goals and timelines.
The report also highlighted the need for robust mechanisms to prevent greenwashing and better financial supervision of climate risks, among other recommendations.
The city would greatly benefit from “clearer direction” from the government and for all relevant bodies to be aligned with the Paris Agreement goal of limiting global temperature rise to 1.5 degrees Celsius to achieve net zero by 2050, noted Tom Ng, climate project leader at Greenpeace, who co-authored the report.
“There is a lack of a ‘high-level’ vision in Hong Kong right now. We need alignment between government bodies and [relevant] authorities that we are pushing towards the same goal. Right now, we don’t see that at all,” said Ng.
The fragmentation of climate plans across different authorities can lead to confusion and inefficiency, the report highlighted, calling for an “overarching strategy set by top policymakers with clearly defined timeframes, quantitative goals, and detailed implementation roadmaps”.
The study, which gave Hong Kong’s governance and accountability a “red” rating to denote that these “need urgent attention”, recommends that the financial secretary launch a high-level paper detailing the roadmap to develop the city into a green finance hub in Asia.
The report by Greenpeace and CarbonCare InnoLab notes that governance and accountability “requires urgent attention” in Hong Kong with a red rating. Image: Greenpeace and CarbonCare InnoLab
The report also calls for relevant stakeholders including Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC), and Hong Kong Stock Exchange to be held accountable. It wants regulators to seek expert advice, establish committees, and issue financial system-wide guidelines on issues such as disclosure and risk management to facilitate green finance growth, which the study claims will lead to a more stringent, transparent and accountable green finance system.
The paper also drew comparisons to cities such as Shanghai, Shenzhen, Singapore, and Tokyo, which have “implemented comprehensive green finance strategies with ambitious goals and some accountability mechanisms to support net zero emissions targets.”
Singapore’s financial regulator, the Monetary Authority of Singapore, for example, has implemented guidelines for environmental, social and governance (ESG) disclosures that require companies to report on their sustainability practices comprehensively.
Hong Kong, on the other hand, still relies on voluntary participation from companies. For example, Hong Kong’s Green Bond Framework, while aligned with Green Bond Principles established by the International Capital Market Association, does not mandate external reviews.
Why no restrictions on fossil fuel financing?
Hong Kong has placed much focus on ramping up its sustainable finance initiatives in recent years, with the aim of being seen as a climate capital funding hub within the region.
This includes, but isn’t limited to, the Government Sustainable Bond Programme, the Green and Sustainable Finance Grant Scheme, the Green Tech Fund, and the Pilot Green and Sustainable Finance Capacity Building Support Scheme – all of which are geared towards promoting green finance in the city and funding sustainability projects.
In addition are concessionary measures to promote green shipping and electric vehicles, for example, which were announced in the city’s 2024-2025 Budget in March this year and reiterated in October’s policy address.
The city now accounts for more than a third of Asia’s total green and sustainable bond issuances. Over 200 ESG funds with assets under management of almost US$170 billion were authorised with SFC as of 31 December 2023, according to SFC figures.
However, there are still no restrictions on fossil fuel financing in Hong Kong, which Singapore has progressively reduced its exposure to in recent years.
This presents risks, Ng noted, making it possible for large companies and financial institutions alike to finance or rely on coal all while promoting green initiatives – a form of greenwashing. It would add another obstacle to the city’s journey to net zero, he said.
“We don’t see any government laws regarding greenwashing, which provide loopholes for companies. [If the city] has clear guidelines that will lead the market towards Paris Agreement goals, [this would allow] different banks or different asset managers to follow a decarbonisation framework, which we are missing,” Ng said.
So while much green finance has gone towards various projects in Hong Kong – such as those in renewables, energy efficiency, and waste management, as outlined in a recently issued report by the city on its Government Sustainable Bond Programme – until more stringent regulations on greenwashing are enforced, questions surrounding the credibility and actual impact of green finance efforts will remain.
A closer look at the Hong Kong Taxonomy
Two months after the Greenpeace and CarbonCare InnoLab report was published, the HKMA launched a Hong Kong Taxonomy for Sustainable Finance (Hong Kong Taxonomy), providing a standardised framework for classifying and labelling financial products based on their environmental sustainability for investors’ reference. The taxonomy encompasses 12 economic activities based on four key sectors: power generation; transportation; construction; as well as water and waste management.
The HKMA then issued a Sustainable Finance Action Agenda in October, which the regulator says will address some gaps in the city’s net zero approach. The agenda mandates net zero goals for all banks, and calls for enhanced climate-related transparency and sustainable investments, as well as innovation and inclusivity.
