Financial Secretary John Tsang has proposed forming a $300 million fund to encourage the transport sector to test low-carbon technology.

In his 2010-11 Budget speech today, Mr Tsang said he hopes the Pilot Green Transport Fund will encourage the industry to introduce more innovative environmentally-friendly technologies.

"The use of low-emission and energy saving transport will not only help improve roadside air quality, but also reduce carbon emissions and promote a low-carbon economy. I hope the transport industry will actively try out innovative green technologies, contributing to better air quality and the health of people living in Hong Kong," he said.

To continue accelerating the phasing out of old diesel commercial vehicles, a $540 million 36-month subsidy scheme for replacing Euro II diesel commercial vehicles will be provided.

Electric cars

Mr Tsang also proposed accelerating the tax deduction for capital spending on environment-friendly vehicles. Firms can enjoy a 100% profits-tax deduction in the first year under the proposal to encourage the business sector to buy more electric or hybrid cars and other eco-friendly commercial vehicles.

The Government has procured 10 electric vehicles and plans to buy up to 20 more per year. The Police force has 10 electric motorcycles in its fleet, while Hong Kong's two power companies have placed orders for more than 20 electric vehicles. About 200 electric vehicles will be supplied to the local market in the next financial year.

Noting charging stations for electric cars have been built in nine government car parks, Mr Tsang said at least 20 more stations will be built this year. The two power companies have also started building 28 charging stations in various car parks.

Harbour treatment

To continue improving Victoria Harbour's water quality he proposed an extra $7.9 billion to cover the remaining works in the Harbour Area Treatment Scheme Stage 2A project.

The Government will allocate $5.1 billion to build an incinerator in Tuen Mun employing the latest high temperature incineration technology to process sewage sludge.

"The water quality of Victoria Harbour will be greatly improved upon the completion of the project in 2014," Mr Tsang added.