An economic evaluation of policy instruments for enhancing building energy efficiency

In recent years, the Hong Kong SAR Government has been active in establishing policies to improve the local environmental quality and reduce energy consumption. Enhancing the energy efficiency of commercial buildings, the dominant electricity consumer in Hong Kong, is a key means for realising a substantial energy use reduction. The policy instruments used and being considered include regulatory controls, incentive schemes and voluntary schemes. This paper reviews the merits and demerits of these types of policy instruments when applied in isolation and in combination. The analysis covered also energy or carbon tax, although the government has not shown any intention to use this regulatory instrument. The qualitative analysis, which was based on economic principles and emphasised on the transaction costs that the instruments would incur, led to the conclusion that the use of a set of well-articulated regulatory and voluntary instruments should be the best choice.