LegCo Paper No. CB(1)1410/95-96
Ref : CB1/PL/EA/1 (These minutes have been seen by the Administration)

LegCo Panel on Environmental Affairs

Minutes of Special Meeting
held on Monday, 15 April 1996 at 4:30 p.m.
in the Chamber of the Legislative Council Building

Members Present:

Members Absent :

Public Officers Attending:

Miss Mary CHOW: Principal Assistant Secretary for Planning, Environment
and Lands (Environment)
Miss Angela LUK: Assistant Secretary for Planning, Environment and Lands (Environment)
Mr M J Stokoe: Assistant Director of Environmental Protection
Mr P K LAM: Principal Environmental Protection Officer

Attendance by Invitation:

The Chinese Manufacturers Association of Hong Kong
The Hong Kong Association of Textile Bleachers, Dyers, Printers and Finishers Ltd.
Hong Kong & Kowloon Electroplating Trade Merchants Association Ltd.
Textile Council of Hong Kong Ltd.
Textiles and Clothing Committee of Industry & Technology Development Council

Staff in Attendance:

Review of Charges for the Disposal of Chemical Waste at the Chemical Waste Treatment Centre

(LegCo Paper Nos. PL860/95-96, CB(1)1181/95-96, CB(1)1226/95-96, CB(1)1234/95-96 and CB(1)1237/95-96 and paper tabled)

The Chairman welcomed the representatives of the Administration and the trade/industrial associations to the meeting to discuss the Administrations proposal to increase chemical waste disposal charges at the Chemical Waste Treatment Centre (CWTC) in 1996-97 to recover 25% of the variable operating cost (VOC) incurred and achieve the target of full VOC recovery by 2003-04.

2. At the Chairmans invitation, representatives of the various associations briefly presented their position papers. Their views expressed at the meeting were summarised as follows :

There should be more transparency regarding the operation cost of the CWTC. Actual figures about the total operating cost as well as the fixed and variable operating costs incurred should be provided to elucidate the basis of the proposed charge increase and to evaluate the cost-effectiveness and efficiency of the CWTC, especially as it was operated by a private contractor with a guaranteed profit level.
The proposed increase in disposal charges was too great and, coupled with other existing waste treatment charges, would impose unduly heavy financial burden on local industries, especially medium and small sized establishments which made up the majority, and force them out of business during the current downturn of the economy.
It was unreasonable that operating charges paid to the operator of the CWTC were adjusted with inflation. Increase in disposal charges should instead peg with economic growth.
Sharp increase in disposal charges would lead to illegal disposal of chemical wastes by industrial operators who could not afford the high charges.
While appreciating the importance of environmental protection and supporting the polluter-pays principle, the industrial sector was of the view that the existing mechanism for determining the charges of various waste treatment schemes should be reviewed and charges should be monitored by a broadly representative review subcommittee set up under the Advisory Council for the Environment (ACE). Pending results of the review, disposal charges at the CWTC should be frozen at the prevailing levels and the target of full VOC recovery should be deferred.

3. Responding to a members enquiry on estimated costs for installing in-house chemical waste treatment facilities, representatives of the associations pointed out that the capital and operating costs for such facilities varied with industries and the business size. Very often, medium and small sized establishments were unable to install their own treatment systems because of insufficient financial and technical resources or inadequate space and had to buy services from the CWTC. Hence increase in CWTCs disposal charges would have greater impacts on the viability of medium and small sized operations.

4. On the timetable for full implementation of the Administrations chemical waste control strategy, representatives of the associations were of the view that a sufficiently long grace period should be allowed for industrial operators to develop waste reduction technologies and to factor the cost of waste treatment into the production cost before they were required to comply with requirements under the control strategy. They also pointed out that the grace period should be different for different industries. The Environmental Protection Department (EPD) should closely monitor the waste arising patterns of different industries and work out an acceptable timetable for full treatment cost recovery from waste producers accordingly. On specific timeframe, Mr Joseph LAU suggested that a period of one to one and a half years would be necessary for the manufacturing industries to make relevant preparations while Mr KWAN Kon-wah remarked that some operators of the bleaching dyeing, printing and finishing sector had spent about three years on research to develop treatment facilities to reduce chemical wastes.

