Hong Kong is now paying the price for its past environmental sins, and the cost is only going to get higher unless urgent action is taken, Secretary for Environment, Transport and Works Dr Sarah Liao Sau-tung, told guests at a HKGCC/Business Coalition on the Environment luncheon on October 11.

One of the most pressing issues is the threat to Hong Kong's water supply because of pollution at the Mainland source.

"The water shortage problem will hit us in 10 years' time if Guangdong develops at the rate it is developing now," she said. "Although we pay for the Dongjiang water and it comes from upstream, pollution moves up at the rate of about 100 metres every year. The Dongjiang is not that long. One day it will reach the head and then what will we do?"

Guangdong authorities have invested HK$20 million to implement a water quality management system upstream, which should help maintain a safe supply, but she said Hong Kong also needs to stop wasting water.

Part of the problem is that the government pays 50 per cent of water costs. She said the public must be educated to conserve water, while the polluter-pays principle should be enforced to make conservation projects sustainable.

"Waste water is no longer waste water once you treat it. It is good water that we need to conserve and use properly," she said.

A trial scheme at the Ngong Ping sewage treatment plant on Lantau to use recycled water for irrigation, landscaping, car washes and flushing the toilet will soon be implemented, she said.

Air pollution is also being aggressively tackled as residents increasingly complain that it is affecting them. But Dr Liao said, "We cannot wave a magic wand and everything will be better; we have to pay for our sins."

Easing the air pollution problem will involve a long-term, controlled, workable strategy which she said is already making progress in that 90 per cent of taxis have switched to LPG. Plans to provide grants to help Hong Kong's 4,900 minibuses to convert to LPG have also been approved, she added.

While encouraging, Dr Liao pointed out that for Hong Kong to seriously tackle its air pollution problem, it needs to work closely with China, as about 80 per cent of air pollution in the territory comes from the Mainland.

"But that does not mean our 20 per cent can sit here and do nothing," she said. "This is a regional problem which involves working diplomatically with our neighbours."

Plans to implement an emissions trading scheme will present opportunities for Hong Kong as a financial centre, but a polluter-pays principle needs to be firmly established to make it sustainable.

Once a minimum international standard has been agreed upon, she expects companies will comply, similarly to the ozone protection standards, but she criticised local industries for trying to thwart the idea. Even Mainland China has been moving ahead of Hong Kong in establishing a polluter-pays mechanism, she said.

"More and more people want a better quality of life but we all have to work together to achieve that," she said. "Government without business cannot make it work."

Following are selected questions and answers from the Q&A session following Dr Liao's speech, which have been edited for space and clarity.

QUESTION: Currently, there are no environmental requirements for minibuses to renew their licences, other than the bare minimum. How can we introduce environmental considerations into re-licensing across the board in Hong Kong?

DR LIAO: Transport is more of a political issue rather than an environmental one. I agree with you that licensing and a requirement to reduce emissions is a very good move, but we have no power to do that. So we are moving them onto green busses, or the franchise buses, where we can look at their franchise conditions. Actually, I am trying to put these green policies in every mode of transportation that we have in Hong Kong, but unfortunately our hands are tied with some of them.

You mentioned the trading of emissions and Kyoto, given Hong Kong's one country two systems, how would cross-border emissions trading between Hong Kong and China work?

China has done one test site successfully, and the State Environmental Protection Agency has issued a memo asking all locations to start research and pilot tests on emissions trading to reduce costs. With us it is cross-border trading, but before we can start trading, we have to set up a group to monitor emissions and air quality so that we have a so-called common procedure and common methodology.

You talk about the polluter-pays principle, would that include cutting subsidies on consumption of resources, like water?

We are only charging you 50 per cent of the cost of water. I think we need to raise public awareness that wastewater is costing them money. In every country or city in the world, it is easier to charge for drinking water than to charge for wastewater. So I am concentrating on education and increasing awareness that wastewater is also chargeable.

Hong Kong and Shenzhen have done environmental impact assessments for the Shenzhen-Deepwater Bay link, but when we asked to see the Shenzhen EIA, we were told that we could not have direct access or a full report. Is the exchange of information a problem? Another concern is that of vehicles coming to Hong Kong with dirty fuel. How confident are you that you can prevent those dirty vehicles from coming to Hong Kong?

We are working closely with the government on one hand, but on the other hand we have to work slowly on access to information for the environmental impact assessment report. We have to work closely with the Mainland to get their data and we have a programme of sharing information and data.

On the second issue of cross-border vehicles, most of the vehicles have a Hong Kong licence, and so the restrictions are mostly from the other side. Very few vehicles come to Hong Kong so it is our own vehicles that we have to control.

I cannot understand why the government has decided to build incinerators to burn 2 million tonnes of waste. Why doesn't the government ship this organic and inorganic waste to China where they have low costs to separate this waste and markets to use the compost?