Yearly Archives: 2014

Hong Kong is one of the most crowded places in the world. With more than 7 million citizens and thousands of tourists living in 1000 square kilometers, traffic congestion is considered a huge problem in Hong Kong’s urban development.[1] In order to solve the problem, Hong Kong government has proposed many traffic policies since 1980. Hong Kong is also the first jurisdiction to propose the Electronic Road Pricing (ERP) in the world. Interestingly, the ERP scheme is never launched in Hong Kong due to the lack of stakeholder support and the instability of policy environment during that time. Besides the ERP, Hong Kong also proposed other policies such as vehicle ownership control and vehicle use control, which were launched in terms of high tax or tolls and had achieved extraordinary success in reducing traffic congestion. I will discuss about these two policies in the following paragraphs.

1.   First Registration Tax (FRT)

Hong Kong has a highly developed public transportation system, which covers over 90% of passengers’ daily journeys.[2] Among all the public transportation, Mass Transit Railway and buses are the most popular ones. It can be said that the traffic system in Hong Kong has almost reached its upper limit that no more vehicles should be allowed on the road. Since public transportation can not be reduced, the only method to manage traffic congestion is to control the number of private cars.

To control the growth of private cars, the government has introduced a First Registration Tax (FRT) as early as 1974. The tax, charged when the vehicle is first registered in Hong Kong, has been increasing since then and is particularly for private cars. Following is the list of First Registration Tax in Hong Kong in 2011.[3]

From the table, we can see that the taxes are mostly imposed on private cars and motor cycles, and the more expensive the cars, the higher the taxes. Some of the public transportation, such as taxis and buses, are also covered in the FRT system but their taxes are very low.

I can not find enough information about the distribution of tax revenue, but we can detect from the table above that most FRT is paid by rich people since only rich people will register expensive private cars. The tax for buses is extremely low, indicating that public transportation which is in service for most middle class and poor people, is almost tax free. In this taxing system, poor people are benefited while rich people are paying for most of the congestion cost.

Effectiveness

According to the research done by Mahmud Hassan TALUKDAR, the growth rate of private cars had experienced a rapid drop due to the imposition of FRT in 1974. The growth of registered private cars was 15.8%, 14%, 14% and 7.4% from 1970 to 1974 respectively. And the growth of private cars was -8.0%, -4.2% and 0.5% from 1974 to 1976 respectively. The fact shows a strong impact of the tax. However, it is unclear to what extent this policy has reduced the traffic congestion, because Hong Kong also implemented a 21-month congestion charging pilot from July 1983 to March 1985.[4] We could only assume from the growth rate of private vehicles that the number of cars on the road was effectively controlled, so the policy is considered effective.

2.  Tunnels Tolls

In addition to the FRT, Hong Kong government also implemented other policies to reduce the traffic congestion. For instance, tunnel tolls are charged in most road tunnels. Hong Kong consists of many islands, which are connected by more than 20 tunnels and bridges. The queues of traffic waiting for the over-capacity tunnel and bridges have blocked the adjacent traffic network and created a huge congestion problem.[5] The major tunnel tolls for major vehicles are summarized in the table below:

Source: Transport Department[6]

We can see that the tunnel tolls have covered all vehicles that need to cross the tunnels, regardless of private or public. But if we look at a per capita level, we can find that the fees per capita for small vehicles are higher than those for large vehicles, which again shows a fair distribution effect that rich people need to pay more for the traffic congestion than the poor.

Effectiveness

The tunnel tolls was imposed since 1984. According to Mahmud Hassan TALUKDAR’s research, the tunnel tolls on the cross Harbor tunnel successfully reduced car and taxi goods traffic by about 15% and light goods vehicles traffic by about 13%. Overall, this policy is considered effective.

Conclusion and suggestion

Hong Kong is a crowed city with most of the roads are small two lanes roads, implying a continuous urgent in congestion management. After years of effort, traffic pricing policies in Hong Kong have achieved great success in private vehicle ownership control and congestion reduction. Successful policies include FRT, tunnel tolls and ERP. Other policies include fuel tax and parking control, which are controversial due to their effectiveness on congestion and side-effect, such as increasing illegal parking. To conclude, Hong Kong government should continue implementing FRT and tunnel tolls. Moreover, pursue more support for the implementation of ERP.

There are no other countries that are more dependent on fishery than Iceland. Due to its geographic superiority, lcelanders have been enjoying the ocean and living on fish for two hundred years. And thanks to its efficient fishery management system, Iceland is able to maintain an optimal fish stock as well as encourage the innovation in fishing technology. Interestingly, Iceland was not known for its prosperous fishery for centuries, rather, it was known by the world in 2008, when the global financial crisis gave the fishermen a critical strike and the country almost went bankrupt. It seems that it is time for Icelanders to invest in fish stock instead of money stock.

