Carrot and Stick Power: Hong Kong Electricity Profits Linked to Pollution


In a move that could revolutionize how China prices electricity -- and cuts its toxic coal-fired pollution -- Hong Kong set new regulations on Monday that partly links the city's two power companies' permissible rates of return to how much pollution they emit. Under the scheme, Hong Kong Electric and CLP can set their electricity rates higher if the companies can cut their pollution more than required. If either company pollutes more than allowed, however, it would be required to charge customers less, reducing its allowed rate of return by 0.2 to 0.4 percentage point. The companies would also be allowed to charge slightly more for electricity if they are using renewable energy sources.Beijing has been exploring ways that power pricing can incentivize alternative energy sources by allowing generating companies to charge distribution companies extra for electricity from renewable sources. Up on the mainland the general rule is to keep electricity prices as low as possible (ie, coal), with only a few provinces allowing wind farm operators to charge more than coal-fired plant operators for the electricity they sell to the grid. The same goes for methane generation. Fines are meant to be issued for excessive pollution, but they are difficult to collect.

Hong Kong, where smog has become steadily worse in recent years, has a vested interest in encouraging the mainland to follow its innovative lead: many agree that the bulk of the city's pollution isn't from local electric companies but from the factories and power plants across the border on the mainland. via NYT and

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