HONG KONG (AP) _ Hong Kong and the southern Chinese province of Guangdong plan to launch a pilot plan to reduce pollution from power plants by the end of the year, Hong Kong's leader said.

Guangdong is one of China's biggest manufacturing bases. Its air pollution often blows down to Hong Kong, whose skyline is frequently obscured by haze.

Hong Kong leader Donald Tsang announced the plan after meeting with Guangdong governor Huang Huahua Wednesday in the provincial capital of Guangzhou. He did not give details.

The plans involve an "emissions trading" arrangement that gives polluters emissions quotas and allowing them to sell unused quotas to other polluters. Factories or power plants are fined for exceeding their quotas, or alternatively, they can buy unused quotas from other less severe polluters.

The underlying premise is to create a financial incentive for businesses to pollute less.

Environmental group Greenpeace's Hong Kong branch said in a statement the plan will only succeed if appropriate quotas are set and the fine for overpolluting is stiff enough.

"We recommend that the fine for overpolluting should serve as a deterrent, so that power suppliers won't decide they'd rather take the fine than cut emissions," Greenpeace spokeswoman Gloria Chang said.

However, Chang said she was optimistic that the emissions trading scheme would follow through and help combat pollution.

"Pollution is high on the agenda. From a political perspective, the two local governments can't disappoint," she said.

"Our determination to cut emissions is firm," Hong Kong leader Tsang said in Guangzhou Wednesday.