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Examining the Hong Kong 2023-24 Budget from the Perspective of Carbon Neutrality by 2050

By Kevin Li, CarbonCare InnoLab (CCIL)

Yesterday (22 February), the Hong Kong SAR government released the 2023-24 budget. CarbonCare InnoLab (CCIL) thinks that the government missed the opportunity for a green economic recovery and transformation through this year's budgeting, to promote Hong Kong's achievement of carbon neutrality and to drive zero-carbon economy. The climate actions listed in the budget remain unchanged, and adaptation is almost non-existent. The budget does not list all the potential climate-related items beyond those of the Environment and Ecology Bureau, which prevents the public from effectively monitoring the government's climate work.

Looking back at 2021, the Hong Kong SAR Government released the "Hong Kong Climate Action Plan 2050", pledging to reduce carbon emissions by half by 2035 and achieve carbon neutrality by 2050, in line with the global goal of limiting the temperature rise to 1.5 degrees. The government also announced in the 2021 Policy Address that it will allocate around HKD 240 billion in the next 15-20 years to implement various measures to mitigate and adapt to climate change.

Looking at the budget, Hong Kong has taken on a dual role in achieving carbon neutrality: one is to reduce carbon emissions in urban activities, and the other is to serve as a regional and global green finance center. Clearly, the Hong Kong SAR Government has given special attention to the latter, explaining the progress made by Hong Kong in the development of green bonds and carbon markets in the past year and vowing to become an "international center for green technology and finance." It has proposed five development directions, established a "Green Technology and Finance Development Committee," and plans to hold the "International Green Technology Week" at the end of the year. We are optimistic about its success.

Green finance has development prospects but requires strengthened governance

However, compared to neighbouring cities such as Singapore, Tokyo, and Taipei, Hong Kong seems to be moving towards expanding the green finance market and tools. Currently, Hong Kong's green bond issuance ranks among the top ten in the world and is second only to mainland China and Singapore in the Asia-Pacific region. This year, the government will continue to issue no less than HKD 15 billion in green retail bonds, seemingly chasing the leading position of green bonds in the Asia-Pacific region. Other cities, on the other hand, place greater emphasis on whether green finance truly achieves the goal of reducing carbon emissions. Taiwan has recently passed the "Climate Change Response Act" and begun to formulate a carbon tax. Singapore, which already had a carbon tax, has increased it, and Japan has drawn on its capital Tokyo's mandatory Cap & Trade system to start a voluntary carbon trading market nationwide. All three places are studying how to reduce carbon emissions through the creation of carbon market. In addition, Japan is studying legislation to regulate the "greenwashing" behaviour of ESG investors. It can be seen that Hong Kong still needs to catch up urgently in the field of green finance governance.

In terms of decarbonisation efforts in urban activities, this year's budget did not introduce any new measures but only continued with the ongoing work. Scattered climate actions make it difficult to demonstrate whether Hong Kong is on the path to carbon neutrality. The only bright spot is that the Climate Change and Carbon Neutrality Office was eventually established in January of this year. The "Carbon Neutrality and Sustainable Development Commission" mentioned by the current Chief Executive John Lee in the previous policy address is also about to be established, and the public has high expectations for their future leadership in government's climate work. The rest of the measures include only the increase of the Green Tech Fund to HKD 400 million, continued promotion of new energy transportation, and expansion of food waste collection pilot programs, among others. Existing measures such as promoting building energy efficiency and energy and carbon audits are only being continued but not being made mandatory. As for the most critical measure of carbon reduction, promoting the development of renewable energy such as solar and wind energy was not mentioned, let alone reference to the recommendations made in the Paris Watch Hong Kong Climate Action Reports published by CCIL over the past three years, and reference to the practices of neighbouring Asian cities, such as increasing renewable energy development targets, implementing urban building energy consumption Cap and Trade programs, and mandating energy and carbon audits for all buildings and installation of renewable energy facilities.

City's climate actions remain unchanged and lacks determination to catch up with carbon neutrality

Compared to the aforementioned measures for mitigating climate change, last year's budget also mentioned the only adaptation infrastructure project, which is to improve the resilience of low-lying areas. However, this year, no new measures were proposed to address this issue. Checking the budgets of relevant departments such as the Civil Engineering and Development Department, no new measures were found. In other words, in terms of infrastructure projects, various government departments are still only following the adaptation measures that have been in place, without strengthening their response to potential and expanding extreme weather impacts. In comparison, Singapore, another coastal city like Hong Kong, has increased its budget this year to deal with rising sea levels, gradually moving further ahead.

As for the climate adaptation and resilience of communities, the Hong Kong Just Transition Report issued by CCIL last year proposed that the government must strengthen the resilience of communities, especially vulnerable groups, to respond to climate change. Checking this year's budget website, as well as the budgets of the Labour and Welfare Bureau, Labour Department, Social Welfare Department, and Home Affairs Department, only the Labour Department mentioned the need to develop guidelines based on the Hong Kong Heat Index, requiring employers to take preventive measures according to the prescribed criteria, and other departments did not mention it. In addition, the Security Bureau's budget does not allocate any funds for possible climate disasters. Compared with ordinary citizens, the budget proposes to explore arrangements for the trading market to continue operating in inclement weather, which seems to place more emphasis on investors' climate adaptation capabilities.

The climate budget in Hong Kong lacks transparency and there is no view of climate change as an opportunity for transformation

In addition, this year's budget has allocated funding for climate-related initiatives, but it is unclear how much more should be included in the HKD 240 billion budget, such as expenses related to community climate adaptation and resilience. These expenses are likely to be hidden within the budgets of various government departments. In fact, except for the Environment and Ecology Bureau, which has a separate budget for climate change, the amount is only within the scope of the department and its related departments. Unlike Tokyo and Seoul, which have separately listed all climate-related budgets, it is difficult for the public to monitor and evaluate the government's climate performance.

Lastly, it should be noted that this year's budget emphasizes economic recovery, but still adheres to the old thinking of stimulating the economy. From emphasizing that Hong Kong will host multiple "mega events" this year, and emphasizing that Hong Kong should become one of the eight "centers," including "International Green Technology and Financial Center," to continuing to focus on large-scale development plans such as the Lantau Tomorrow Vision and the Northern Metropolis, even promoting green technology has become one of the "mega events," but it has not seized the opportunity to view climate change and the COVID-19 pandemic as opportunities for economic recovery and transformation, promoting zero-carbon economy and zero-carbon industry. I wonder what experiences the Financial Secretary and the world's political and business leaders who attended the World Economic Forum in Davos, Switzerland, where the leaders spoke about the climate crisis and raised the banner of green economy, exchanged with each other.

As mentioned earlier, 2023 is a critical year in the path towards halving carbon emissions by 2030 and achieving carbon neutrality by 2050. We can no longer just talk about commitments, but must accelerate the implementation of the Paris Agreement. The government must seize the remaining time and accelerate and strengthen financial investment in climate mitigation and adaptation in order for Hong Kong to have a chance of achieving carbon neutrality by 2050.