How Does Air Pollution Affect the Hong Kong People and Economy?

Categories: Taxation

In this piece of coursework, I will investigate on the rapid increase of pollution in Hong Kong and the disadvantages it may bring to the people, businesses and the economy. I will also evaluate ways in which government has tried to overcome this problem.


I will collect both primary and secondary data from internet, newspaper and magazine cuttings. I will collect my primary data using the questionnaire which I designed and question students and adults of both sexes to provide a wide range of unbiased results.

The questionnaire was designed to collect an overall impression of what the local residents which about the pollution in Hong Kong, how much they know is being done about, what they feel about more should be done. The secondary data provides me with accurate information and statistics from both the government and other organizations.

Introduction to pollution:

Hong Kong has developed itself from a small fishing town to one of the worlds largest business district with billions of dollars flowing in and out daily through different ways; tourism, import and export, foreign investment etc.

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etc. But with the excess amount of companies investing, construction of infrastructures, government economical activities...etc, there has been a cost that the government and capitalistic entrepreneurs has ignored for a long time.

This cost is pollution which effects not just Hong Kong economy but also the living standard and a lot of others different things in Hong Kong. With the prediction, Hong Kong's pollution is going to bring down the economical status that Hong Kong now has.

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Surely the government is aware of this problem, but they are doing just enough to get away from the pressure from the media, people and also green organizations. In this course work, I am going to discuss Hong Kong's pollution, how it is going to affect Hong Kong's economic growth and what is the solution to it?

Over the past few years where Hong Kong has had major economic growth due to investing companies, pollution has becoming a severe factor to Hong Kong's citizens. The government has raised campaigns to try reducing the pollution. For example, four years ago the government began a campaign worth one and a half billion Hong Kong dollars to reduce pollution. It aimed to change the fuels used by public transport (especially busses and taxis) to make the air pollution better.

Air Pollution:

Air pollution is one of the biggest worrying factors in Hong Kong nowadays. Air pollution can also be categorized into to 2 different sections, street level pollution and smog. Street level pollution is pollution mainly fumes given off from vehicle exhausts and smog is mainly given out from factories. Air pollution is the main factor that risks our health in different ways. It is related mainly to long-term health effects caused by a lot of high levels of tiny particles that can go in deep into our lungs. Sometimes the pollution level can be so high tat can may instant effects on our heart and respiratory system. Government in Hong Kong uses API (air pollution index) to see the air pollution level in Hong Kong.

Air pollution is a growing concern in Hong Kong especially when around 72% of vehicles in Hong Kong run on diesel. The burning of diesel gives out a highly toxic gas such as carbon monoxide, nitrogen oxide and sulphur dioxide. Since 1991, the number of vehicles in Hong Kong has increased by 41%. The increase in vehicles definitely played a major part in the increase of pollution in Hong Kong. In order to control the amount of toxic gas being given off from cars, the Environmental protection department has started to fine owners of cars which were giving out more toxic gas than the standard level. To reduce the consumption of diesel, the government has also introduced petrol. But unfortunately many of the vehicle owners were unwilling to buy petrol, as it is more expensive.

Looking at the graph, we can see clearly that the emission of vehicle exhaust has decreased through out the passed 10 years. This can mean that the government has tightened the control over vehicle exhaust in order to improve the pollution in Hong Kong.

Apart from exhaust fumes from vehicles, there is also pollution from construction sites. Due to the rapid growth in the number of sky scrapers in our city, the level of dusts and pollution from these worksites have significantly increased. It is definitely a nuisance to people living next to, or near, a construction site. Fortunately there are regulations controlling dust from construction sites, which require contractors to undertake a number of control measures. These include washing construction vehicle wheels as they leave the site, covering of stockpiles, watering of access roads etc. Failing to take such measures is an offence, with a maximum fine of $50,000 for first offences.

Personally I think that most of the smog pollution within Hong Kong has been blown from the northern part of Hong Kong, mainland china. Many factories are situated there because of the cheap labour and land. The large number of factories gives out fumes and toxic gases that will eventually travel to Hong Kong by wind. But the government cannot do much about this because they cannot completely close down these factories even though they create negative externality (the pollution).

Air pollution does not only affect the health of local citizens but it also affects our economy in relation. If air pollution continues to get worse the health of people in Hong Kong would be affected leading to a lower standard of living. Sick people would therefore have to go to hospitals and government would then have to invest more money on the health department rather than other sectors such as education. If the government cannot invest in other sectors then its economy or standard of living in that country may also fall.