5. Upon invitation by the Chairman, Miss Mary CHOW made the following points in response to the associations comments on the proposed increase in chemical waste disposal charges and the pricing system of waste treatment schemes :

The CWTC had been offering its service free of charge since it commenced operation in April 1993. It was only in March 1995 that the Administration started to adopt a phased direct charging scheme to recover 20% of VOC from users. While the Administration was proposing to increase charges to recover 25 % of the VOC, it would continue to bear the full capital cost (CC) and fixed operating cost (FOC) of the Centre. This would mean that the Administration was still bearing the majority share of waste disposal costs.
Existing fees payable by industrial operators were low. Statistics showed that during March 1995 to January 1996, about 71% of CWTC users were paying less than $1,000 a month. Ten out of a total of 41 monthly demand notes issued to users of the bleaching and dyeing sector were of amounts less than $1,000. Since September 1995, no user from the sector paid more than $10,000 a month. The Administration therefore believed that the additional fees to be borne by industrial operators would have only a slight impact on the industries. In addition, sufficient time was already allowed for operators to factor in the disposal charges in their production cost as the year-on-year increase in charges during the years 1997-98 to 2003-04 would only be in the region of 20% to 24%.
The operating charges paid to the operator of the CWTC were adjusted with inflation because it was a standard practice to include a price fluctuation provision in contracts covering a prolonged period. However, as far as the proposed charge increase was concerned, the adjustment due to inflation should not have a strong impact on waste producers who would be paying only 25% of the VOC.
After the implementation of the Waste Disposal (Chemical Waste) (General) Regulation, the EPD had been closely monitoring the disposal of chemical wastes by industries to ensure strict compliance with the new legislation. Work would be continued and industrial operators would be prosecuted if they contravened the law.
The Administration did not find it necessary to set up a subcommittee under the ACE to monitor the pricing system of waste treatment schemes. With its members coming from various industries and trades, the ACE was an effective consultative body. Moreover, as subsidiary legislation to increase waste disposal charges would have to be scrutinised by the Legislative Council, a proper monitoring mechanism was already in place.

6. Addressing representatives concerns about the operation and cost-effectiveness of the CWTC, Miss CHOW and Mr P K LAM made the following points :

The CWTC was not operating as a monopoly. At present, 49 licensed waste collectors and 22 waste disposal facilities were available to waste producers apart from the CWTC.
The Administration was as concerned as the industries about the need to monitor the pricing of chemical waste treatment since it was subsidising a great proportion of the VOC and the full FOC and CC of the CWTC. While the CWTC Contractor was obliged to ensure efficiency in operation, the EPD also had an established monitoring mechanism to oversee its daily operation. Studies indicated that the operating fees of the CWTC were comparable to similar overseas treatment plants.
The operating fees payable by the Administration, including both the FOC and VOC, were specified in the CWTC Contract. These rates were arrived at through a tendering process.
The CWTC was not operating with a guaranteed profit. There was an incentive for the CWTC operator to improve its services and operational efficiency to attract more customers and reduce production costs. As the VOC paid to the CWTC was based on the actual quantity of waste collected/treated by the Centre multiplied by the rates set out in the CWTC Contract, the more customers it could attract, the more profits it would make.
Concerns about the need for greater transparency in the operation of the CWTC and improvement in its efficiency were fully noted. The Administration welcomed the proposal to set up a liaison system to enhance communication between the CWTC management and its users and to discuss issues of mutual concern. The proposal would be examined further. The Administration also intended to conduct a review of the CWTC Contract including the pricing structure of the major treatment processes. While the review was expected to be completed by mid-1997, a waste arising survey was also being conducted to update the current waste generation pattern. Discussion would also be held with the CWTC Contractor to adjust the Centres operation in order to take into account changing needs.

7. Responding to the associations request for information on other waste collectors and waste disposal facilities, the Chairman requested the Administration to provide the required information for reference by the associations and members. As the waste treatment figures the trade representatives gave differed greatly from those given by the Administration, the Administration was also requested to supply more detailed figures. The Chairman further stated that the Panel would give due consideration to the views of the associations when members scrutinised the subsidiary legislation to raise disposal charges. As regards the proposed liaison system to facilitate better understanding between CWTC and its users, the Chairman opined that it would be more appropriate for the two parties to work out the details with the assistance of the Administration and requested that the Panel be updated on the progress in due course.

PELB/
EPD

8. A member expressed concern about the impact of environmental charges on local industries and the claim that more and more industrial operations were being shifted to neighbouring regions because of stringent environmental requirements and increasing waste treatment charges. In this connection, Miss CHOW advised that all relevant policy branches would be consulted before a waste disposal charging scheme was implemented. The consultancy study commissioned by the Industry Department in 1993 also revealed that high cost in labour and land was the main factor leading to the relocation of industrial operations away from Hong Kong. The Chairman remarked that as the issue was the concern of both this Panel and the Panel on Trade and Industry, the two Panels would liaise with each other on how to follow up the matter.

9. The meeting ended at 6:10 p.m.

Legislative Council
14 May 1996

Last Updated on 18 Aug, 1998

LegCo Panel on Environmental Affairs

Minutes of Special Meeting held on Monday, 15 April 1996 at 4:30 p.m. in the Chamber of the Legislative Council Building

Review of Charges for the Disposal of Chemical Waste at the Chemical Waste Treatment Centre

Minutes of Special Meeting
held on Monday, 15 April 1996 at 4:30 p.m.
in the Chamber of the Legislative Council Building