The Government is pursuing the polluter pays principle for sewage treatment: the people who pollute have to pay to clean it up. In the case of sewage that means virtually everyone in Hong Kong. However, households pay only half their share of sewage treatment expenditure at present, and trades and industries pay about 80 per cent of the cost of treating the excess pollution they produce. The heavy subsidy leaves the Government no choice but to dig into its coffers to cover the full costs of sewage treatment. Future treatment facilities, which will upgrade the treatment standards and hence further improve the overall water quality, will be even more expensive to operate. The EPD has calculated that it would likely cost an average household in the region of $30 per month by 2013-14 to recover the full operating costs of sewage treatment and disposal, well below levels paid in other major cities around the world. For most residents, that would be a small price to pay to clean up the heart of Hong Kong, its harbour.

The proposal is, in fact, the second stage of HATS. Stage One has been operating since 2001 and treats 75 per cent of the sewage generated around Victoria Harbour at a chemically enhanced primary treatment plant on Stonecutters Island. However, this has not resulted in uniformly better water quality. While significant improvements have been recorded in the east and centre of the harbour, water quality in the western harbour is deteriorating, for two reasons. First, 25 per cent of sewage, mostly from Hong Kong Island, still ends up in the harbour basically untreated. Second, the large volume of effluent discharged from Stonecutters is not disinfected. Overall water quality in the harbour cannot be further improved until these problems are fixed.

Stage Two of HATS offers a two-pronged solution. In Stage 2A, disinfection would be introduced at the Stonecutters plant, deep tunnels would be built to transfer Hong Kong Island's sewage to the plant and the plant's facilities would be expanded, all by 2013-14. This would cost $8.1 billion to build and $430 million a year to operate on top of the current annual $1 billion in operating expenses for all sewage services in Hong Kong. Stage 2B would involve building biological treatment facilities, a higher and more expensive form of treatment, with the timing dependent on water quality and sewage flows. The Executive Council approved the proposal in April 2005, together with a policy of full recovery of operating expenses from polluters. The proposal was then presented to the Legislative Council where it was generally supported, although a couple of concerns were raised.

The disinfection process has been queried by some in the community who fear it would increase chlorine levels in the harbour. Before discharge, the EPD plans to chlorinate then de-chlorinate the treated effluent to remove the residual chlorine. An environmental impact assessment (EIA) for the proposed disinfection, begun in summer 2005, is being carried out to ensure this will be the case. In December 2005, the Finance Committee agreed to allot $166.5 million for both the Stage 2A EIA and the planning and design work for the deep tunnel link to Hong Kong Island.

The other area of concern is the timing of Stage 2B. This stage would cost $10.8 billion to construct and $700 million a year in operating costs, far more than Stage 2A. The Government acknowledges the need to build Stage 2B in the long run, but at the moment is not certain of the timing. We have agreed to review the situation in 2010 or 2011, taking into account water quality trends, sewage flow and population growth, which appears to be slowing down. The community's acceptance of the polluter pays principle will also factor into our assessment, for we cannot continue subsidising the cost of sewage treatment if long-term sustainability is to be achieved.

Hong Kong people pay some of the lowest sewage charges in the developed world, partly because they are not paying the full costs of sewage treatment. The current system costs the Government about $1 billion a year to operate, but households and the trades combined pay less than $500 million in annual sewage charges, or only half their share. An average household pays $11 per month. Apart from sewage charges, heavy polluters, such as restaurants, pay extra through the Trade Effluent Surcharge which amounts to a total of $210 million a year. That still leaves the Government having to dig into its coffers to cover the full costs of sewage treatment.

In keeping with the polluter pays principle, the Government is determined to raise sewage charges so that 100 per cent of current and future operating costs can be recovered. We will still fund capital expenditure, but polluters have to carry their share of the burden. When Stage 2A of HATS is commissioned, operating costs will increase by more than 50 per cent compared with the present. We reckon households will likely need to pay in the region of $30 per month to cover future operating costs including those of Stage 2A. The goal is to gradually increase the charges until full costs are recovered. Percentage-wise, this is a big increase, but in dollar terms it is affordable to most households. It is also still at the low end of what other developed cities pay.

The prospect of higher charges is never an easy one to broach with the community. However, there are signs that the community is more willing to consider the polluter pays principle. A government survey found more than 60 per cent of people were willing to pay more for a cleaner harbour. The Legislative Council has also indicated its willingness to discuss the issue. We aim to put forward a proposal on increasing sewage charges to legislators in the first half of 2006, together with suggested changes to the Trade Effluent Surcharge (see box). The outcome will have a direct bearing on the future water quality of Victoria Harbour and the principle of polluter pays. The Government alone cannot continue paying to treat people's sewage. Rather, everybody in the community needs to recognise they are polluters and they have a responsibility to prevent their pollution from damaging Hong Kong's greatest natural asset, Victoria Harbour.