Not forgetting sick people would want to take sick leave from their jobs. During these sick leaves, companies would still have to pay their employers but however, they are receiving no input from them. As the companies still pay for their wages, they cannot afford to employ more labour. Therefore the total output of the company will fall.

Another possible adverse effect of pollution is that highly tertiary sector workers will leave Hong Kong to work in other places. This will lead to a shortage of highly skilled workers and so the Hong Kong government will have to raise wages as high skilled labor is highly scarce and the demand for it is relatively inelastic. The diagram below can explain this:

Pollution may cause many of the skilled workers to leave Hong Kong. If they leave Hong Kong, then the supply of these people will decrease as shown by the shift in the supply curve to the left (S1 to S2). The quantity of labor for this job will decrease (shift from Q1 to Q2). As there is less supply for this sort of labor then, the wage will rise (W1 to W2). As firms are paying more for the same amount of labour, the average profit one unit of labour provides will decrease reducing economic growth.

Pollution is an external cost and pollution causes social and private costs. Private costs are costs paid by economic decision makers. Private benefit is benefit received by economic decision makers. Social costs and social benefits are costs and benefits associated with the society. Therefore:


But how much is the optimum pollution level where there is most social benefit? A marginal social costs and benefit graph could tell us.

The marginal social benefit curve shows how much more benefit society as a whole will gain from one extra unit. The marginal social cost curve shows the extra cost to society as a whole of this extra unit. If the MSB is greater than MSC, then it would be beneficial to increase the consumption (positive externalities). If MSC is above MSB, it means that each unit produced creates more costs to the society than benefits being gained (negative externalities). Therefore production should be cut. The optimum point is there the two graphs meet. It is in theory that the amount of costs created is equaled to the amount of benefits gained.

eg. New developments such as the Hong Kong Disneyland have significant effect on Lantau's pollution. But because the marginal social benefits (attract tourism etc) exceeds the marginal social costs (pollution), it is therefore reasonable to build Disneyland.

What solutions are there to reduce pollution?

There are many possible ways in which pollution can be reduced and controlled. Fines and regulations, tax, subsidy, improve education, technology and tradeable permits. But the government has to decide within ones which are the most beneficial with least side effects.


The development of modern technology could control the pollution level. A few years ago, the government introduced the LPG taxi which will cause less pollution. The government will also start replacing most of the light vehicles, mini-buses...etc to use LPG instead of diesel. Although it will reduce the pollution of Hong Kong, but because of the LPG station is costly and inconvenient to build, it is hard for owner of light vehicles', mini-buses' and taxis' to change their cars into LPG cars. It is expensive to do so. But the government is therefore investing $1.4 billion to help owners to switch from diesel to cleaner LPG engines, and to control the remaining diesel emission.


Looking at the supply and demand diagram for subsidies we can see that as the government provides a subsidy for a good, the quantity of the good increases as the extra money which firms have got from government allows them to produce more. The price for consumers also decreases because the amount in the reduced price is already paid by the government.

By placing a subsidy on goods, the government encourages the production of this good. Therefore the government would usually place a subsidy on goods which are more environmentally friendly so more are created and the price is relatively lower than other goods of the same sort. This would decrease the consumption of polluting goods and services. For example, the government subsidized on the production and use of LPG building stations around Hong Kong.

Emission standards for newly registered vehicles have been tightened since 1995. The Hong Kong government uses the Euro III standards in step with the European Union in 2001. The results come out to be diesel vehicles emits 90% less particulates and 40% less nitrogen oxide than the version before.

A trail of LPG and electric public buses was completed in 2001. Both are less polluting than diesel. The government are now have schemes that are going to encourage owners of the 6,000 old diesels public and private light buses to change to environmentally friendly LPG or electricity light buses.

The government also has system that controls smoky vehicles. The spotted smoky vehicles are required to undergo a smoke test within a specified period. Failure to pass the test will result in canceling the vehicles license.


This supply and demand graph shows the market for a good after tax has been placed. A firm would need to raise the price of their goods if the government places a tax on it. Therefore the priced paid by the consumer of the good would also increase. The price of the good is increased because at the current price, the income revenues made from the good will be the same but there will be extra costs from taxes. Firms will be able to supply less of the good to the market as the cost of producing this good has risen. As less people are willing to pay the price for this product, the demand will fall leading to less of that particular good supplied. When less is supplied, there would be less harm to the environment.

So to ensure that they cover these extra costs, the firms raise their prices. The demand for the good will contract because less people will be willing to pay that extra amount of money.