Introduction to Icelandic fishery

Iceland is the second largest island in Europe. Located beside the junction of East Greenland Current from the north and Irminger Current from the south, Iceland enjoys a flourishing fish stock in Icelandic water. Among its abundant and various ecosystem, there are about 25 species that have commercial importance and only a handful dominate the catches.[1] Main species include Cod, Haddock, Saithe, Redfish, Atlantic catfish and Greenland halibut, with cod products accounting for 35-40% of the total seafood export revenue.[2] During the catching seasons from January to October each year, total catches in Icelandic waters fluctuate between 1 and 2 million tonnes annually since late 1970s.[3] The export of fish products plays such an important role in Iceland economy that it makes up 41% of merchandise exports, 26% of total exports and 10.5% of GDP in 2011.[4]

Australia Carbon Policy

Current carbon policy in Australia is a carbon pricing mechanism, which is also referred to as a carbon tax. However, since its implementation on 1 July 2012, there have been a lot of discussion and criticism about its effectiveness and distribution effects. As a result, the government recently has introduced some legislation trying to repeal the carbon tax and commence other carbon policies. Uncertainty about the repeal, as well as discussion and negotiation among different parties will remain until 1 July 2014, when the new financial year will come and the continuity of the carbon tax will be decided. Before the decision is made, let us discuss whether the carbon price is to blame.

Policy Origin and Goal

Carbon policy was firstly put on the political table by Howard Government in December 2006, when an emissions trading scheme was advised. Nevertheless, due to the change of government and leadership, the emissions trading scheme was never implemented. Research and negotiation about the detail of the carbon policy continued. It was not until the end of 2011 when the Clean Energy Act 2011 passed the Lower House in October and the Upper House in November that a carbon pricing policy finally came onto the stage. The carbon price was effective on 1 July 2012.

Carbon Pricing is the major part of a broad energy reform package called the Clean Energy Act 2011, which aims to increase energy efficiency and encourage investment in clean energy in order to meet Australia’s long-term target of reducing Australia’s net greenhouse gas emissions to 5% below 2000 levels by 2020 and 80% below 2000 by 2050.

How It Works

The carbon pricing policy requires corporations which emit over 25,000 tonnes of carbon dioxide equivalent greenhouse gases per year to report on greenhouse gas emissions and pay a price for every tonne of carbon pollution or equivalent greenhouse gases that they emit. The price of a permit for one tonne of carbon was fixed at $23 for the 2012-2013 financial year, and $24.15 for 2013-2014 financial year, with unlimited permits available from the government. From 2015 or 2016, it will transition to a flexible market price under a “cap and trade” scheme. Due to the characters of the industry, agriculture and transport sectors are exempted from the carbon pricing. 75% of each company’s annual obligation must be paid by 15 June each year and the remaining 25% by the following 1 February2. According to the 2012-2013 annual report, 100% of the 377 liable entities have reported their emissions and 99.74% of their liability was acquitted on time. The government has collected $3,630 million in carbon price revenue receipts with accrued revenue of $1,417 million due for collection in 2013-2014.

In order to reduce the burden on entities that face high carbon costs and are constrained in their capacity to pass through costs in global markets, the Jobs and Competitiveness Program, a part of the carbon pricing scheme, will issue free carbon units to eligible applicants. In 2012-2013 financial year, the government has issued around 89 million free carbon units to 123 applications who are in the most emissions-intensive industries in the economy that are highly exposed to international competition3.

The carbon pricing mechanism is actually a carbon tax on heavy emission companies in industries such as electricity generation, stationary energy, landfills, wastewater and industrial processes. Some highlights of the policy are:

• Only cover big electricity generators and industrial processors
• Fixed price
• Unlimited permits
• Free permits available

Compared to the cap-and-trade model, the tax model is an easier way for government to monitor and control the implementation and for clients to comply with their obligations. Besides, it will lead to a better result in the uncertainty condition where the abatement costs change. If abatement costs increase, the quantity of abatement will decrease; if abatement costs decrease, the quantity of abatement will increase. The flexibility of the abatement quantity allows companies to better adjust to the variation of the economy and minimize their loss. However, the carbon tax is also controversial due to its coverage and distributional differences.

Coverage and Cost-effectiveness

The carbon pricing mechanism is expected to cover a selection of large business and industrial facilities, which account for approximately 60% of Australia’s carbon emissions. In reality, the total number of carbon units lodged for 2012-2013 was 283 million, which means the carbon tax covers just over 50% of Australia’s 552 million units. Since the carbon tax was only implemented last year and many large businesses were receiving free permits, there is not enough evidence to show that the tax has an effect on greenhouse gas emissions. The emissions has decreased in the past five years while the economy also slowed down because of the financial crisis, so it is difficult to tell the effectiveness of the carbon tax. It is possible that the carbon tax has very little effect on the emission.

Distribution Effects

Since the carbon tax was introduced, wholesale electricity prices have increased significantly, which has increased the cost of households, small business and agriculture. This evidence shows that carbon tax has increased the cost of electricity generators who can transferred most of the cost to consumers. If there is not enough subsidy to the victims, the tax system will retard economy development and generate inequality. Some people argue that the agriculture sector is losing competitiveness because of the high electricity prices due to carbon tax. It seems that the carbon tax is affecting everyone except the polluters. There are a lot of redistribution problems in the carbon pricing mechanism.

Changes

To conclude, the carbon pricing scheme was well implemented but there is uncertainty about its effectiveness and revenue redistribution. Obviously, there is some problems in the policy design. Hopefully, the carbon tax will be repealed and a more comprehensive and efficient carbon policy will be introduced later this year.

References

• Clean Energy Regulator Annual Report 2012-13, Australian Government Clean Energy Regulator
• Clean Energy Act 2011, Office of Parliamentary Counsel, Canberra