An HKMA spokesperson told Eco-Business that the Hong Kong Taxonomy is “designed not only to cater for economic activities in Hong Kong, but rather to enhance cross-border financing raised through Hong Kong, while incorporating elements to address the local context in Hong Kong”.
The Hong Kong Taxonomy will come in two phases, with the current first phase providing definitions and technical screening criteria for renewable energy, including solar and wind power, to drive capital flows towards associated investments and assets.
The upcoming second phase will see the Hong Kong Taxonomy expanded to cover more sectors and economic activities “with a view to supporting not only Hong Kong’s decarbonisation but also the transition of the region”, the HKMA spokesperson noted. “The expanded taxonomy will also cover new environmental objectives, namely climate change adaptation, as well as new components like ‘Do No Significant Harm’ (DNSH).”
The primary objective of any DNSH criteria in a taxonomy is to ensure that an activity, despite making a substantial contribution, does not have adverse effects on other environmental objectives.
While both the taxonomy and action agenda are commendable, they remain voluntary and are unlikely to hold companies liable for any violations for now, noted Ivy Leung, executive director of CarbonCare InnoLab. The non-profit closely tracks climate action and sustainable practices in Hong Kong.
“The classification system still doesn’t require companies to report on their impact and it isn’t legally binding. Because of this, [companies] cannot be audited,” she said.
In a bid to prevent banks from greenwashing, the HKMA told Eco-Business that it issued a circular in November 2023 setting out expected standards and the sharing of good practices observed, following a review of banks’ selling of green and sustainable investment products.
“The circular covers areas such as product due diligence, disclosure, governance and controls, staff training and book-building activities, with a view to mitigating potential greenwashing risk and strengthening investor’s confidence,” the HKMA spokesperson noted, while also recommending those engaged in green bonds to seek third party assurance.
“HKMA encourages market participants, including banks, investors, and issuers and borrowers of green bonds and loans, to seek alignment with the Hong Kong Taxonomy and suitably engage external reviewers to verify the alignment as a demonstration of the commitment to transparency and accountability,” explained the spokesperson.
While HKMA’s sustainable finance taxonomy and action agenda may help to deter companies from misleading the public about their sustainability, the lack of public awareness of greenwashing and regulation from the top presents obstacles, added Leung.
“Much of the public still relies on the Hong Kong Customs and Excise Department’s Trade Description Ordinance,” Leung said, referring to a legislative framework enacted back in 2013 and was designed to protect consumers from unfair trade practices and misleading omissions by banning false trade descriptions for goods and services.
“Combined with the lack of regulation and penalties, companies can still get away with greenwashing, even if they are not aware they are committing it,” Leung added.
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“Net zero by 2050 is a city-wide initiative; it involves action from every stakeholder, such as those in the private sector, public sector, and philanthropy. Everyone must do their part. This is why we need to see more accountability, transparency, regular updates, and high-level action from the government.”
Ivy Leung, executive director, CarbonCare InnoLab
Renewed reasons for renewables
Beyond nuclear power, Hong Kong needs to make measurable and policy-driven progress in renewable energy generation, which critics say is key to reducing emissions in the natural gas-reliant city.
For now, Hong Kong’s energy mix remains predominantly led by fossil fuels such as natural gas, which has a share of 48 per cent, and coal, which generates 24 per cent of the city’s energy needs. This means roughly two-thirds of Hong Kong’s energy supply comes from high-emission sources. The other third comes from nuclear power, which is imported from Daya Bay in neighbouring Guangdong province.
A mere one per cent is renewable energy, which comes from solar photovoltaic systems found on some rooftops and reservoirs, and wind energy from a lone wind turbine on the city’s Lamma Island.
Hong Kong’s only wind turbine, located on Lamma Island. The turbine overlooks Lamma Power Station – Hong Kong’s second-largest coal-fired power plant – which supplies energy to Hong Kong Island and Lamma Island. Image: nhigh / Flickr
“Renewable energy in Hong Kong still has some potential… but we see that there is no overarching policy or no integrated policy idea over how to increase renewable energy capacity,” said WWF’s Ho.
This is despite more ambitious targets pledged in its latest Climate Action Plan 2050, noting plans to achieve a 50 per cent reduction in total carbon emissions before 2035 and to achieve net zero by 2050. The proposal also pledges to increase the share of renewable energy in the fuel mix for electricity generation to 7.5 per cent to 10 per cent by 2035 and subsequently to 15 per cent by 2050.
The city announced its first climate commitments in 2017 with its Climate Action Plan 2030+, which outlined a reduction in carbon intensity of 65 to 70 per cent by 2030, compared to 2005 levels.