Tradeable Permits:

Tradeable permits are a new modern way in which government controls pollution. Firstly, the government decides a limit for the amount of pollution. Then it is issued to businesses according to their production level for an amount of money. If firms are not willing to pay permits, they would have to think of alternate ways to produce with less pollutant. Firms are then allowed to buy and sell permits to each other if they have a shortage or surplus. If this idea is working successfully, the government would begin to lower its limit to eventually control the problem.


The government can also improve the standard of education within Hong Kong so that kids can be taught at a younger age about how serious the situation of pollution is not only within Hong Kong but also around the world.

Hong Kong and Guangdong co-operation:

In 2004, The Hong Kong Environmental Protection Department has teamed up with the Guangdong Environment Protection Bureau to create basic pollution measuring and control devices. 16 air quality monitoring stations have been setup around the Pearl River Delta region

Addition of Public Transport:

By creating more public transport, it could encourage citizens to ride on them instead of traveling using private vehicles. This way, it could reduce the number of cars on the streets.


Pedestrianisation is to convert roads which are originally used by public vehicles into areas of which only pedestrians are allowed. This then limits the amount of cars allowed in that area.

Electronic Road Pricing

Electronic road pricing works by setting a price which drivers have to pay every time they pass a point. Drivers which are unwilling to pay this price would be forced to stop driving therefore congestion will be reduced. For example, the government recently has increased the tunnel fees partly due to restricting the number of vehicles crossing the harbor each day.

Analysis and Evaluation of Solutions:

All the above different types of solutions could possibly reduce and control the pollution level but which ones have the least side effect and is the most efficient? Technology could be an ideal solution to the future of our pollution crisis. Though it would be very costly; in the long term, it could unquestionably benefit our society as a whole. The problem is, "Who will be willing to pay for these costs?". It could be said that the government should be responsible, at the same time it could be the citizens or firms. It could be difficult to decide on who is going to pay for the research of these technologies. Subsidies could be granted by the government to develop the technological area.

The amount of money subsidized come from citizens of Hong Kong as a form of tax. The increase of tax to pay these grants could possibly upset a lot of the Hong Kong citizens. Firms which support environmental production for example use of solar power could also be subsidized by the government. However, I personally think that tax on a specific good could be a better idea to manipulate consumers to switch from one product to its substitute. This is because the current economy is not fairly strong. People are very concerned about how their money should be spent. Therefore, it is much easier to use this idea to control pollution. On the other hand, it could be difficult to predict the most effective tax rate. Disagreements also arise in governments as environmental departments and financial departments have different motives. One bases their motives on creating a better society by controlling pollution while the other aims on increasing tax to create the most profit.

Trade permits is an effective solution as governments can clearly restrict the amount of pollution produced. Firms have a great freedom to control their amount of permit trading with each other if they have a surplus or shortage. However if a firm purchases all or a majority of the trade permits, it could mean holding a strong monopoly position generating a problem to the market. Education, like technology benefits the future and has a long time effect. One of its advantages is it is not fairly costly as it could be taught in school the basics of pollution. By adding more public transport hypothetical should encourage people to travel less using private vehicles but if the plan does not work out as intended, it could actually cause a larger amount of pollution. To support the addition of public transport, government could also decrease its prices further encouraging its use.


Pollution is more of a problem in Hong Kong now than it ever was. But I feel that the government is not the only one to blame for the increase in pollution over the years. The Hong Kong government has not done much to stop pollution, and whenever it has held campaigns against pollution, they have not been as successful as planned. It is very easy to blame the government pupil. But I feel that the people in Hong Kong have also not done much to help the situation. Even after knowing the poor situation of pollution in Hong Kong, the people of Hong Kong have continued to leave their car engines on while parked releasing immense amount of exhaust.

To make sure that the people of Hong Kong do their bit to reduce pollution, it is essential for the government to educate people more about the issue of pollution. I think that the citizens of Hong Kong could do much more to stop pollution. Many people in Hong Kong waste electrical energy at will and if they are more considerate and cut down on the use of electrical energy, pollution can be reduced as the production of electrical energy releases many types of gases into the atmosphere. If people in Hong Kong do their bit and the government increases their spending on trying to reduce pollution, I am sure that the pollution in Hong Kong will definitely decrease.

Updated: Nov 01, 2022
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How Does Air Pollution Affect the Hong Kong People and Economy?. (2020, Jun 01). Retrieved from

How Does Air Pollution Affect the Hong Kong People and Economy? essay
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