It can be argued, however, that the original plan’s emphasis on carbon intensity allowed for some flexibility depending on economic growth and energy consumption patterns, while the city’s latest plan sets a clearer target for absolute emissions.
Ho also said that Hong Kong should look into reducing building emissions, which could address some 90 per cent of all electricity use in the city. While there are initiatives to install solar panels on building rooftops such as the Feed-in Tariff (FiT) Scheme, having to obtain safety certificates and approvals from relevant authorities, coupled with the safety concerns and potential infrastructural damage that typhoons incur each year, deter some property owners from taking the next step.
Launched in 2018, the FiT scheme allows individuals and businesses to install renewable energy generation systems and sell the electricity they generate back to the local power companies at rates higher than the standard electricity tariff.
Until Hong Kong finds ways to expand renewable energy capacity, Ho says the city will have no choice but to increase its imports of clean energy such as nuclear power from mainland China, particularly the Greater Bay Area (GBA).
The GBA is a development plan that seeks to have nine cities within Guangdong Province – Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou, and Zhaoqing – along with Hong Kong and Macau, act as one economic powerhouse.
A nuclear power plant in Guangdong province. A third of Hong Kong’s energy is the result of nuclear power from mainland China. Image: IAEA Imagebank / Flickr
Unfulfilled infrastructure plans
Other developments that contradict Hong Kong’s net zero ambitions are the city’s plan to develop artificial islands off its coast to create additional space for residents and property.
The development, dubbed the Kau Yi Chau Artificial Islands Project, will see the government create roughly 1,000 hectares of new land through land reclamation near Lantau Island, which is the city’s largest island, and home to natural habitats, wetland areas, as well as rich marine biodiversity.
An artist’s impression of the Kau Yi Chau artificial islands in Hong Kong. Image: centralwaters.hk
Reclamation work for the three-island project – which non-profits say will threaten marine animals, coral, and fish populations and further increase the city’s emissions output – will begin as soon as the government completes statutory environmental impact assessments in 2025.
The islands will aim to accommodate a population of 400,000 to 700,000 people and see the first batch of residents move in by 2033. There is also hope that the islands will be the city’s “third” central business district.
Some already foresee the project ending up as a “white elephant” similar to other uncompleted developments such as the West Kowloon Cultural District, which was envisioned to be an arts and cultural hub and was supposed to be completed in its entirety in 2015. The city’s Kai Tak Cruise Terminal, which was originally destined to be a major cruise hub, remains underutilised due to inadequate transport links to the terminal and underused retail spaces, despite being fully built.
Another ongoing project that claims to solve the city’s housing crisis is the Northern Metropolis plan, which will see the government transform parts of Hong Kong’s northern New Territories – near China’s border – into an “integrated living and economic” hub.
The lack of the artificial islands project’s mention in any of the city’s latest net zero blueprints should have raised some eyebrows, Ho noted, mentioning that the islands contradict other existing plans.
“The city did not consider the carbon sequestration or the carbon sink capacity of these two project sites into their long-term net zero plan,” Ho said, pointing to the impact on the biodiversity that will result from land reclamation work. “Why are we destroying our carbon sequestration potential to build buildings?”
The city’s emphasis on increasing connectivity within the GBA in recent years should, theoretically, have already solved the housing issue because of the large amount of space and affordable housing across the border. But the city has done the opposite, Ho noted.
“On one hand, the government is encouraging integration within the GBA. But on the other hand, they are spending their assets to build infrastructure in Hong Kong. It’s hard to see the point,” added Ho.
A distant dream?
Until Hong Kong announces a detailed plan, complete with interim decarbonisation targets and credibly explains how the city will achieve those goals in the near term, the city’s net zero ambitions may simply remain ambitions.
The city needs to set interim targets and issue regular progress reports, Leung noted, adding that this would allow the government to take stock of progress so far, assess what else needs to be done in the next few years, and most importantly, keep the city on track to net zero.
“A progress report must also transparently convey progress. Net zero by 2050 is a city-wide initiative; it involves action from every stakeholder, such as those in the private sector, public sector, and philanthropy. Everyone must do their part,” she added. “This is why we need to see more accountability, transparency, regular updates, and high-level action from the government.”
“Otherwise, we will reach a scenario where we haven’t achieved our goals – and realise that we do not have enough time to achieve them.”
Themed “Mobilising capital for the green revolution”, the Hong Kong edition of Eco-Business’ flagship forum Unlocking capital for sustainability finance will be held on 28 February 2025. Find out more details here.
